Buying a Vacation Rental in Hawaii? The Rental History Is Not Important

It’s tempting to ask for the rental history… specifically the gross income… when you’re thinking about buying a vacation rental property. In fact, it’s one of the questions I hear the most from buyers looking for a condominium or house that they want to share with others. However, with any investment, past performance is not an indicator of future outcomes.

While it’s acceptable to ask for a rental history and to review the information, I don’t recommend giving it too much weight when you make your decision. Here’s why: There are simply too many variables that determine whether a vacation rental condominium or house is “successful.”

Located across the street from Kahaluu Beach Park in Kailua Kona on the Big Island, the Beach Villas at Kahaluu is a popular vacation rental complex (MLS 609867).

Five Factors That Affect The Bottom Line

Property Management. It’s a simple truth: some property managers work harder than others to maximize occupancy and take care of their renters (and their owner clients). A property manager’s service affects the bottom line. Plus, the rate you pay for their services can vary from 10 to 35 percent (or more), so be sure to ask, “What’s included?” when you are negotiating their fee.

Marketing. You’ve likely been online searching for a place to rent on your next vacation and clicked through a slideshow of photos that make you cringe. They’re underexposed, crooked, and low quality. And then you see a property that’s well photographed with bright, clear images that invite you to find out more. Which one will you choose to rent?

This one-bedroom unit near downtown Kailua Kona is located in the Royal Sea-Cliff Club, an oceanfront complex that offers a front desk if you choose to use Outrigger as your property management company (MLS 603986).

Property Condition. There are the big items (the pool, the kitchen cabinets…the bathrooms!) and there are the small items, like linens and dishes. You may not want to take on a bathroom remodel immediately after purchasing a property, but you can easily swing by Target or Pier 1 and purchase new sheets, dishes and accent pillows. I am amazed at the number of condominiums in Hawaii that proudly display bedspreads and blankets that look like they were purchased thirty years ago…at a garage sale!

Guest Reviews. Vacation renters are not shy when it comes to writing reviews. Look at almost any site, like TripAdvisor, VRBO, or Airbnb, and you’ll see a multitude of comments from guests. You can market your property by focusing on all of the positives, but if the location is next to a busy highway or if the property manager cannot be reached, your guests will announce it to the world.

Owner’s Intent. Some owners are aggressive while others could care less if their property rents. When you’re considering a property to purchase, it’s difficult to know an owner’s intention. Ask your real estate agent to inquire with the seller’s agent to find out if pursuing rental income is a goal or a casual side benefit.

With ocean and golf course views, this one-bedroom condominium is located in Waikoloa Villas, a complex that allows vacation rentals (MLS 607867).

Money Isn’t Everything

In summary, the rental history of a condominium or house is not important. Is it a factor? Yes. But don’t let the gross income earned in the past solely guide your decision to purchase a vacation rental property. I have helped several clients purchase properties on the Big Island of Hawaii who are now renting them to vacation guests. Read my client reviews and then e-mail me (mikedespard@hawaiilife.com) or call me (808-209-0033) to let me know how I can help you.