Know what to expect when purchasing a vacation rental on Kauai.

Vacation rentals on Kauai can generate a good amount of income for a few reasons. First its expensive to come to Kauai so people who are traveling to Hawaii can afford it. Secondly, we have a tourist season that lasts through out the year. However, there are expenses that come along with owning a vacation rental on Kauai. Be sure to consider these expenses when purchasing here.

1. Property management expense                                                                                                                  –It’s the law in Hawaii to have an on island property manager. This expense can vary if using a real estate company this expense can be 25-50% of the rental funds. Managing a vacation is a lot more leg work than a long term rental therefore people charge higher rates.  Some owners are creative and advertise on a do it yourself website like vrbo.com, or have a friend be the property manager for a lesser fee. Anyone on island without a Hawaii real estate license can manage rental properties for up to one owner.
2. Taxes                                                                                                                                                                     An owner will have to get a General Excise Tax license and pay 4% tax on the rents received (sales tax). There is also the Transient Accommodation Tax to be paid for Kauai vacation rentals 10.25% on the rents received. As of 2022 there is a Hawaii County tax (HCTAT) tax an additional 3% tax.
3. Mortgage (if applicable)                                                                                                                                              A 25% or more of a downpayment is required by most lenders to purchase a vacation rental here on Kauai. This expense varies on how much downpayment, rates and terms. I always recommend working with a lender in Hawaii when purchasing a vacation rental on Kauai.
   

   Puu Poa condominiums in Princeville

4. Property Tax                                                                                                                                                      Vacation rental is the 2nd highest tax rate in Hawaii right under Hotel & Resort. Right now from the state tax website is $9.85 per $1,000 net assessed valuation. The current tax classification rates can be found at this website here. 
5. Maintenance/Association fee                                                                                                                        If purchasing a condo expect to pay $700-$1,500 in maintenance fee’s. Most condo projects include water, trash, sewer, maintenance of the grounds, insurance of the outside of the buildings, and updates to the outside of the building.

Is purchasing a vacation rental on Kauai for me?

I would say if you are a frequent visitor to Kauai (yearly or more) it is definitely something to consider. Especially if you are not too concerned about the monthly income of the unit. The vacation rentals on Kauai are not well known for netting a ton of money however any property appreciates like crazy on Kauai!

It is also a lot easier to get a positive or break even cash flow without a mortgage.

Want more tips and information on purchasing a vacation rental on Kauai. See these other blog posts below: