Buy a rental in HI?

[StashthatCash]

Just a general question here, does anyone currently own a property in a vacation area such as Hawaii that they rent out?  I was on Airbnb and there are a bunch of people that I see renting out condos for a decent amount per night (around $200-$250) and it seems like they run a pretty full schedule. 

So if I were to run through the quick math, lets say I can rent it out for $200 a night and say 200 nights per year which obviously is $40,000.  There are condos that are going for just above $100K with ocean views which I imagine are easier to rent out.  All in all, would it be worth it?

[clarkfan1979]

Below is a link of a report conducted by a consulting firm on rents for the island of Kauai.


http://dbedt.hawaii.gov/hhfdc/files/2015/02/RENTAL-HOUSING-STUDY-2014-UPDATE-COUNTY-OF-KAUAI.pdf


It seems like an occupancy rate of 65% is best case scenario. If you run the numbers, it's very difficult to make any money with a 35% vacancy rate.

There was a podcast on biggerpockets.com for vacation rentals. He rents out an apartment in Austin, TX on airbnb.com He does all the management himself and has an occupancy rate of 85%. He makes money but he is local and does all the work himself. He also found a condo complex that let's him do weekly rentals, which is hard to find.

[Jeremy E.]

if you are renting it out nightly, it helps for someone to be there to check up on it/clean it occasionally.

[fishnfool]

Very informative study Clarkfan, thanks for sharing that link.

There is a high demand for SFH's on Kauai but the vacation rental market is a different animal. Personally I would count on a 50% vacancy to be conservative in doing the math. There are just too many vacation rentals all competing for their clients. Many of the lower cost condo units count on repeat low budget vacationers. It can take some time to build up a demand for your unit to get the vacancy number lower. But if you have some of the preferred amenities and a ocean view you will get a nice demand for your unit. As mentioned you'll need to set up a cleaning person to keep your unit up. Most owners charge a cleaning fee from $100 to $200 and have a 3 day minimum stay. You pretty much need someone to change linens and do a light cleaning with every client.

Most of the units I've rented in HI with a value between $150K to $250k rent for $85 to $150 per night depending on the season. I have rented a condo for the last 6 years on Kauai for $75 per night from a private owner, incl tax & cleaning. Those condo's are selling for @ $200K right now. Some of the owners I've met buy them to rent out and pay for their investment that they like to use for part of the year. The condo maintenance fee's eat up most of any profit you might see.

But if you can have a place to enjoy that is paying for itself, that's great!

OP, if you can get a condo for $100k with a ocean view and rent it out for $200 per night that sounds like a great buy!