Why Invest in Airbnb Hawaii (2024)

Why should anyone consider investing in Airbnb Hawaii? Hawaii is one of the world’s most precious and appealing property markets.

As the recovery unfolds, demand for buying and renting in Hawaii is sure to increase. Real estate is an excellent investment for several reasons, and Hawaii real estate is an outstanding portfolio option.

Table of Contents

Why Hawaii Is a Great Location for Airbnb Investment
How to Start an Airbnb Hawaii Business
The Top 5 Cities in Hawaii for Airbnb Investment
Conclusion

In this article, you’ll find important guide points, such as an overview of Hawaii’s real estate, relevant property metrics, existing Airbnb regulations, the best cities to invest in, and more.

Why Hawaii Is a Great Location for Airbnb Investment

The growth in the value of a property over time is referred to as appreciation or capital gain. While the Hawaii real estate market has had its rise and fall, it has always experienced steady appreciation. Also, the declines are not as severe as on the US mainland.

Since 1972, a single-family house’s long-term average yearly gain has been about 6% and 5.4% for a condo. In the past few years, average selling prices for Hawaii properties have also increased. The median single-family house sales price in June 2019 was $800,000, while the price in May 2021 was $978,000. In June 2019, the median sales price for condominiums was $432,500, and in May 2021, it was $457,750.

Here is the most recent data from Mashvisor on Airbnb in Hawaii:

Median Property Price: $1,070,407
Average Price per Square Foot: $985
Days on Market: 96
Monthly Airbnb Rental Income: $5,418
Airbnb Cash on Cash Return: 4.67%
Airbnb Cap Rate: 4.75%
Airbnb Daily Rate: $209
Airbnb Occupancy Rate: 73%
Walk Score: 41

Let’s see what investing in Hawaii Airbnb can give you and what you should be aware of.

1. Hawaii Real Estate Is Resistant to Inflation

Prices often rise with time, and you can’t buy as much with a dollar as you previously could. However, in such a case, because real estate is purchased for a specific price and monthly mortgage payments are often set, the price you pay for your real estate investment will not rise over time—therefore fighting inflation. However, the rent you charge may increase in line with inflation, boosting your overall revenue.

2. Rental Income Can Provide a Cash Flow

Cash flow is the income made after deducting expenditures like taxes, insurance, utility, and wear and tear. The money is like an extra income each month, and it may grow when rent rises in line with the market. Rents in Hawaii often rise, so your monthly cash flow may rise over time.

The average rent for a one-bedroom Airbnb Honolulu Hawaii is roughly $2,000 as of July 2021. If you find a good bargain and buy a one-bedroom condo for $200,000 cash, with utilities and upkeep bills of $1,000 per month, you will make about $1,000 in monthly cash flow.

If you took a mortgage after putting down 20% at closing, your mortgage might be approximately $1,000. You’d be making money with maintenance and utility while your condo develops and the average rent rates rise.

3. Tourism Helps the Local Economy

What follows will be a significantly altered experience for tourists and locals—hopefully in a positive sense. For the first time, Hawaiian natives lead Hawaii’s tourist organization, instead of white mainlanders with hotel degrees.

Moreover, there’s a strategic plan in place for each of Hawaii’s four provinces. The plan extends through 2025 and relies on sustainable destination management rather than advertising. It involves the state’s residents, ranging from farmers to hotel owners.

Many things can be said about the Hawaii real estate and tourism this year. According to recent news, there are so many visitors to the state that the restaurants are becoming filled. Moreover, it causes guests to wait for up to one hour just to obtain a table. Locals and tourists alike are all waiting, and no one is pleased when they are both hungry and waiting.

While it is good for real estate investors and Hawaii rentals, residents find it hard to manage. Locals think that the easiest way to fix the problem is for people to avoid visiting their home state while it is in its current form. However, the required debt payments and the post-pandemic rush outlined by Mayor Victorino make it an almost impossible task.

4. Tax Deductions Are Available Each Year

Real estate offers various tax advantages, including mortgage interest deductions, cash flow from property investments, depreciation (even if the property increases in value), and more. You should always ask your accountant about the tax benefits of your Hawaii Airbnb monthly rentals.

