Investing in Paradise
You may recognize the phrase Maui nō ka ‘oi (“Maui is the best”) from a coffee mug or t-shirt at the ABC store, but it’s more than just a catchphrase. It really gives a glimpse into why so many people dream of vacationing—or better yet, living—on the beautiful island of Maui.
Maui has an irresistible draw that pulls people in from all over the world, whether it’s just for a visit or the prospect of buying real estate. Entering the housing market can be daunting no matter where you’re looking, but the market on Maui is particularly unique due to the fact that there’s such limited land on the island. But don’t stress—the law of supply and demand is on your side! There will always be demand to live in paradise here on Maui, but there is only so much supply, which is why it’s important to invest now.
The best news? Real estate on Maui always appreciates over the long-term. As an example, my family purchased a condo at Sugar Beach Resort in 1985 for $125,000. This condo is now worth over $1,200,000 due to today’s competitive market. Tourism numbers have climbed back up following the island’s COVID-19 shutdown, and these numbers will only continue to rise. The rapidly expanding vacation rental market brings more opportunity with it. So the question is, which is a better investment on Maui: owning a home or a condo?
Owning a Condo: Let Your Property Work for You
From an investment standpoint, a condo is a wise choice with long-term benefits. If you’re looking for rental income to help with a mortgage payment, you should consider purchasing a condo zoned as a vacation rental. In Maui, you cannot rent a house or a condo to short-term renters (often done through sites like VRBO or Airbnb) unless the property is specifically zoned for short term vacation rentals. A short-term rental is deemed anything less than six months and is most often used by vacationers looking for an island getaway. Visit the Maui County official website for more information on short-term rental guidelines.
Purchasing a condo and renting it to visitors will not only earn your money back, but will more than likely produce a profit over time due to the timeless appeal of Maui. Vacation rentals on Maui have always been a conservative long-term investment because there is constant tourism demand. Even with rising interest rates, we are seeing record high nightly rental rates which produce great returns for owners. If you’re interested in seeing current numbers and examples about how a typical vacation rental performs in revenue minus expenses, feel free to contact me. Invest in a vacation rental now, and you’ll thank yourself later!
A Few Things to Keep in Mind
Beyond zoning, there are a few key factors to take into consideration before jumping into the Maui short-term rental market.
Yes, it’s true that location is everything—but don’t be discouraged if real estate is difficult to find in typical “prime locations.” Visitors have different preferences when it comes to rental properties. For instance, a family of four may prioritize a property within walking distance to the beach. Meanwhile, a group of foodies will want to be near the island’s best eats. When looking at a property that’s eligible for short-term rental, consider its location in terms of the demographic you wish to appeal to.
Something else to keep in mind is the possibility of additional costs. Your condo may be subject to HOA fees, maintenance and repair costs, and possible renovations. Don’t let this deter you, but be aware that rental properties have their own fees and regulations to account for. Fees will vary based on the condo complex, but it’s good to familiarize yourself with these potential expenses. These often include management of the grounds and pool, but some may cover services such as cable or Wi-Fi.
Another aspect to take into consideration is the management of your condo. Will you hire someone to handle any issues that may arise, or will you be the one answering a guest’s call at midnight if the toilet overflows? Whatever you choose, it’s important that you calculate both the financial cost and the time commitment involved.
Home Sweet Home
Owning a home, on the other hand, comes with its own benefits. Like condos, homes appreciate and hold their value in the long-run. Both property types are highly desired in today’s market.
For a family seeking more square footage and storage space, a house may be the best choice. The perks of purchasing a single-family home on Maui include a greater level of privacy (no noisy upstairs neighbors!), the ability to enjoy indoor-outdoor living via your own backyard, and extra room for bikes, surfboards, kayaks, and snorkel gear in the garage. While short-term rental eligible condos are primarily populated by visitors who are just passing through, Maui’s residential communities are filled with full-time residents who can help you integrate into the community.
Renting Your Home
Renting is still a viable option with a house. Although it’s challenging to obtain short-term rental eligibility for a single-family home, there is an approval process in place for Bed and Breakfast permitting that makes this an option. Going the long-term route is an easier and more straightforward way to open up your home to renters. In addition to providing a consistent stream of income you can rely on each month, your choice to open up a long-term rental opportunity will be much appreciated by locals as there is a perpetual need for additional housing on the island. This can still be a lucrative way to use your space, especially if you plan to split your time between Maui and the mainland for six months or more at a time.
Many houses on Maui include something called an ‘ohana unit. An ‘ohana, legally known as an accessory dwelling, is an additional house or apartment located on the same property as a primary residence. These units can be attached or detached from the main house and are fantastic for usage as a mother-in-law suite or for long-term rentals.
It’s common for homeowners on Maui to rent their ‘ohana as the additional income cycles right back into their mortgage payment. With the high demand for housing in Hawaii, you won’t struggle to find potential renters. In fact, you’ll likely have to pick from a pool of eligible applicants!
There’s No Time Like the Present
Maui is a place like no other, but it’s far from being a hidden gem. People dream for years of spending their honeymoon on one of Maui’s black sand beaches or sharing a Haleakala sunset with their family. Maui continues to climb vacation destination lists, and tourism is only going to increase as people become comfortable traveling again.
Owning a condo or house is a great way to earn supplemental income, and the market on Maui only confirms this. Ready to take the next step towards owning a piece of paradise? Get in touch today and let’s start looking at properties!