Despite the regulatory landscape, the acquisition of Oahu vacation rentals and condo hotels in Honolulu continues to be a highly discussed and sought-after topic among both local and international Hawaii real estate investors. It is a subject that demands a wide-ranging understanding to navigate successfully on a daily basis.
Within this guide, we will assist you in comprehending the fundamentals of distinguishing between lawful and unlawful vacation rentals in Oahu. Furthermore, we will provide valuable insights on locating legally permissible vacation rentals in the area, along with crucial information on permitting requirements and taxation considerations. Our aim is to ensure a peaceful and enjoyable experience while maximizing the return on investment for your new Oahu Airbnb venture.
Which locations on Oahu offer legal vacation rentals?
To discover authorized vacation rentals on Oahu, your most reliable option is to explore within the four designated Resort Zones. It is worth mentioning that there are numerous vacation rentals in Honolulu that lie outside these Resort Zones, but this is due to their acquisition of one of the limited Non-Conforming Use Certificates (NUCs) granted many years ago.
Zone 1: Turtle Bay Resort Zone | North Shore Vacation Rentals
Our preferred area for legal vacation rentals stands out due to the limited hotel competition in the region. The North Shore of Oahu is a renowned tourist destination, offering an authentic Hawaiian experience with its secluded and nostalgic ambiance, in stark contrast to the bustling, hotel-dense atmosphere of Waikiki.
Oahu’s North Shore boasts an impressive 7-mile stretch of pristine white sand beaches, world-famous shrimp trucks, the historic Haleiwa Town, and is globally recognized as the ultimate destination for big wave surfing. Each year, hundreds of thousands of tourists flock to this area, often traveling by tour bus from their Waikiki hotels since Turtle Bay Resort is the sole hotel in the entire region.
Unlike the numerous condo hotels available for sale in Waikiki, the North Shore has only two legally permitted vacation rental condos. Both of these exceptional properties are situated within the Turtle Bay Resort Zone, providing convenient access to the beach and two magnificent golf courses—the Arnold Palmer and Fazio courses.
Zone 2: Vacation Rentals in the Ko Olina Resort Zone of West Oahu
Our second choice for vacation rental investment on Oahu would be the esteemed Ko Olina resort community in West Oahu. This community remained relatively unnoticed for two decades until the esteemed Disney’s Aulani Resort and Four Seasons Ko Olina opened their doors.
Similar to Turtle Bay, the Ko Olina resort zone presents limited competition in terms of nearby hotels or competing vacation rental properties. In fact, the Ko Olina Marriott, Disney Aulani, and Four Seasons Ko Olina are the only hotels situated between Waikiki and Makaha, which is the furthest community west on Oahu. This unique setting offers visitors an entirely distinct experience compared to the other resort zones.
Zone 3: Makaha Resort Zone
One of the most captivating opportunities for vacation rental investment on Oahu can be found in the Cottages at Mauna Olu project. Since commencing construction in 2019, this community has been offering brand new homes in the picturesque locale of Makaha. Thanks to the passage of Bill 41, these homes have been fortunate enough to be grandfathered into the legal vacation rental regulations, benefiting from their strategic location within the sole resort zone in the Waianae region. This unique position sets it apart as the only resort zone offering single-family homes, making it a truly distinctive option in the entire state, not to mention the largest.
Nestled within the idyllic gated community of Mauna Olu Estates, these homes enjoy an enviable setting perched above Makaha Beach in the breathtaking Makaha Valley. This location promises an authentic Hawaiian experience, as Makaha is renowned as one of the most secluded neighborhoods on Oahu, far removed from the bustling metro districts of Honolulu and Waikiki. With its perpetually sunny weather and arguably the most stunning and secluded beaches on the island, this is the epitome of island living.
The spaciousness of these homes makes them an ideal choice for multi-family travelers. The expansive yards offer abundant opportunities for outdoor entertainment, a feature often lacking in other options. Additionally, the breathtaking sunsets witnessed from this locale are truly unparalleled on Oahu.
We are beginning to hear impressive anecdotes regarding rental numbers, and it will be fascinating to see how things progress, considering many Airbnb listings here are relatively new, as owners have only recently received their keys.
Zone 4: Waikiki Condotels
When it comes to brand recognition, Waikiki unquestionably holds its place at the forefront. Visitors to this iconic neighborhood are greeted with an array of enticing restaurants, vibrant nightlife, and lively bars, many of which are conveniently within walking distance. The majority of Waikiki condos are mere blocks away from the renowned Waikiki Beach, making this location an obvious choice for vacationers. Undoubtedly, the demand for accommodations in Waikiki remains consistently high, although it is met with a significant supply. With tens of thousands of hotel rooms and a multitude of vacation rental condos available for sale, Waikiki offers a wealth of options for investors.
For those seeking entry-level investment opportunities, buying a vacation rental in Waikiki presents an array of choices. Numerous condo-hotel buildings, known as condotels, populate the area, resembling hotels in appearance, ambiance, and operation. These condotel units typically feature a front desk concierge, compact rooms with queen or twin beds, and a convenient mini fridge.
With prices starting as low as $200,000, investing in a Waikiki condotel proves to be a budget-conscious option for investors. Naturally, this affordability attracts visitors who are mindful of their expenses. In fact, condotel units constitute the most common type of vacation rental available for sale in the Waikiki condo market, effectively dispersing the demand.
It is important to note that many of the condo-hotel buildings in Waikiki require unit owners to rent their properties through the hotel’s pool. This means that the management and bookings of your condo are handled by the hotel’s management team, albeit at a significant management fee, often reaching 50% or more of the gross rental income. While this arrangement may not be the most favorable for cash flow, it does offer the benefit of part-time residence in Hawaii, while also providing coverage for ownership costs and hands-free rental management. Before diving headlong into a specific Waikiki vacation rental, we strongly recommend reaching out to us so that we can guide you towards the buildings that align best with your lifestyle, management preferences, and cash flow requirements.
Navigating Oahu’s Short-Term Rental Regulations
Short-term rental laws in Hawaii vary from island to island, but it is Oahu that has faced the greatest level of scrutiny. In the past three years, several pieces of legislation have been introduced, imposing strict rental restrictions on properties that were previously not permitted for vacation rentals or located outside designated Resort Zones in Honolulu County. One particularly contentious measure, Bill 41, has recently been passed, becoming the prevailing vacation rental law in Honolulu. This comprehensive legislation governs all aspects of advertising, permitting, and taxation for vacation rentals, causing significant disruptions for both Airbnb hosts and vacation rental managers.