First time STR in Hawaii to offset capital gains?

[Christopher Jordan]

Hello Bigger Pockets, I'm a newbie. I just sold my business and in looking for ways to offset capital gains taxes stumbled across a strategy in which a STR can write off all depreciation in year one via a cost segregation analysis, thereby reducing taxable income greatly for a specific year. Owning a vacation property in Hawaii has been a lifelong dream of mine, and it seems that this dream may also be able to generate some tax savings for me.

I'm looking for a 2 bedroom or more condo in a resort-zoned area of Hawaii, specifically the Waikoloa Beach or Mauna Lani Resort areas which are already resort-zoned. I know that Hawaii is trying to reign in STRs so I don't want to stray outside of a resort-zoned area, however this means that costs are inflated. There are very few condo units selling sub $1M, and I really don't want to spend much more than that.

Hawaii is a year-round rental area, so shooting for 80-90% occupancy seems do-able. I don't really expect the property to cash flow, I realize that it's an expensive place to operate a STR and that on-island management is necessary by Hawaii law, but I'd like to be able to cover most of my mortgage and expenses after putting 30-40% down.

Does anyone have experience in this market, or with this cost-segregation to write off income technique? Hawaii law requires an on-island manager, but in order to qualify as an active business I’ll need 100 hours managing the property so hiring a regional manager may hurt my tax write off plans. Any thoughts on how to abide by Hawaii rules AND  utilize this to offset capital gains?