Short Term in Hawaii?

[Sam Booth]

Anyone have advice about buying and short term renting a condo or apartment from a building? I see some deals that look decent and wondered if it's worth it and if the laws make it possible or a pain to short term rent these sort of units?

It sounds like it could work in an "resort area??"

[Bryan Vukelich]

Aloha @Sam Booth

I wanted to chime in as you have been getting some misinformation from other members though @Mark Waite provided good advice. Personally, I have and currently work with many investors looking for legal STR's and some of my clients are also looking for opportunities on Maui and Big Island. In the past 40 days, I've had 2 clients close on STR properties in Waikiki where the numbers looked quite attractive. For O'ahu, it is completely possible to buy a legal nightly rental building and be cash flow positive. Below is some key info it is best you are aware of.

* STR's can legally operate in Waikiki, Turtle Bay, Ko'olina and Makaha if the property is in the hotel/resort district AND the AOAO allows for short term rentals.

* If you need financing, best you work with a local lender that is familiar with STR units. However, most conventional lenders will not finance a unit that does not have a stove/oven. If you are interested in a unit that only has a kitchenette, I do have relationships with lenders who will finance it but the rate is considerably higher. You will need at least a 25% down payment.

* I have a relationship with a highly rated STR property management company. They charge 20% for full service and handle all marketing, cleaning, maintenance and will pay the GET, TAT, and OTAT tax on your behalf.

* GET, TAT, and OTAT taxes are paid by the guest.

* I recently had a client buy a beautiful 2 BR for $715k at Waikiki Sunset. This building was approved for STR's in Bill 41. A quality STR management company thinks it will gross $7-$9k/mo in current market.

* I also had another client buy a STR at Ilikai for $575K. It is expected to gross $4200-$5500/mo in current market.

* In currently market, you can buy a well maintained 1 BR in $550-$650k range and it will likely gross $5-$6k.  To get an idea of units and highly rates, I recommend you visit Alii Beach Rental website.  

* I have clients who live on the mainland but are self managing their property to avoid paying a PM fee.  Obviously this greatly reducing operating expenses. 

* VERY IMPORTANT: The STR market is in a period of uncertainty. Bill 41 is scheduled to go into effect Oct 23rd, 2023. Due to this bill, STR owners are supposed to register their units with the Department of Planning and Permitting (DPP) to obtain a registration number in order to legally operate their STR. At this time, it looks like the DPP will not have the registration process in place by Oct 23rd. There is uncertainty what will happen then. For this reason, I'm advising my clients to wait to buy an STR here until we see how this all plays out - unless they have high risk tolerance.

Happy to answer any questions you have - I am here to serve you.