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We are thinking of renting part of our home out to tourists on Air BnB or similar webisites (we have a detached ohana type room). Anyone have any good or bad experiences to share? Any tips?
I know about the Hawaii transient tax I would have to collect. Are there other tax implications I should know about? Anyone know if homeowner's insurance will cover this, or if not, is there a company that would insure short-term rentals?
I am located on the big island, Kona side if that makes a difference.
I would love to hear your stories. Thanks in advance.
I use Airbnb for a Vacation Rental (whole house) on Kauai. I also use VRBO and Tripadvisor. They all bring me bookings, and I have had no major problems with the guests. I would think that Airbnb is better suited to just a "detached ohana type room". Your Homeowners insurance may not cover a short term rental. Ask them.
When we rented our house out through VRBO, we looked at the competition in our neighborhood. We then knew (1) how busy they were, (2) what price to ask, (3) how to market our home by writing a decent narrative and posting good pictures. We tried to look at our home through the eyes of a prospective renter and wanted to look as good as possible, especially if there is a lot of choices.
You need to register with the State of Hawaii (www.hawaii.gov). They will tell you what taxes you need to collect and pay (both TA and GET). I filed my taxes quarterly, and also had to do an annual report. Things may have changed since we quit renting our house in 2010.
1) Will my home insurance cover my damages if a renter burns my house down? MAYBE.
2) Will my home insurance cover the costs of skin grafts if a renter gets third degree burns while burning my house down and further sues me for a billion dollars because of [insert litigation reason]? HIGHLY UNLIKELY.
Has anyone crunched the numbers to see if it is more profitable to vacation rent vs. long term traditional rent?
10% more? - probably not worth the headache
25% more? - hmmm.....
50% more? - might be worth it.
I could easily without much work whatsoever, AirBnB any of the single family homes I own and make well more than 50% here on Oahu vs. a long-term renter. It isn't even close.
Tons more on the vacation rent, tons more hassle and wear and tear on the property.
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Yup, tons more hassle. Cleanings between each rental, meeting to hand over keys or give access, some sort of lease agreement each time, etc. If you can rent out a unit long term at a profit, just go get another unit to rent out to make the additional money and save the bother of short term leases. We rent out our houses at a bit less than the going rate, one of them is even an official low income rental. We have had zero trouble from our renters since they don't want to mess up a sweet deal.
Has anyone crunched the numbers to see if it is more profitable to vacation rent vs. long term traditional rent?
I have been running a vacation rental on Kauai for 26 years. I do all the advertising, bookings, record keeping, taxes, etc. My son and his wife, who own a half interest, take care of the property, since they live nearby.
Last year we took in about $80,000 and had expenses of about $53,000. Net taxable income $27,000, but the expenses only count mortgage interest, not the whole mortgage payment, so the cash flow is less.
My kids would like to get out of the business, but we have another three years to go on the mortgage. If we rented it long term, we could get between $3000 and $3500/mo. The mortgage is about $1900/mo, including real estate taxes and insurance. The Hawaii General Excise tax would be About $123, maintenance perhaps $300, and association fees about $230. Leaves less than $500/mo ($6,000/yr) before income tax.
Vacation Rental is much more profitable, but the hassle factor is a serious consideration
Last edited by HankDfrmSD; 04-16-2016 at 08:07 PM..
Reason: more accurate
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