I recently held an open house at Hali’i Kai, and there were many questions on buying a rental property on the Big Island.
Before buying a rental property, it’s essential to understand the costs of purchasing property on the Island and maintaining a rental property. There is much knowledge that goes into picking the right rental property, especially on the Big Island.
1. Location, Location, Location
Millions of people come to the Island each year. They come for the beaches, the weather, outdoor activities, and the spectacular eco-systems. If you are purchasing a rental property as an investment, buying an excellent location will assist your rental occupancy numbers. As they say in real estate, location is key.
2. Homeowners Association
Throughout the Big Island, you will see quite a variety of HOA (Homeowners Association) dues. Each complex provides different services in its association packages. The prices can range from $400 a month to $4,000 a month. Understanding the association rules and making sure there are no restrictions on rentals is ultimately up to you. Having a real estate agent that knows the property rules will also help guide you. Some condos in Kona, like Alii Cove, do not allow for short-term rentals. Some condos like Hali’i Kai have a minimum stay of 3 days. Understanding the property rules and regulations is an integral part of a rental property.
3. Depreciation/Maintenance Costs
Putting aside a percentage of your rental property’s worth for routine maintenance and normal deprecation is a tremendous preventative move. Hawaii is an international destination from over the world and part of the beauty of the Island. Your rental property will have many people go in and out of the property. That creates wear and tear on the property and should be maintained. The better condition the property is in, the better your reviews will be and your rental rates.
4. Property Taxes
We are lucky to have one of the lowest property taxes in the nation. Property taxes still play a part in your overall expenses, and factoring theming into your bottom line is important. As a general rule, your property tax is 1% of the sales price. Tax rates are calculated by the county and are based on home sales within the past ten months.
5. A Property Management Plan
If you don’t live on the Big Island, it’s required to have an on-island representative. Having a plan on how you want to manage the property is essential. Hiring a reliable and skilled property manager ensures tenants are taken care of and the property is maintained. I recommend talking to a property manager before buying. They work with rentals daily and will have some great tips and advice. If you need some recommendations on whom to call, give me a call or send an email.
Specializing in West Hawaii Properties
Purchasing a condo or single-family home on the Big Island can be exciting and overwhelming all at the same time. If you have never purchased a property in Hawaii, it could be quite different from the mainland. Working with a real estate agent who knows the community’s pros and cons will help you feel confident in your real estate decision. I would be honored to help you find your piece of paradise.