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Updated over 3 years ago, 03/20/2021
Hawaii STR or San Diego LTR?
Hello from a new member! I am trying to make a decision and was hoping to pick some brains from people with experience.
We currently live in San Diego and have a LTR that’s doing fairly easy, profiting about $300-400 after paying the mortgage.
My family and I are ex-kamaaina and visit Oahu often. So I got this crazy idea, what if we sell the LTR and use the profit to buy a condo in Waikiki? So we have a place to use, and rent it out when it's not in use. (I'm sure I'm one of the many who has the same thought.) I've been researching regarding STR in Waikiki, tax, etc. If we are to buy, it'll be the legal condotel.
But after crunching some numbers and noticing high HOA+fees, in today's tourist economy after COVID, I'm not sure if it would profit enough to surpass the current LTR, especially when the LTR in San Diego market also has the potential for future value appreciation. I don't mind at least breaking even for the first year or so, but wouldn't want to jump in if there's not much profit even when the economy bounces back. I'm also wondering if the condotels are overpriced, now that many illegal ones are getting shut down. But when the tourism is back, wouldn't these condotels go up in price even more?
Is it worth it?
Any opinion, advise, crystal ball prophecy appreciated!
Remember to also factor in how much money you would typically spend on hotels when you go to visit Hawaii. If you’re saving an extra few thousand, that’s money you would be taking from the San Diego profits anyways.
That’s probably not the deciding factor but I wouldn’t overlook it. Hard to say where prices end up. Everyone expected them to top out last year in my market and they’re still going up.
Thank you! Yes I factored in the cost of our hotel stay, and if occupancy is about 70% we will get about the same profit as LTR.
However, because we are not getting a huge loan, hotel class of STR would be a lot lower than the hotels we would usually stay. We have to check it out in person to see if we would stay at those STR as well, but with Ca travel restriction, we can't go anytime soon :(
Why not keep your SD property and convert to a STR for more cashflow?
@Mika Manzo I also moved from Hawaii to San Diego, SD is not a bad runner up! But SD to PHX has been a little bit of a tougher pill to swallow Haha
I love and miss Hawaii, and have looked pretty extensively into going down a similar route. In the end, I found that even with the tax write off for travel, it's just not worth it. With it's foreign investors, STR restrictions, and high HOAs; Oahu is just not built for Cash flow.
I've decided it makes more sense to continue cashflowing with current properties, and use some of my yearly cashflow to enjoy a nice vacation or two.
If you're considering Oahu, that basically means condos in Waikiki. Last time I looked (pre pandemic) i was alarmed that the nightly rates were absurdly low on many of them (less than $100 a night). So just really be confident in your numbers before you pull the trigger.
We ended up going with a cottage in Kauai which has higher nightly pricing.
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- Olympia, WA
@Mika Manzo, I would keep the performing LTR and add the STR to the portfolio.
I have a buddy of mine out here in SD that purchased a DET SFR in Hawaii on the main island about a year ago. Little bit of a different scenario than what you described... but similar idea. STR and a place to stay when they visit.
However, he's actually considering pulling his money out already (they've had decent appreciation there too) so he can reinvest here in SD for the long term play. Long term appreciation play in San Diego is forecasted among the top 3 in the US. Compounding gains on an already high priced asset look really strong over time. Plus, many people don't realize this but SD actually has very good CF. It's the INITIAL CF that is poor compared to some of the midwest markets. However, rents increase here approx 3-4% a year. And an increasing rental market will follow an appreciating housing market. We're experiencing it right now.
I've just read a thread in the STR forum about Hawaii. In short, the state has basically shut down tourism and STRs haven't been doing well. That said, with many owners trying to exit, now may be a good time to buy, but you might need to weather the storm a bit longer until you see decent cashflow. Also, be sure to check local rules and regulations, it seems like Hawaii isn't very friendly to STRs overall.
I live in San Diego, it's a decent place for long term equity grow. The cashflow is a bit low especially given current prices, but since you bought it earlier, it may not be too bad. You'll need to look at your goal.
Originally posted by @Chris Ng:
I've just read a thread in the STR forum about Hawaii. In short, the state has basically shut down tourism and STRs haven't been doing well. That said, with many owners trying to exit, now may be a good time to buy, but you might need to weather the storm a bit longer until you see decent cashflow. Also, be sure to check local rules and regulations, it seems like Hawaii isn't very friendly to STRs overall.
I live in San Diego, it's a decent place for long term equity grow. The cashflow is a bit low especially given current prices, but since you bought it earlier, it may not be too bad. You'll need to look at your goal.
Actually, they are talking about expanding STR's in Hawaii County (main island). https://www.westhawaiitoday.co...
And rightly so, since currently they are restricted to business districts for the most part, with the existing ones grandfathered in. This just allows the big hotel chains and resorts to run the tourism game, while those small time farmers with an extra ohana or two, don't get to rent out their space to make some extra cash. Of course, if that happens, speculators will move in and just explode prices if that law changes.
The Big Island has some of the best opportunities for real estate investing in the country IMO.
@Michael Rutkowski That would be nice if passed. Perhaps, this is a good time to buy.
Originally posted by @Chris Ng:
@Michael Rutkowski That would be nice if passed. Perhaps, this is a good time to buy.
Knowing Hawaii, there will be some huge caveats, and limitations. It seems to specifically cater to farm property, and limited to certain areas. Seems like those areas are closer to Kona from everything I could read about it. Waikaloa, and south of Captain Cook. Also around Volcano, but not aware of anything else in Puna District. I have been watching this for months now. But with how it goes on the BI, people just do what they do, regardless of the law. Especially down in Puna.
Hi @Mika Manzo
Hawaii can be a great place for STRs. If you hire a private management company (not the hotel), you can make more than $300 a month. If you manage yourself, you can definitely make more then $300 a month. But the big factors are your price point, down payment, and personal preferences.
Plan on needing 35% down.
Personal use often hinders the returns. For example, some families need 2 bedrooms. Those (legal 2 bedroom STRs) are harder to come by and harder to cash flow without a larger down payment.
Personally, I believe the best STRs on Oahu are single family homes, but that's a higher price point than condos. Also, legal ones are rarer than legal condos, but if you have time to wait I would recommend a SFR.
If you'd like to talk about it some more, please feel free to reach out.
Aloha, Isi
I've been looking pretty hard at Maui condos the last few weeks for an STR. Narrowed to the northern area around Lahaina / Napili / Ka'anapali. I've found the HOA fees to be just insane [$700 low end up to $1500+ for a 2br] and for that reason it is hard to make many of these inflated sell prices pencil out to a profitable STR unless you really have prime location + pimped out interior + 90th+ percentile ADR pricing and self manage [impossible to profit with 20-30% PM fees]. Even then the numbers are just too slim to let me pull the trigger on one or two units I would really like to chase. I will wait some of these out and hope prices drop and try to swoop later. Until then I'll just use Marriott points for my visits ...
Have never been to the other islands, so no experiences there.