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Maui Vacation Rentals Outpacing General Maui Market & Becoming More Valuable

The legal short term vacation rental market on Maui (and really throughout the entire state) is absolutely booming right now. Our market has been trending upwards since 2012, yet has shown some signs of stagnation in the market as a whole during the last 6-12 months with the exception of short term vacation rental properties. As discussed in previous blog articles, I have authored (see the bottom of this post for the archive), the properties that I am referring to are legal short term vacation rental condos that are either zoned Hotel or have been grandfathered in by the Minatoya opinion. In Maui County and other counties around the state — short term rental permits by means of Short Term Rental Permit or a Bed and Breakfast license are not transferable with the sale of the property and are extremely difficult to obtain. The home below offered by our team just recently had it’s 3 year STR permit renewed, but again, this is not transferable.

As a Realtor Broker, the head of Hawaii Life Vacations West Maui Portfolio, and a Real Estate Investor who practices this business at a very high level on an everyday basis, I am uniquely qualified to represent your best interests as it pertains to your financial and personal enjoyment future in Maui. Furthermore, I have an excellent team of agents who I work with on Oahu, Kauai, and Hawaii Island who are specialists in their respective markets that I collaborate with to serve the entire state- please let me know how I can best serve you.

If you are interested in specific short term vacation rental condo listings, please reach out to me directly as many websites don’t properly display this information correctly and/or there are erroneous representations. The foundation of my practice is trust, expertise, and service. I work with many off-island buyers, oftentimes with remote purchases, and these principles are integral to your protection and success.

Because these properties are such hot commodities, we are seeing multiple offers (many all cash) on our most attractive assets that come to the market almost immediately. 

43 Papaua Place, a direct oceanfront 5d./4ba. legal vacation rental home in Napili offered by our team, Papaua Paradise on Hawaii Life Vacations. 

Strong Demand for Maui Short Term Vacation Rentals

As you might imagine, there is a very strong demand for legal short term vacation rental properties in Maui, and why not?

  • Who doesn’t want to own a property on the #1 rated island in the World (20 years consecutive according to Conde Nast)?
  • Earn a decent and steady cash on cash return (the majority of my clients who have full-service management companies in place see about 3-6% not taking into account appreciation or depreciation) and are starting to break even with about 35% cash down payment on many properties. 
  • Enjoy excellent tax deductions by visiting Maui a couple of times a year to enjoy the sunshine and work on your condo a bit.
  • Have the ability to grow equity and roots in one of the top equity markets in the World.
  • Diversify one’s financial portfolio as the stock market rages to all-time highs.
  • 1031 out of overheated markets or look to earn a better return and/or coupled with other desirable aspects of ownership
  • People love to stay in Vacation Rentals rather than hotels for a myriad of reasons – Key Amenities of a Succesful Hawaii Vacation Rental Property
  • Southwest Airlines is now operating in Hawaii, making air travel more affordable, and Hawaiian Airlines continues to expand its direct flights to the islands.
  • Amy Highnote, who spoke at a vacation rental conference last year I attended in Palos Verdes and is the founder of Key Data (graphs below), writes an article here that U.S. Vacation Rental properties are well insulated against a recession. Predicting a recession? Historically, vacation rentals in domestic leisure destinations perform well during recession periods

Maui Short Term Vacation and Hotel Rates and Occupancies Increasing

Real Maui Vacation Rental Numbers

The above 2020 YTD data (hence the occupancy percentage at this point in the year being lower but much higher than the same point last year which is represented by Comp dates) and below (2018 v. 2019) are a brief snapshot of this property (Hokulani at 825 at Honua Kai, worth about $3M today)  which I represented my clients on back in 2014 and we have managed ever since. Last year, in our rental portfolio, we had our record year for almost every KPI (key performance indicator), and the most notable one, our annual gross revenue figure amounted to over $270,000; our previous high was about $235,000. They are a variety of factors which do account for this in the interest of full transparency: 1. The owner did not use the property much this year compared to year’s past 2. We have established substantial upward momentum in marketing this property for several years now. However, regardless of these factors, there is no question that occupancy is up, and so are the rates.