5. Airbnb Hawaii Is Legal

Investors interested in entering the Hawaii Airbnb industry will be relieved to learn that the business is legal in the state. However, it does not imply that you can operate a vacation rental business anywhere on the land. To maintain your short-term rental company lawful and avoid penalties, you should stick to zoning requirements.

Hawaii’s regulations vary from county to county. They are intended to limit the number of rental units in residential neighborhoods, particularly in tourist destinations such as Hawaii County and the Big Island.

One important fact to keep in mind is that the visitors to Hawaii who want to stay in a vacation rental rather than a hotel should be aware of a newly implemented rule regarding short-term rentals on the island of Oahu. Beginning in October 2022, the minimum stay for non-resort zone short-term rentals will be increased from 30 to 90 days.

Some additional and optional Hawaii Airbnb long term rentals and short term include the following:

Nonconforming use certificate
Building codes
Housing codes

Find a Profitable Rental Property

How to Start an Airbnb Hawaii Business

Various rules control the Airbnb business on the islands, some of which make it challenging to host an Airbnb property. While not definitive or legal advice and only applicable at the time of writing, below are some legal factors to take into account when considering becoming an Airbnb host.

Understand the Zoning Laws

Zoning restrictions, which vary on each island, determine whether a property may be lawfully utilized as a short-term rental.

Oahu: Is it possible to rent an Airbnb Oahu Hawaii? According to Bill 89, also referred to as Ordinance 19-18, which Mayor Kirk Caldwell approved in June 2019, the number of Bed and Breakfast (B&Bs) on the island would be limited. In particular, no more than 0.5% of the total number of housing units within every Oahu regional area may be used as B&Bs.
Maui: Can you rent the Airbnb Maui Hawaii? Paia-Haiku Community Plan Region and Maui Meadows of Kihei-Makena Community Plan met their short-term rental housing or Airbnb permit limitations in June 2021. For example, Maui County allows short-term rentals without the landlord’s presence. You must apply via Maui County’s Planning Department and submit a Zoning & Flood Confirmation Form to apply for a short-term rental home.
Kauai: Airbnbs are permitted in Visitor Destination Areas (VDAs) and areas designated for hotels. The number of vacation rentals in such regions is about 4,000, and Kauai no longer accepts short-term rentals outside these approved zones.
Big Island: Are you looking to turn your property into an Airbnb Kona Hawaii? Take note that Bill 108 prohibits new short-term rentals in single-family residential units. They are only allowed in multi-family units, hotels, resorts, and commercial zones.

Consult a Realtor

Only a few places in Hawaii are permitted to be utilized for short-term rentals. You can’t just buy any house or apartment and list it for rent on Airbnb. Many areas in Hawaii only allow long-term rentals, which the state defines as 180 days or longer.

Consider using an online method to make your process more manageable if you are searching for the ideal property via the traditional way, which requires long and tedious work. Many online platforms are available that can help with real estate buying and investing. An online real estate platform like Mashvisor can be of help.

Focus on the Pricing

If you check for condominiums online and sort by lowest price first, it may be difficult to understand why one two-bedroom property costs three times more than another. It might be due to costly maintenance expenses, a leasehold vs. fee simple asset, or a monthly special assessment charge. Remember that every property is advertised at a specific price for a purpose.

Learn About the Potential Property

Speaking to a property manager and tenants about their condo complex may teach you a lot, and a skilled agent will do the homework for you. You’ll want to know if they allow for short-term rentals, how citizens feel about short-term rental properties, if there’s been any discussion about the building not designed to allow short-term rentals, how residents feel about the condo association, and more.

Think About Rental Taxes

When you earn rental revenue from your Hawaii property, you must pay three distinct taxes:

General Excise Tax (GET)
Hawaii Income Tax
Transient Accommodations Tax (applies if renting to short-term renters)

In addition to rental income taxes, you must account for property taxes and any costs involved with renting your home. Several property owners, for example, employ an online reservation service like Airbnb or VRBO to advertise and rent their property.

