WARNING: Do NOT Buy a Short Term Rental Property in Hawaii... Until you watch this Video
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- Опубликовано: 8 фев 2025
- Hawaii Short Term Rental Investing. Discussing my 4 Pillars of Short Term Rental Investing. This is applicable not only to Hawaii but throughout the USA.
Maui - Short Term Rentals for Sale - www.hirealesta...
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Contact Jesse for Real Estate Services:
Jesse G. Wald R(B)
Jesse@HiRealEstateExperts.com
(808) 446-5841
#shorttermrentals #hawaii #realestate
What about the SRT ban that is being considered for Maui? How does that figure into the investment consideration?
Don't buy one in the Apartment Districts in Maui County until the Hawaii Supreme Court rules on it (unless you would be fine with living there full time or renting it out full time).
Excellent Question. I released a different video a few weeks ago where I discuss the potential changes in STR Laws on Maui. I'll share a link below:
ruclips.net/video/8QyNIqfTV8I/видео.html
Prices in the Kapalua area are down ~20%. Occupancy rates are also down significantly -
@@JesseGWald Yup, I already saw that and wondered if there were any more recent developments. Thanks for keeping us all up to date. MAHALO
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2:36 Nobody else will actually say that part out loud. In order to cover a mortgage you need to put down 40% to 50% to break even. Great video Jesse
Great video. I bought my Maui short term rental in Napili over three years ago. Even with the impact of the fire, I have averaged break-even or positive cash flow. I paid cash for my unit. The "personal use" category can't be overstated if that was a consideration for the purchase. Going to stay with my adult son has been priceless especially since we are at the same beach we took him too many times in his youth. It almost feels like going home and back in time. I would add the legacy consideration. I am leaving something for my family to enjoy for many years to come. That is priceless to me.
Thanks for the feedback! Yes, the legacy consideration is huge. Your family is very lucky to have you.
We did the same in Napili. The legacy thing was also our thing too.
@brunothepug8807, I completely understand the "priceless" aspect of personal usage and legacy. Those memories are invaluable! However, with property values surging in places like Hawaii, have you considered expanding your portfolio internationally? Turkey, for example, offers incredible beachfront properties where you can create those same family memories, plus enjoy higher ROI and growth potential. With Istanbul's rich cultural heritage and stunning coastal regions, it's like having the best of both worlds-an affordable "home away from home" and a solid investment for future generations. Let me know if you'd like more info on Turkish real estate opportunities!
Another great video, Jesse. A few thoughts shaped by 2 decades of investing ...
Cashflow makes you rich (associated with high income), and appreciation makes you wealthy (associated with high net worth).
The higher the cashflow and/or appreciation, generally, the higher the risk. The biggest risk to your portfolio is you becoming a forced seller. The biggest risk of being a forced seller is buying negative cash-flowing assets.
Btw, I am surprised you didn't do bonus depreciation, etc considering you have had the REPS for years.
Always providing in-depth and thoughtful content!
A very helpful video for investors. Succinct and to the point, a great reference if someone gets too myopic on one of the factors/pillars instead of the aggregate.
I agree that if your plans are to own the property for a long time, this might make sense. But that 10 year price appreciation slope is way too steep for me. I think we'll see a buyers market in the next couple years. I also find some of the incredibly high HOA fees deal breakers.
Great video and thanks for sharing such valuable information 🌺🙏🏾
We have a short term rental condo that we own in Waikoloa and our Insurance recently increased $600 per month due to the Lahaina fire. We own our condo and made a very small profit last year. I just thought we would be making more on it. Seems like every time we turn around there is another expense. We are undecided if this was the best choice but we love Hawaii.
Yes, and the doubling of property tax plus the new Maui TAT does not help either.
We bought in Maui in 2022. The hoa fees and the property taxes have skyrocketed making this investment a money pit. As much as i love our place i believe it may be time to let it go.
3% return. Yikes! The 5th pillar is your time involved to manage the property. Owning rentals is a JOB
Not if you hire a property manager!
An exchange rate to Canadian
At around 5:20 typo friends freinds
lol. Thanks. I always have at least one typo in my videos. Unfortunately I can’t edit it out after I release the video.
And income taxes. Or❤ capital gains taxes
Income taxes because I’m a real estate professional.
Do non-residents pay the same types of property taxes as residents to. If not perhaps you can include that in your next video. Thank you kindly for your amazing work always look forward to your videos.
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WARNING!!!!!!!! Staying at your rental property more than 14 days a year, or more than 10% of the annual total days you rent it to others at a fair rental price, the IRS will generally classify your rental property as a residence, rather than a business. As such you lose the ability to deduct ANY expesnes, INCLUDING DEPRECIATION, from whatever rental income you receive. Most people are not aware of this ridiculous rule and may end up paying MASSIVE penalties to the IRS.
How would they know
Your claim is wrong:
1. Misunderstanding the “14-Day/10% Rule”:
1(a). The Actual Rule: Under IRS rules (specifically, Section 280A), if you use a dwelling unit (like a vacation home or rental property) for personal purposes for more than the greater of 14 days or 10% of the total days it is rented at a fair rental price, the property is considered a “dwelling unit used as a residence.”
1(b). What It Means: This classification doesn’t turn your rental activity into a non-business activity; rather, it changes how you allocate expenses between personal and rental use. It does not mean that you lose all deductions or that the property is no longer “rental property” for tax purposes.
2. Deductibility of Expenses Is Not Completely Lost:
2(a). Allocated Deductions: Even if the property qualifies as a residence (because of personal use), you are still allowed to deduct expenses-but only to the extent that they are attributable to the rental activity.
2(b) Depreciation and Other Expenses: For instance, if you rent the property for 100 days in a year but use it personally for 30 days, you must allocate expenses (including depreciation) based on the percentage of days rented versus used personally. You can deduct depreciation and other expenses proportionate to the rental use; you simply cannot deduct the portion that relates to personal use.
3. No “All-or-Nothing” Penalty:
3(a). No Automatic Massive Penalties: The claim that you “lose the ability to deduct ANY expenses” and that this can lead to “MASSIVE penalties” is misleading. The IRS does not impose penalties merely because you use the property for personal purposes beyond the 14-day or 10% threshold.
3(b). Potential Issues: Problems (and possible penalties) might arise if you improperly report income or deductions. However, the IRS’s rules for a dwelling unit used both personally and as a rental are designed to allocate expenses appropriately rather than completely disallow them.
4. Allocation Rules Are Well-Established:
4(a) How It Works in Practice: Suppose you have a property that you rent out for 200 days in the year and use for personal purposes for 40 days. You would need to allocate expenses-such as mortgage interest, property taxes, insurance, repairs, and depreciation-between personal and rental use. The portion of the expenses related to the 200 rental days is deductible, while the remaining portion is considered a personal expense.
4(b) Tax Benefit Considerations: The IRS rules for mixed-use properties aim to prevent taxpayers from deducting personal expenses as business expenses, not from allowing any rental deductions.
@@jeffcotter2143 The Burden of Proof Is on You, Not the IRS. The IRS doesn’t have to “know” everything upfront; it’s your responsibility to maintain accurate records and report correctly. If you claim rental deductions, you bear the burden of proof to substantiate them.
@@GlobalHighlander I don’t know anything juts wondering. Could you say fix a broken toilet while you were there or do a backsplash whatever