Honua Kai Rental Income Figures

The rental revenues at the Honua Kai Resort and Spa in Ka’anapali present some of the strongest cash on cash returns of any condo-tel property in all of Maui – and perhaps in the entire state of Hawaii.

At current operating costs and present/historical rental income figures, many of the units on the lower end of the price spectrum at Honua Kai (i.e. $1.5M or below) will start to break even and present positive returns with as little as 30% down payment on a conventional mortgage. Please keep in mind that there are many factors that come into play here.

A recent shot of Honua Kai (teal roofs in the middle of the photo) taken on one of my grueling yet very rewarding mountain bike rides up the West Maui Mountains

Categories for Rental Properties at Honua Kai

Each of the below sub-categories at Honua Kai have different historical occupancy rates and gross income figures. Please ask me about what units generally rent the best and I am happy to share detailed information on how each of these categories have performed from a historical gross income and occupancy standpoint.

• Studio Units – Partial ocean view and full ocean view properties. Currently, there are just a couple partial ocean view and true ocean view studio units on the market.
• One Bedroom Units – Mountain view, resort view, partial ocean view, and ocean view units. There are only resale one bedroom units currently on the market, the developer has completely sold out of these. There are a number of one bedroom plus den units being offered by the developer. Here is a post that I previously wrote on these units. Link to one bedroom plus den units for sale.
• Two Bedroom Units – Mountain view, partial ocean view, ocean view units. There is a good variety of both developer and resale inventory in these various categories actively for sale.
• Three Bedroom Units – Ocean view and oceanfront units. There are only a few select 3 bedroom oceanfront properties for sale in the resale market as well as the developer inventory

The living room of Konea #550 – an oceanfront three bedroom unit priced at $3,699,900. For details on this property, and all resale units and some of the developer units, please visit my Honua Kai Real Estate Gallery.

Factors Affecting Gross and Net Rental Income

• Property Management Fees – It’s your choice! There are both on site and off site property management companies at Honua Kai for you to chose from. These various companies offer a wide range of services and have different fee schedules. When making this decision it is important to ask oneself how involved you want to be in this process as taking it on in its entirety requires substantial time and effort. The going rate for property management at Honua Kai is 20-44% of gross rental revenue depending on the property management company. These percentages can also be dependent on which type of unit you own.
• Marketing Exposure – Not all property management companies are created equal. If your intention is to rent out your unit as much as possible, it is important to select a company that has excellent web exposure as the vast majority of renters book online. If your intention is to have the unit available for your personal and familial use with less advance notice, you may want to consider a different type of company.
• Excellent Service – Working with a property management company that truly understands your goals and objectives will augment a tailoring of services that will keep you happy as an owner and encourage strong reviews of your unit thus generating repeat guests.

Financing Options at Honua Kai

Honua Kai is the only property that I know of that is classified as a Condo-tel and can be financed with as little as a 25% down payment for well qualified borrowers. Read a little more about this in a previous post of mine, I am happy to share all the sources of active financing at Honua Kai upon request: 25% Down Payment Financing Options at Honua Kai.

A portion of the increase in the recent 10% increase in HOA fees was for the replacement of outdoor pool furniture seen in the above photo and is present throughout the outstanding pools at Honua Kai.

Fixed Cost Considerations

I am in the process of writing my next blog about costs of ownership at Honua Kai, but in the meantime it is important to consider these costs when making your financial projections. HOA fees are a function of interior square footage at $1.33/sq.ft. One must consider acquisition cost of the unit which are on the rise (I detail this in my latest monthly market update: Honua Kai Real Estate Market Update May 2013), property management fees, property taxes, utility costs, terms of your proposed mortgage, and property rental income (there can be vast differences in company to company).

Three Important Criteria for Selecting the Right Honua Kai Unit

When counseling my Honua Kai buyer clients I always encourage them to think about the different aspects of ownership and prioritize the below three criterion based on their own personal needs.

1. Short Term Cash Flow vs. Acquisition and Operating Costs – Generally speaking, the smaller units are going to “pencil out” better than the larger units, but there are still many details that must be evaluated when creating these scenarios.
2. Lifestyle and Personal Enjoyment – Studio units represent some of the very best cash on cash returns due to their lower acquisition and monthly carrying costs. It is important to ask yourself if you are going to be happy staying in a studio unit for a couple months out of the year. Is a one bedroom versus a two bedroom going to be large enough for you and a few family members? Maybe you want to think about a one bedroom plus den unit. These are just some of the scenarios that I help my clients prepare themselves for.
3. Resale Value – We have seen some substantial price appreciation at the lower end at Honua Kai and I think we will see this trend continue. There are a number of two bedroom and three bedroom units that are currently under contract or that have closed recently for less than their initial purchase price. I detail these market trends most recently in my latest monthly market update: Honua Kai Real Estate Market Update May 2013.

Exclusive Buyer’s Agent Services

• I do not work for the developer at Honua Kai, but I have a very strong relationship with them and have helped numerous very satisfied buyer clients with purchasing developer units.
• The sales team at Honua Kai does an excellent job, but they cannot represent your buyer interests from an agency standpoint. I feel that I can offer a different perspective and skill set because of the fact that I represent buyers and sellers all across the island of Maui, I have a broader perspective of overall market trends, and I provide excellent communication and services for my buyer clients, many of whom complete the majority of the purchasing process while not even physically being on island.
• I am going to help educate and secure you the best property for you whether it is a resale or developer unit; I do also have insight on properties that are not on the market or advance notice on properties before they are entered in the MLS.

Buyer Success Stories

I’d like to share a couple success stories from a few of my buyer clients who shared some first hand insight about my efforts in representing them on a couple developer units.

• Canadian Couple From Vancouver B.C. Purchases a 3 Bedroom Honua Kai Unit for $1,900,000
• A couple from Great Falls Montana purchases a one bedroom partial ocean view unit for $500,000
• One Bedroom/One Bath Mountain View Unit at Honua Kai Sold for $525,000

Selling at Honua Kai?