Buying a vacation rental in Hawaii can be a smart investment—one that generates passive income and gives you another great excuse to visit the islands. But before you make a purchase, it’s important to understand the unique rules, taxes, and considerations that come with owning a Hawaii short-term rental.
If you’re wondering, “What do I need to know before buying a Hawaii vacation rental?” here are the four most important things to consider.
Here are 4 things to know and do before you buy a vacation rental in Hawaii.
1. Work With a Realtor Who Understands Hawaii’s Short-Term Rental Laws
In Hawaii there are only certain areas that can be used for short term rentals. There strict zoning laws that regulate where short-term rentals (STRs) are allowed. Not every house or condo can legally be rented on Airbnb or VRBO. Many locations in Hawaii only allow long-term rentals, which are defined by the state as a rental of 180 days or more.
2. Account for GET Tax & TAT Tax When Estimating Potential Income
In Hawaii, there is a (General Excise Tax) GET and (Transient Accommodation Tax) TAT that you must pay when you rent out your short-term rental property in Hawaii. Rates vary slightly by the island, but 15% is a good starting point for a combined total. GET and TAT are charged against the gross rent you receive. So, if you rent out your condo for one night and get $100, your tax may be about $15.
3. Be Cautious of Too Good to be True Prices
If you’re browsing listings and wondering why one condo is two or three times cheaper than another, there’s usually a reason. Lower prices may be due to:
- High monthly maintenance (HOA) fees
- A leasehold property rather than fee simple
- Special assessments
- Poor building condition
- Strict rental restrictions
Always look beyond the list price and calculate the true cost of ownership.
4. Learn About the Building and Talk to the Property Manager
There’s a lot that you can learn from talking to a property manager and residents about their condo building, and a good realtor will do this work for you. You’ll want to know if the condo rules allow for short-term rentals, how people in the building feel about short-term rentals, if there’s been any talk about the building not allowing short-term rentals, if there’s any deferred maintenance on the building, sinking funds, how residents feel about the condo board, and more.
Want to Learn More About Buying a Vacation Rental in Hawaii?
Whether you’re a first-time investor or experienced with real estate, Hawaii’s short-term rental market is unique. Working with a local expert can help you avoid pitfalls, understand local regulations, and find properties with strong earning potential.
If you have questions or want personalized guidance, contact us—we’re happy to help you navigate buying an investment property in Hawaii.
janet
February 11, 2020
what is the best rental investment property…anything beachfront and what return can be expected.
Tom Selman
February 12, 2020
> Hi Janet, Thanks for the comment. Wow, that is a fantastic question and it’s giving me inspiration for another research article! The best rental investment and return rate will vary significantly depending on your investment preferences and your personality. For example, if you want to be a more active or more passive investor and what investing goal your working to accomplish. If you don’t want to have to spend much time on it and don’t need a lot of monthly income then finding a good buy on a family home and doing a long term rental with the goal of building equity through market appreciation may be a great option. If your looking to make more on a monthly basis and have the time and desire to be a more active investor then an ocean front condo short term rental could be the best option. The zoning laws changing and the decrease of illegal short term rentals is giving some airbnb operators a huge boost right now! As for return, wow, that’s really tuff to say, SO much depends on the individual. It’s not for everyone, and some people don’t like it and even loose money. However, some people I know, like my brother in Ohau, does EXTREMELY well on it, that’s his full time business and he loves it! (I’m planning a viedo blog with him soon to interview him and get his personal insights on the business, so stay tuned!)
I could give you a more exact answer by talking to you and getting some more info about your preferences and goals. I would love to chat with you more about this over the phone, or in person if your going to be on island any time soon.
I’ll send you a short follow up email, thanks again for the fantastic question!
Aloha,
Tom Selman
Roman
May 20, 2020
Thanks for post. Maybe we will be useful & may help you with salling, buying or renting house – hawaiitrustedrealt.com. We can cooperate with you.
Billy
December 4, 2020
I see alot of nightly rentals on the big island. In the waa waa area i was wondering if im allowed to build a few on the 3 acre i got.
Jim Ham
March 15, 2021
I’m not sure the information about your second point is accurate. I own two vacation rentals in Hawaii and have never paid a cent out of my own pocket for GE and TA taxes. Those taxes are passed on to the renter. My responsibility is to make sure I collect the taxes, and pay the state of Hawaii in a timely manner, which I’ve been doing since 2012.
Hank
October 9, 2021
Hawaii vacation rentals are generally a bad investment because too many expenses are uncontrollable except a mortgage if you have one. Accommodation taxes, property taxes, HOA fees, Special Assessments, management fees for handling rental property is mandatory if you live outside Hawaii and chronic unforeseen costs regarding appliances and furniture. All of these expenses may rise rapidly and unexpectedly making investments in vacation rental properties problematic.
Dorothy shelton
May 25, 2024
I think people should know that not just hotels were included in moritorium after fire if you had court case on monthly rental not associated with fire tenant could continue to live free Ian’s you couldn’t do anything about it just keep paying mortgage and utilities ins and all expenses for a year there were many no recourse