Why Choose a Long-Term Rental?
Lots of demand in Hawaii, historically great market appreciation, much less work to manage than vacation rentals. This is the buy and hold approach; it’s a more passive investment, and most months, it may only take an hour or less per month of work to maintain. This is how my wife and I got our most recent rental property. We bought a home that needed some elbow grease, fixed it up while we lived in it for a couple of years, and then started renting it out. Lucky for me, my wife loves working on house projects! The annual rate of return after deducting all expenses and accounting for how much the loan gets paid off each year, annual rents received, and market appreciation compared to our overall equity position in the home is normally about a 30% annual return for us! I should mention that every year isn’t that good, and we do manage the rentals ourselves to maximize our monthly income from it.
Why Choose a Short-Term/Vacation Rental?
It also has lots of demand in Hawaii, great market appreciation, and generally even better monthly profits than a long-term rental if you are managing the property yourself. On average, your monthly rent with a short-term vacation rental in Hawaii can be up to 2-3 times what you would get versus a long-term rental. The big difference here is that it’s going to be a much more active investment. You can hire people to clean for you, but If you don’t have at least 3-5 hours per week available to work on it, then I don’t recommend it. On the other hand, If you enjoy offering great customer service, your entrepreneurial, and want an ongoing business project to work on, then this could be ideal for you. It takes time to build up a vacation rental business and with companies like Airbnb. Getting some good reviews and achieving superhost status makes a huge difference on your bottom line. Plan on your first year being a building and learning year.
Do Things Ever Go Wrong?
Yes, last month we had a toilet seal break, and it was $250 to fix it. A few years ago, we had a renter who left the place in terrible condition, and it was a lot of work to get it ready for the next renter. Thankfully their $1,000 deposit paid for most of the repairs. Any time you do any kind of real estate rentals, eventually something will go wrong. This is just a fact of life, all business and all of life is this way, and it’s good just to expect it. Personally, we look at it as a cost of doing business, and don’t let it bug us too much. We like to focus on the fact that in the big picture, we love real estate! It’s been a lot of fun and a fantastic investment for us.
At the end of the day, the best real estate investment all depends on you. Just like Hawaiian Shave Ice, everyone likes a different flavor, and there’s no one size fits all.
Want to Know More?
Whether you are new to real estate or you’ve been doing this for a long time, Hawaii is different than most other states. Getting help from an industry expert is really the best way to go. If you ever have a specific real estate question, just send me a quick email, call, or text. I’m happy to help, no strings attached.
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Aloha,
Tom
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