Specializing in Makena, Wailea, and Kihei Real Estate
Lauren Peacock
(808)280 1343(808)280 1343

Ask Lauren: What is the difference between Vacation Rental and Non-Vacation Rental?

Aloha Maui Real Estate Entreprenuers!

I get this question a lot at my open houses so I wanted to try to help answer this most important question. What IS the difference between vacation rental and non-vacation rental? In Maui, we have two big buckets of condominium real estate: vacation rentable, and non-vacation rentable.

Whether a condo is vacation rentable or not, is deemed by Maui County; not the HOA of the building complex. When looking at online real estate sites such as Realtor.com or Zillow.com, its important to note that this information is hard to find although sometimes it is listed in the description of the property itself. You’ll want to reach out to your favorite realtor to get more information if you’re truly interested in a specific condo or complex.

Units that are not vacation rentable can still be rented…just long term; typically with 1 year lease terms but I’ve seen as short as 6 month rentals before as well. These units are typically where people that live here full time and work; rent or buy. These units are usually lower in price and have lower HOA fees, but that’s not always the case. This is also where you find most of your dog-friendly complexes. If you’re in the market for one of these units, mortgage lenders are a little easier to find and can do mortgages right now for as low as 3% – 5% down if you’re the primary occupant and owner.

Vacation rentable units are available for nightly rentals or long term rental. If you own one of these units though, typically they are rented out nightly because well…they generate more income that way. These units come on the market at higher prices and have higher HOA fees; however you can accrue a lot more income from renting these units. If you were to purchase a vacation rentable unit, your biggest bang for your buck is to manage the rental process yourself through hiring a cleaner and using sites like AirBNB and VRBO. However, note that Hawaii state law requires you to have a “property manager” on island that has a key to your unit for things like floods or emergencies. If you’re not comfortable managing your own rental unit, companies like Alii Resorts and Kihei Condo and Car are great for managing rentals; however they sometimes come with a hefty price tag that can eat up your rental income. Vacation friendly condos are sometimes referred to as “condo-tels” by mortgage companies and can be a little trickier when obtaining a mortgage. Usually (but not always) you’ll need at least 20% down for this type of real estate.

Some non vacation rental properties in Kihei include:

  • Kihei Villages
  • Southpointe at Waiakoa
  • Kihei Shores
  • Haleakala Gardens
  • Hokulani Golf Villas
  • Loke Hale
  • Ke Alii Ocean Villas
  • Kai Ani Village
  • Kai Makani
  • Villas at Kenolio
  • and more….

Some Vacation friendly condos include:

  • Mana Kai
  • Royal Mauian
  • Hale Pau Hana
  • Kamaole Sands
  • Maui Kamaole
  • Sugar Beach Resort
  • Kihei Akahi
  • Maui Banyan
  • Kihei Beach Resort
  • Kauhale Makai
  • Maui Sunset
  • and more…

Some visitors have come to Maui and think that maybe they can vacation rent a non-vacation rental and no one will find out. That’s a big mistake. Remember, our economy here on Maui is based on tourism so Maui County has an office dedicated to finding illegal rentals. The fine is large and can be painful. Always do the right thing and follow the rules…trust me, it’s much easier that way.

When searching for your perfect vacation rental, remember to include the following when calculating your costs and projected income:

  • Nightly Rates = High season is from mid October – mid January (4 months), Low season is mid January – mid October (8 months) with a small pop in July. Make sure to calculate 100% capacity, 80%, 60%, 40% and 20% to get best and worst case scenarios.
  • Taxes (varies depending on if you are a primary home owner/occupant or if you use the property as an income investment property). Ask your realtor to help you figure out taxes for your property.
  • GET (Government Excise Tax) = 4.16% on everything
  • Housekeeping – can usually be passed through to the renter to pay as a part of their stay. Also don’t forget to include damage deposits!
  • HOA – Home owners expenses typically cover landscaping, water, trash, and overall complex maintenance. Some include electricity and cable T .V.
  • Supplies/appliances – Guests will need things like coffee, soap, towels, and occasionally break a microwave that you will need to replace. I typically account for $100/month in my rough calculations.
  • Other – renters LOVE oceanfront units. However, those can sometimes come with maintenance assessment fees. If you own an oceanfront unit, it is inevitable that someday the building will need repair and owners will most likely incur an assessment of some type to keep the HOA reserve in good standing. Make sure you account for this and save a little bit each year.

Please contact me if you have any further questions and hopefully this article helps those out there wondering about Maui and the huge potential here for investment and rental income properties.

Mahalo!

 

 

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