Vacation Rental in Kauai?

[Teju Prasad]

Hi, I was wondering if anyone owned a vacation rental property in Hawaii, specifically Kauai? Looking to connect would love to get a sense of your experiences. Thanks

[Mike Neubauer]

Quote from @Ashton Magdos:

I am also interested in getting a vacation rental in Kauai. My wife and I have visited at least 5 times in the past decade and have always thought to obtain a rental there. I have never invested in a property outside of the city i live and would love to hear about anyones personal experience buying a rental in Hawaii. Specific questions, what occupancy rate can one expect on short term rentals? How to use hard or private money for down payment, and if anyone knows an agent in Kauai or Maui that i could reach out to? 

 OK, there's a lot to unpack there, but we invest in short term rentals and live on Maui.  My wife is a realtor here on Maui and has associates on Kauai that she could connect you to, if you don't find one, but it's very difficult to find realtors that are also investors.  Most are not and they don't know all the things you want to look for and questions to ask to get your best investment. 

For an STR on Maui you'd be looking at condos in buildings approved for transient accommodations. Not all are. Forget single family homes. You won't get a permit for it. You'll need 30% down on just about all of them. If anyone tells you otherwise, beware. We've been doing this for a long time, that's the way it is. Most are considered "condotels." Banks can't sell those loans so there are only a few that will lend on these properties on Maui. Make sure you use a local lender. I can give you a few if you are interested in. There's a couple reasons for this, one, a local lender on an offer sheet looks a whole lot better to a seller's agent than a mainland bank, which all seem to promise they can close on a loan, but time after time they seem to fall through. You want to use someone that has closed "condotels" on Maui if you go that route.

Using hard or private money is certainly an option for the down payment or the entire purchase. I have a good HML company I'd recommend too if you are interested.

Occupancy rate and cash flow are going to be dependent on who is managing the property and where the property is located.  If you are self managing your property and it is in a good location you can expect 90%+ occupancy if you do it right.  We average close to 95% and we keep a 4 night minimum on our units.  If you're using a property management company you'd be looking at paying them about 25% of your gross on average so you probably wouldn't cash flow much if anything at the end of the day, and you could probably expect about an 85% occupancy if they're a reputable company.

Hope this helps!