Hawaii is becoming an increasingly popular tourist destination, and many more people are starting to consider purchasing a vacation home. As a result of that, one in 24 homes in Hawaii is now considered a vacation home or rental. Out of the state’s 23,000 vacation rentals, over half of them are owned by non-residents.
Although investing in a vacation rental isn’t a guaranteed way to get rich quick, it’s a great way to help you earn extra income over time. With that in mind, here are some important factors to consider if you’re wondering whether buying a vacation home in Hawaii is a good investment.
The Hawaii real-estate market
If you’re considering buying a vacation home in Hawaii, you’re probably familiar with the controversy surrounding the state’s housing market. There are constant arguments — especially mainland — regarding the best time to buy, property values, and the possibility for a bubble burst. According to Hawaii housing market reports, there’s no risk of a bubble burst. Instead, the housing market is actually becoming more stable.
Compared to the rest of the United States, home prices in Hawaii are much pricier due to the high demand and limited number of buildable locations. Summer is the best time for buying and selling homes, as Hawaii often sees record-breaking price movements over the summer. Before making any major investments on a property, you should look into the area’s rules and regulations for vacation rentals.
Investing in a vacation home
A recent survey by HomeAway found the average renter of a vacation home collects an additional $33,000 yearly in rental revenue. As a general rule of thumb, target a yearly rental income of $12,000 to $14,000 for every $100,000 spent to purchase a vacation home. It’s also essential to take the location’s property taxes into account when calculating potential revenue.
Keep in mind that your yearly rental income will vary if you’re not planning to use the home solely for profit. According to Airbnb, owners who rent sporadically make an average rental revenue of $11,000 a year. In other words, you’ll earn less if you stay in your vacation home or neglect renting it out for a period of time, so make sure to plan for this.
Setting a rental price
Pricing your property competitively will help you maximize your occupancy and avoid vacancies. It can be difficult to decide on a price for your vacation home — setting it too low may attract the wrong kind of guests, while setting it too high creates risks for vacancies. It’s important to know the ins and outs of the market and pay attention to the prices offered by your competition.
If you’re looking to set a higher price for your property, keep it up-to-date and offer amenities. The investment you make in restoring the property will pay off in the long-term, as you’ll be able to avoid vacancies while generating more revenue. Consider searching for appliance repair in Honolulu, a new TV for the living room, or high-speed WiFi. Additionally, access to transportation, proximity to attractions, and neighborhood safety are all relevant factors in setting a price.
Vacation rental home use is on the rise. After a record-breaking 20 percent increase from the United States in 2018, vacation rentals are beginning to outpace hotels. Buying and renting out a vacation home is ideal for generating rental revenue while having the option to vacation whenever you want. All in all, it’s important to remember that the purchase of a vacation rental won’t make you rich overnight.