Now that we’ve covered the relevant details on starting an Airbnb Hawaii, let’s see the best five cities for Airbnb in Hawaii that may even turn into an Airbnb arbitrage one day.

Airbnb hosts or homeowners should ensure that they always account for rental income taxes and property taxes to avoid potential issues.

The Top 5 Cities in Hawaii for Airbnb Investment

Mashvisor, a real estate company specializing in property location and real estate market analysis, provides all the Airbnb data below. We focus on the cities with the highest cash on cash return, from highest to lowest. Having said that, here are the top five cities for Airbnb investing in Hawaii.

1. Waianae

Tour operators release their boats at the Waianae Small Boat Harbor to take visitors out to dive with wild dolphins or cruise around the shoreline. It is a small operational harbor where fishing boats and tiny yachts may be seen. Moreover, Pokai Bay is Waianae’s top swimming beach.

Median Property Price: $549,148
Average Price per Square Foot: $521
Days on Market: 50
Monthly Airbnb Rental Income: $5,099
Airbnb Cash on Cash Return: 7.53%
Airbnb Cap Rate: 7.73%
Airbnb Daily Rate: $217
Airbnb Occupancy Rate: 78%
Walk Score: 21

2. Mililani

Despite mainly being a bedroom community for Honolulu, Mililani houses shopping malls, parks, schools, and a public golf course. The city is comparable to a normal American suburb.

Median Property Price: $775,806
Average Price per Square Foot: $554
Days on Market: 31
Monthly Airbnb Rental Income: $8,007
Airbnb Cash on Cash Return: 7.01%
Airbnb Cap Rate: 7.08%
Airbnb Daily Rate: $294
Airbnb Occupancy Rate: 73%
Walk Score: 52

3. Kapolei

Kapolei is home to several spectacular, one-of-a-kind attractions. A big water park, an outstanding golf club, the new Disney Aulani Resort with three lagoons, and a variety of retail and dining options are all available.

Median Property Price: $1,119,500
Average Price per Square Foot: $668
Days on Market: 53
Monthly Airbnb Rental Income: $7,892
Airbnb Cash on Cash Return: 5.06%
Airbnb Cap Rate: 5.10%
Airbnb Daily Rate: $461
Airbnb Occupancy Rate: 70%
Walk Score: 50

4. Aiea

Pearlridge, Hawaii’s largest indoor retail complex, is located in Aiea. The city is home to the sole monorail system on the island, which transports people between Uptown and Downtown Pearlridge. Customers can enjoy the breathtaking trip that includes Pearl Harbor and the Arizona Memorial views.

Median Property Price: $686,279
Average Price per Square Foot: $508
Days on Market: 56
Monthly Airbnb Rental Income: $3,858
Airbnb Cash on Cash Return: 5.03%
Airbnb Cap Rate: 5.12%
Airbnb Daily Rate: $177
Airbnb Occupancy Rate: 85%
Walk Score: 13

5. Honolulu

The capital city of Honolulu boasts historical landmarks, excellent food, and world-class retail outlets. It is home to the majority of Oahu’s population, stretching from Pearl Harbor to Makapuu Point and including the world-famous Waikiki Beach along the way.

Median Property Price: $871,840
Average Price per Square Foot: $895
Days on Market: 88
Monthly Airbnb Rental Income: $4,315
Airbnb Cash on Cash Return: 4.80%
Airbnb Cap Rate: 4.89%
Airbnb Daily Rate: $165
Airbnb Occupancy Rate: 71%
Walk Score: 46

Conclusion

Purchasing a second house, investment property, or Airbnb Hawaii to rent out to tourists is a major financial investment. You must calculate all potential expenses associated with the transaction, from closing charges and taxes to cleaning fees and property upkeep.

Working with local specialists is the best method to determine the future expenses and benefits of purchasing a vacation property in Hawaii. In addition, when searching for property, consider online real estate platforms such as Mashvisor.

Mashvisor offers a vast database covering nearly every real estate market in all 50 states. It also provides customers with access to some of the most effective real estate investment tools accessible online.

For your real estate investing needs, sign up for a 7-day trial of Mashvisor today, followed by 15% off for life.

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