All Forum Posts by: Cole Schlack

Quote from @Cole Schlack:

I would like to see what everyone is getting for returns on their Short Term Vacation Rental in the $1m value range

I will start, 

Waikoloa Beach Hawaii, Big Island Hawaii

Value $1m

2022 Gross Rent $87,422 (estimated for the end of the year) 

PM 20%- $16,844

Property Tax $6,360

HOA/Maintenance 11,808

Utilities   $6,780

Supplies $1,770

Net Profit 43,860

Do you realize that you could take that $1,000,000 and lend it to me to do all of the hard work instead and take the risk instead of you taking the risk, as just described and you'd make $50,000 instead of $43,860 with very little risk  to you and no work on your part?

Yours is estimated at $7,285 per month based on a $1,000,000 value.

My STR (to be) in N. Phoenix bought for $527,000 is projected using averages for comp STRs in my neighborhood, to go for "on average" $511 a night for 63% occupancy for a yearly projected of $115,894 or $9,657 monthly if I'M  only "average" for the STR . (I don't intend to be average ;-)

So, somehow, my property at half the price of yours is projected to produce 25% more gross revenue.

But, I can't eat "projected" so I always take the conservative approach just in case.

Maybe we should team up, you provide the capital, I provide the STRs and we both have fun. You'd certainly make more money with less risk than what you have outlined. But, I have to admit, I do like Hawaii, to visit, just not to invest.

We managed for a client (who since moved here and no self manages).  He paid $760,000 in 2020 (now worth in the $1M range) and in the year we managed grossed $260,000.  It is not impossible to still hit those numbers here (Tampa area beaches, FL).

A 4.5% cap rate on an STR seems low. Most short-term rentals I've seen including my own usually have at least a 10% cap. They are more risk so there's usually more income.

@Cole Schlack - great post Cole.  Much of that applies to owning on O'ahu but thought it might be helpful to readers to add some remarks regarding O'ahu compared to Big Island.

1) Same on O'ahu.

2) Same on O'ahu

3) It's pretty dang expensive here. Got gas at Costco this past weekend and happy to see premium was $4.54. And electricity rates have gotten even more expensive this year. And we definitely have some of the highest property values in Hawaii, but recently I've had a VA buyer acquire a 2 BD/ 2 BA townhome for $486k - based on comps, it was a very good opportunity. I just had another buyer go under contract for a nice attached home in Pearl City for $720k, and seller is crediting back 4% to cover the buyer's closing costs as well as payoff some debt. Plus the home has existing space to create a rental unit. I think he'll do well with it.

 But despite how expensive some things are here - the ability to surf year around in pretty warm water . . . priceless. 

5) No lava here - but we got some of your VOG last week.

6) Agree expect we don't have plenty for sale right now - very low STVR inventory at this time on O'ahu. 

7) I am big fan of the Big Island and may eventually move there - but for now I love all that O'ahu has to offer.  
 

Aloha, 

I will help you since I'm the investor, so I'm on buy-side and have no conflict of interest. I could probably add some more.

#2. Even for leasehold, there're sometimes options to purchase the fee to convert to FS. Like this one apt in Hilo, sell for $100k, fee to convert is $50k, rent per-month LTR is $1200. And it's STVR-permitted forever.

Second, even if it's leasehold, if the price is interesting, it could be a massive deal. Lets say 10 year LH of $60k with HOA above $500/mo, your expense is about $1k but monthly income could be between $2-$3k. The problem with LH is... you don't capture the appreciation, since it's the most interesting aspect of hawaii investment (appreciation).

#3. Hawaii is expensive but if one contributes to Ohana lifestyle you may get food for free LOL, I keep eating this same sashimi/poke for one month LOL, the neighbour is so nice :) Now if you don't contribute or have no nice neihbour, you could buy in Sack N Save and price is relatively 'acceptable'.

#6. Hawaii is very STVR-friendly. As matter of fact this is the only place I'm interested in investing because the supply is extremely limited and STVR is heavily regulated. 

#7. It's not just the best island, it's heaven on earth. Where you can swim with dolphins and if you get bored, you could hike tropical all green lush forest in just 20 minutes. This place is a miracle and gift from God. 

Next..... and this is the biggest secret I think.

If you have specialized skillsets (contractor/car repair/industrialist) then you are in high demand because supply of human labour is extremely limited but it favours you that have good skillset. There're lot of business opportunity in this paradise.