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Buying a vacation rental in Kauai can be a smart way to increase your return on investment and help offset costs of ownership. By owning a vacation rental, you can not only become one of the lucky few to stake claim to a limited piece of real estate in arguably one of the most epic destinations on the planet, but it might also be a means to an end to get your home base for your annual getaway or help stage your long term retirement plan. Whether you intend to use your new home half the year or for two weeks over spring break, renting it out during your absence can be a very cost-efficient and tantalizing prospect for many buyers.
However, it is important to understand how and where vacation rentals work in Kauai. The law and permit requirements are extremely specific and consequence and penalties of misuse can be costly, as well being a criminal violation subject to prosecution. A local real estate agent can help provide clarity and ensure you have the confidence needed to move ahead in your purchase.
What is the VDA?
Kauai county defines the “Visitor Destination Area” as “timeshare boundary lines on county zoning maps.”
Basically, these are broad but very specific areas of which all inhabitants have the opportunity to apply for a vacation rental permit (TVR) and covers primarily resort coastline areas such as Poipu and Princeville. Currently, it is permissible for anyone within the VDA to operate a vacation rental.
However, the VDA is a meandering zone and different subdivisions may or may not be within it. It is important to work with a qualified agent to determine whether your desired property is in fact in the VDA zone.
What is a TVR?
A TVR is a “Transient Vacation Rental” or if outside the VDA is called a TVNC or “Transient Vacation Non-Conforming” use certificate. They are permits for “dwelling unit(s) provided to transient occupants for compensation or fees, including club fees, or as part of interval ownership involving persons unrelated by blood, with a duration of occupancy of one hundred eighty (180) days or less.” Ordinance 904
No single family transient vacation rental shall operate outside a Visitor Destination Area without a Nonconforming Use Certificate obtained under Sec. 8-13.10. (Ord. No. 935, November 14, 2012)
Thus, if you are outside of the VDA, the property either has a grandfathered TVNC permit or it does not. All applications had to be submitted by October of 2008 and no new permits are being granted. Every year, this permit must be renewed via Kauai County application at a current cost of $750 and by providing proof that all GET and TAT taxes are current.
This is what makes a TVR (non-conforming use certificate from the county) incredibly valuable… priceless, really.
Why did this happen?
Tourism rates increased quickly and many private homes were being rented as accommodation demand and opportunity for profit skyrocketed. As a result, less housing became available to full time residents, traffic, noise and activity increased in traditionally quiet areas (Haena, Hanalei, Ho’ona in Poipu), and the imbalance of tax equity and public safety became very concerning to the County of Kauai. As further explained by ordinance 864, “…the uncontrolled proliferation of vacation rentals in residential and other areas outside the Visitor Destination Areas…is causing significant negative impacts to certain residential neighborhoods…”
The intent of the establishment of the VDAs was to consolidate visitor accommodations into focused areas, to regulate impact on residential neighborhoods, and to capture appropriate tax revenue.
Bottom line, there is a reason we all love Kauai. The look, the feel and sense of open space helps give it its magic. While the other islands also have their charm, the rural aspect of Kauai keeps it unique and the intention is to preserve this mystique as development and tourism demands increase.
How much is it worth?
It is hard to put a price tag on a TVNC as NO NEW NON-CONFORMING USE PERMITS ARE BEING GRANTED. Homes prices will vary depending on whether it has a grandfathered TVNC appurtenant, although you can count on it not only being more expensive, but it will also continue to be more prized for resale as time goes on and the anticipated attrition of these permits occurs.
In Poipu, quarterly median residential sales prices in 2017 hover between $700,000 – $800,000*. Most single family homes currently for sale with a TVNC use permit (outside of the VDA) in place will cost well over $1,000,000. There is great value for all homes within the VDA with their TVR’s current as well.
*Hawaii Information Services
If you would like to see the current vacation rental inventory for sale in Kauai, please contact me for a market update.
Of course… marketing your vacation rental is key and stellar professional images are a must. Images contained courtesy of Lannie Boesiger who specializes in real estate and vacation rental photography.
It should be noted that each county varies in its regulations and laws of vacation rental permits. Visit the county sites below for specifics: