Recap: Buying a Short-Term Vacation Rental Property on Hawaii Island
When Hawaii Island (the Big Island) implemented regulation of unhosted short-term vacation rental properties in 2019, I wrote about the process extensively. Recently I have had a string of daily calls from both buyers and agents asking questions about what properties would be eligible for short-term rentals, either with the owner absent or present. That made me think I need to recap where the regulations stand — and what to expect going forward.
Rules on Renting Short-Term When You Are Not in Residence in your Home
Letʻs start with the straightforward case. You want to invest in a second home or condo or residential property on the Big Island, and have it produce income when you are not using it (or perhaps you want it as a pure investment, not planning to stay there yourself at all). This is referred to by Hawaii County as an “unhosted” rental:
- If the property you are buying already has a Short-Term Vacation Rental (STVR) license, it transfers with the property and you just need to keep renting, paying taxes, and re-registering each year.
- If the property does not have its STVR license, it must have one of these permitted zoning classifications to apply for one:
- V (Resort);
- CG (General Commercial);
- CV (Village Commercial);
- Residential and Commercial Districts situated in the General Plan’s Resort and Resort Node areas; or
- RM (Multi-family Residential) for multiple family dwellings within a condominium property regime.
In other words, do not plan on buying a single family home in a residential or agricultural district and getting approval to rent all or part of it on a short-term basis.
The good news if you plan to buy now but move in a few years? Long-term rentals are in high demand. And a long-term tenant is much less hassle, much less wear and tear on your home, and if you use professional management, will likely have a 10% fee rather than 25-40% of your gross income.
Buying a Property to “Airbnb” or Bed-and-Breakfast
No version of what the County calls a “hosted” rental, meaning the owner or manager lives on the property, was covered by the short-term vacation rental bill passed in 2019. So for these rental properties, there is, at this point, no supervision or enforcement — although the expectation is that you will collect and submit both General Excise Tax and Transient Accommodations Tax on the money you earn.
The only license currently available for such rental under the County Code is a bed-and-breakfast license...and that comes with very specific conditions, including residential zoning, permitted bedrooms, and no more than five rooms are being rented.
It is a very good bet that the County will crack down on hosted rentals in the future, as I explained in this earlier blog post.
In short: in the current environment we are seeing more restrictions on short-term property rentals across Hawai’i. Other than properties in resort zoning which is intended for this scenario, there are no guarantees going forward.