Hawaii Questions

Question: We had a question about  Hawaii real estate, we recently went to the islands of Oahu and Kauai. On Oahu we stayed in a hotel and we did all the touristy stuff: Waikiki, Pearl Harbor, the North Shore and the likes. We stayed at the Kauai Beach Resort for a couple of nights and then in a vacation rental on the Garden Island and were very low key. We explored some beaches and trails and ate fresh fish, but mostly relaxed. Our Kauai vacation rental was very homey. We were curious about buying a vacation home. Can you buy portions, like a time share, do locals or investors own them? What are pros and cons of owning one? We would love to be able to come and go when ever our schedule allowed, but wouldn’t mind renting it out when we are not there. Just trying to figure out how to get a piece of paradise! Thanks.

Answer: Thank you for the very long, and not easily answered question. A lot of people come to the islands looking to get their piece of Hawaii real estate, especially after staying in a great rental home. There definitely is a huge time share market. It has grown so large, that a huge portion of hotels and resorts are now time share commodities. A lot of times this goes unnoticed by the casual visitor, because they go to these hotels and stay in the rooms just as they would any other hotel. The difference is that they are not sole properties of the hotel chain or corporation, they are often just being managed by the hotels and privately owned by investors. This has become a very popular way for people to feel that they have their own piece of Hawaii. However it is much different than traditional property ownership. I won’t go into the full details of time shares here, but often times it is more like owning a club membership than owning land.

As far as Hawaiian homes as vacation rentals go, there is a vast assortment of situations in which houses are used as vacation rentals. There are some owners who split their time in Hawaii with living on the mainland or abroad. A lot of these owners hire management companies to fill their homes while they are not in them. This can be a great source of income depending on the economy. A nice vacation rental can demand anywhere from $300 a night to $3000 a night. Beach homes and large estates are often rented out for wedding parties and by celebrities. Even a modest home can get over $200 a night. If you do the math based on 75% occupancy, that is upwards of $4200 a month. This is a great way to offset the cost of a mortgage for a house that you only occupy a week or a month out of the year, and real estate is often a very solid investment.

Local home owners also rent out portions of their homes as vacation rentals. Many builders in Hawaii design homes with lock-outs, mother-in-law quarters, or guest cottages.  Often times for visitors these can be great finds. A lot of owners will go out of their way to make a guest feel at home. They can provide great insider tips about places to visit or to skip and be all around great resources for someone visiting the islands for the first time.

Some people buy property in Hawaii strictly for the rental income. They often hire a vacation rental management company and/or a property manager to make sure that their investment is well taken care of, and fully booked. There are some investors that never even visit Hawaii, but look at their property as a commodity.

For everyone the decision to own part of paradise is personal and depends greatly on expectations and money. By purchasing a property in Hawaii, you be assured that you will always have a place to stay, possibly generate some additional income, and own your slice of heaven. That said, you still have the headaches of maintenance, you often have to hire a property manager, deal with advertising and you hold the risk when times are not so good.