If you have come to Kona and stayed in a vacation rental condo, you may be wondering what the vacation rental return would be on a condo like this. There are some variables that can never really be pinned down. One of the most important ones is percent vacancy. This figure depends on many factors: how the condo is marketed, where the condo is located, and what the rental fee will be are very important. If you purchase an oceanview or an oceanfront condo, does it have a following? Does the complex have any timeshares in it?

For the purposes of a very loose estimate, you can use a vacancy rate for vacation rentals of 40% for a condominium in an oceanfront complex.

In the market that we have now (winter of 2006), here is an example of a vacation rental unit:

2 bed/2 bath in an oceanfront complex with ocean view

Purchase price:	525,000
Down payment: (lenders will require 20% for a high-caliber vacation rental condo, because the owner occupancy is lower and lender risk is higher)	105,000
Amount financed:	420,000
Principle and interest at 6.25% (30 year fixed):	2,586
Monthly Maintenance Fee:	700
Property Taxes: ($334/month)	4,000
Homeowner's Insurance ($50/month)	600
Maint of unit / Utilities ($200/month)	2,400
Total monthly outlay:	3,870
Total yearly outlay:	46,440
Vacation rental: per night (average of high and low season rates)	158
Vacancy factor (1-.4=.6) X 365 X 158=	34,602
Minus mgmt fee of 25% the mgmt. fee could be anywhere from 20% to 60%)	8,651
Total yearly recoup:	25,951
Shortfall	20,489

Here's another example:
One bed/one bath in an oceanfront complex. Unit may have an ocean view.

Purchase price:	300,000
Down payment:	60,000
Amount Financed:	240,000
Principal and interest at 6.25% (30 year fixed):	1,477
Monthly Maintenance Fee:	330
Property Taxes: ($183/month)	2,200
Homeowners Insurance: ($33/month)	400
Maint of unit / Utilities: ($200/month)	2,400
Total monthly outlay:	2,223
Total yearly outlay:	26,676
Vacation rental: per night (average of high and low season rates)	104
Vacancy factor (.6) X 365 X 104=	22,776
Minus mgmt fee of 25%= the fee could be anywhere from 20% to 60%)	5,694
Total yearly recoup:	17,082
Shortfall:	9,594

Please note that this page is not for investors and does not use investment calculations. This page is to give someone who wants to buy a vacation rental an idea of how much money might be generated by such a proposition.

Lure of Hawaii is brought to you
by: Lura Beebe, Real Estate Broker,
Lure of Hawaii

lura@lureofhawaii.com
Cell: 808-938-3089
Office: 808-329-9787