Hawaii investment properties and the Airbnb effect

Hawaii investment properties and the Airbnb effect

Hawaii investment properties can also benefit from the Airbnb effect.
Without a doubt Airbnb is a big hit. As they venture into more and more areas around the globe, more news is written about the company. In real estate, it is showing a small but dramatic effect in my opinion. The platform has provided an incredibly easy way for people to manage their property as a Hawaii vacation rental. The short term market rents dramatically can increase an investment's profitability.

I have clients visiting Hawaii to view properties that book Airbnb units. Other people I know rent properties out on Airbnb. The reports I receive on renting out properties in Hawaii on Airbnb are mostly positive. In general, I think people are excited about the possibilities of this platform for Hawaii investment properties.

In years past sites like VRBO and Homeaway seemed to dominate the space and now Airbnb is clearly taking over.

Hawaii investment properties. Being aware of the market and local laws

Buying a Hawaii investment property in order to rent it out via Airbnb can bring in a higher return. There are many facets to consider in order to do so responsibly and understanding the associated risks.

1. Zoning in Hawaii.

If you have been around Hawaii for a while, you will become acquainted with how many properties seem to be chopped up and rented out separately. Many have turned a blind eye to this practice over the years because of our unbelievable housing shortage. It also goes back to how much real estate costs. From a homeowner’s stand point, if you can convert part of your home to a rental, it can mean affording a better home in a better location. For a tenant it can mean living in a better neighborhood for less cost. This symbiotic relationship has existed for decades across neighborhoods in Hawaii.

It is important to be aware that this frequently violates the zoning and building codes. Government officials and the neighbors have turned a blind eye to this because of the housing shortage. However, turn those extra units into an Airbnb that violates the zoning laws and if you have neighbors that are unhappy about it, watch out! George Atta, the new Director of the Department of Planning and Permitting has said he will crack down on illegal vacation rentals.

Therefore, make sure your property would not violate zoning laws or the building code. Most residential real estate in Hawaii allows for a 30 day minimum rental. There is nothing wrong with turning that home at Sunset Beach on Oahu's North Shore into a short term rental on Airbnb, provided it is for 30 day periods.

2. Hawaii Condominiums:

Many condominium projects in Hawaii have instituted a minimum rental period. Some of the ones with the most teeth are the co-ops in Diamond Head. For example the Diamond Head Apartments says that you can not rent the unit that you just purchased for at least a year after purchasing it. Then afterwards there is 6 month minimum rental period.

People have tried to rent their units out quietly anyway and trying to not reveal which unit it actually is in the building. For some this has not worked out so well. Condos such as Kahala Beach Apartments actually has their assistant manager LOOK for illegal rentals on line. Other building managers have reported to me that they have owners come to them and complaining that specific units are illegally renting out their units.

It is understandable to have the backlash, because many of the owners do not want to feel like they are living in a hotel. As a contrast there are some Hawaii condominium projects that openly flaunt the rules and because that is the condo's culture, no one complains.

3. Hawaii State Laws:

There are 2 state laws to be aware of when renting out your Hawaii investment property on the short term. First is that rentals need to have an representative on-island. Either you need to be on island or you need to have someone on island for the tenant to contact in an emergency. Also, for short term rentals the appropriate Transient Accommodation Tax number has to be shown on the rental ad. This is includes on Airbnb. Transient Accommodation Taxes apply to any rental shorter than 6 months. So even if you rent by the month, then this number must shown.

4. Hawaii Tourism Market:

Once relying on Airbnb income for your unit, owners are a bit at the whim of the tourism sector. This has had some bumps in the road in the past. The most notable one of late is when the Japan earthquake created a tsunami and the nuclear disaster at Fukushima. It was a sudden horrible shock to Japan and overnight, trips to Hawaii were canceled. Waikiki was empty. Economists expected to last for 9 months. We did see a meaningful recovery in about have that time. It is just to be aware that a short term rental can have much more risk that a long term tenant.

With all of these pitfalls, investors can still do well with buying Hawaii investment properties and renting them out on Airbnb. There is a way to do it legally and still do well. It is good to have good representation that can help show you what is or is not legal and the possibilities of earning money with a piece of real estate in Hawaii.

If you have a question about this article, Hawaii investment properties or looking for real estate in Hawaii, please do not hesitate to contact me at 808-394-9779 or use the form below. Mahalo!

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