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What You Should Know Before Purchasing a Vacation Rental on Maui

“Please find me a condo with a strong rental history.” I can’t tell you how many times I hear this from clients looking for a vacation rental condo, or even a home on Maui. It drives me crazy because, I know from doing this for 10 years now, the rental figures you receive from a management company are the most subjective numbers out there. I will try to explain why you should look past those numbers when searching for the perfect property.

Dreaming of owning a Maui vacation rental?

Look Past “the Numbers”

There are the huge rental/hotel companies here on Maui that manage some of the larger complexes like Aston and Outrigger. These companies are right on the property, they have a world-wide following, and are averaging above 80% occupancy for their owners.

They usually have your unit in a rental pool (they get rotated on an even basis and some even guarantee every owner will get the same amount of rental nights). They also charge the owners around 50% of your gross income to do this for you. If your unit grosses $100,000 per year, they are taking half of that and then you have your TAT tax and GE tax on top of that. (I can explain those to you if you would like.)

Then on top of the 50% taken by management, you also have owners who like to use their units throughout the year, and who also let friends and family use it. There is generally no income reported during those times. I know several units where the owners are using it 3 months of the year.

With all these variables, you can see where the bottom line would not look that great.

mauipool

Everyone will want to visit, and with views like this, you can see why

Some Maui Vacation Rental Management Options

Here are my suggestions for someone looking for their dream vacation rental property on Maui:

1. Start with a vacation rental website like VRBO. As an owner you can add your rental here for a small fee every year, and you can also see what other owners are making per night and how booked they are on the calendar. This site is huge, and once you start, it builds a snowball effect and you receive more and more clients. Most management companies will not charge you their split if you provide the client. There is big savings right there.

2. Next, we have a number of great local management companies that are charging below 30% to do the same thing the bigger companies are doing and usually doing it better. I am happy to provide you with contact numbers for these companies when you request it. At a $100,000 gross per year, that would be an additional $20,000 plus to you the owner.

3. There are even some savvy owners who are doing all the work from their computer and just using an on island contact* here for the cleaning and small details. There are new door locks that are controlled by computer from anywhere in the world now. Hawaii law mandates that if you own and rent a condo here, you must have a contact person on the same island.

*On island contacts may only manage for one property owner, otherwise you must use a property management company.

Finding the Right Maui Vacation Property For You

My suggestion to everyone I work with is this…find the property you love first. Do not put so much weight into the rental history. Our rental demand across the island is continuing to climb, and Maui is still the #1 island in the world. Once you find the right place, with the help of a knowledgeable agent who knows the rental landscape, you can make your dream property work for you.

mauiview

#1 Priority: Find a property you absolutely love

Numbers can always be massaged in your favor. I must be brutally honest with you though, you are not going to buy a vacation rental condo and turn it into a cash cow. Even if you pay cash. The cost of ownership is just too high. It is very possible to have it pay for all of its fees, and maybe even a little left over for you at the end of the month, but that would be it. Keep that in mind as you do your research.

Contact a Condo Vacation Rental Expert on Maui

If you would like to know more about purchasing or owning a vacation rental on Maui, feel free to contact us or your favorite Hawaii Life agent.

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Mike

March 19, 2014

Excellent post! I just spent a couple of days researching vacation rentals on Maui and no matter where I looked, it appears to be a low return investment given the risk and taking the potential property appreciation out of the equation. Thank you for the additional information.

Mike

March 19, 2014

Excellent post! I just spent a couple of days researching vacation rentals on Maui and no matter where I looked, it appears to be a low return investment given the risk and taking the potential property appreciation out of the equation. Thank you for the additional information.

Elyse

October 31, 2015

Any info you can share regarding the erosion of the beaches on the West Coast of Maui and sinkholes forming in and around the properties there? I have great concerns as I enter into escrow in this area. Thank you!

Elyse

October 31, 2015

Any info you can share regarding the erosion of the beaches on the West Coast of Maui and sinkholes forming in and around the properties there? I have great concerns as I enter into escrow in this area. Thank you!

patchara baumgartner

April 4, 2016

Do you have similar information for Kona? Thank you.

Patchara

patchara baumgartner

April 4, 2016

Do you have similar information for Kona? Thank you.

Patchara

Frank Owens

June 24, 2016

This is exactly the reason I’m trying to convince my wife to buy in Dominican Republic. You are NOT going to have any gain here, it’s priced in. Plan B is Puerto Rico. Game over.

Frank Owens

June 24, 2016

This is exactly the reason I’m trying to convince my wife to buy in Dominican Republic. You are NOT going to have any gain here, it’s priced in. Plan B is Puerto Rico. Game over.

Danita

July 9, 2016

Does anyone have any information on out-of-state lender’s? I am looking at purchasing a condo there and we’re having problems with the owner not wanting to deal with the lender that we have in California is that a normal thing thank you

Danita

July 9, 2016

Does anyone have any information on out-of-state lender’s? I am looking at purchasing a condo there and we’re having problems with the owner not wanting to deal with the lender that we have in California is that a normal thing thank you

Arek

September 9, 2016

Could you help me with getting set up with a vacation rental on Oahu and suggestions on property managers dealing with vacation rentals. Thank you.

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