Remember In Hawaii, STRs come with extra taxes: a 10.25% Transient Accommodations Tax (TAT), a 4% General Excise Tax (GET), plus a 0.5% Oahu Surcharge Tax on gross income from rents. Even if you are out of state resident that GET tax is charged on Hawaii clients which is messed up.
STRs are definitely in vogue, but they're not without risks. Across Europe, cities are cracking down with new bylaws to regulate and tax them. In some cases, they're banning them entirely. Take Toronto, for instance. They've recently outlawed STRs of secondary dwellings due to a lack of affordable rental housing. You can rent out your primary residence or a room in it, but there's an annual license fee and a nightly tax involved.
Many investors jumped on the STR bandwagon, expecting the market to stay the same. Big mistake. They didn't account for regulatory changes or market saturation, which could lower prices. With historically low barriers to entry, STRs seemed like a golden opportunity. But now, many Toronto property owners are facing financial troubles, with the new rules set to kick in six months.
Bottom line: Don't bank on the current market conditions staying the same, especially if you're making a 25-year financial commitment. Personally, I stay away from the mainstream trends where everyone who is priced out of traditional long term rentals are now trying to rent out a room or a whole house on the daily.