2018 Maui Short Term Rental Condo Pricing Stats

2019 Maui Short Term Rental Condo Pricing Stats

I pulled the above data directly from our Maui MLS as we don’t have any fancy tools at this time to differentiate the data for our vacation rental condos vs. residential condos. You will note that the total unit volume sold went up 9.2%, the average days on market dropped 5.2%, the average price dropped 1.8% (number more skewed by large sales like the high $10M sale in 2018 vs. the $7.95M high sale in 2019), the median sales price point increased 5.5% (stronger barometer of actual market trends), and the total sales volume increased by 7.1%. Compare this data with the infographic of the general market below, and you will see how the vacation rental condo market is outpacing the market as a whole.

We are seeing these trends take place from entry-level vacation rental properties, which really start at about $300K and escalate to around $10M. In this previous post, I rank Maui’s top luxury vacation rental properties, Sapphires to Diamonds – Ranking Maui’s Top Luxury Vacation Rental Investment Properties.

Limited Supply Maui is Not Building More Vacation Rental Properties

To my knowledge, there are no more short term vacation rental projects slated for Maui in the near future. With heavy opposition to the proliferation of short term vacation rentals and a strong community desire to increase affordability in both the rental and sales market, I think it is highly unlikely that we will see any new projects come on in the future. Luana Garden Villas, the final phase of the Honua Kai Resort and Spa in Kaanapali, is the most recent fee simply whole ownership vacation rental to be offered in Maui. Of the 72 new developer townhomes, there is only one remaining for sale actively on the market right now.

I blogged about Luana here previously and I believe we will start seeing resale properties at increasing values in the near future.

Luana Garden Villas at Honua Kai – search all Honua Kai Resort Real Estate here

To further illustrate this sentiment, the Grand Wailea recently announced that they would be substantially scaling back their expansion plans due to community opposition (variety of reasons), and the Ka’anapali Beach Hotel decided to do a facelift and modest increases to their room capacity amidst the aforementioned prevailing sentiments.

January 23, 2020 Maui News Article

Additionally, there are sentiments in the community to limit the number of tourists who are able to visit the islands on an annual basis. I am not sure how much traction that this will garner or how this would be enforced, but I do know that they do it in other international resort communities.

Dramatic Fine Increases for Illegal Short Term Rentals on Maui

One of my friends and fellow colleagues at Hawaii Life, Jessica Baker, did an awesome job with her post which reveals the details – Huge Fine Increases for Illegal Short Term Rentals in Maui. The fines are mainly being levied towards those renting out their homes on a short term basis without a permit, which was becoming increasingly more prevalent, so those with permits or have the underlying zoning become more valuable.

Thank you for taking the time to read this post. I hope you enjoyed and found value in this article, please feel free to leave me a public comment or reach out to me directly if I can be of service to you.

Jeremy Stice R(B) at Your Service

As the director of Hawaii Life’s West Maui Vacation Rental portfolio and one of Hawaii Life’s top-selling Brokers, my team and I are here at your service. I was born and raised here in Maui, am a third-generation Realtor, and my wife and I have called West Maui home for the last 10 years and enjoy sharing our passion for it with all who are interested. I make a commitment to pick up my cell phone as best as I can, return voicemails, text messages, and email in a timely fashion. I also work 7 days a week so feel free to call me anytime you need me. However, if I am busy at the time, I will get back to you shortly. I am here at your service, I look forward to sharing my passion and expertise with you. Want to follow my blog via email updates? Please enter it below. This will not be used for any other reason than automatic blog updates that I post. Subscribe to the Jeremy Stice Blog Roll Here 

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Anna Severson

February 6, 2020

That’s a fantastic shot of Papaua point! Shaka!

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