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Airbnb Investment All About Airbnb

Airbnb Property Investment Analysis: Is it profitable to invest in Honolulu?

airbnb property investment Honolulu

Let’s talk about why Honolulu, Hawaii, can be the best investment decision you’ll ever make! It’s a fact that owning a beachfront property is a dream for the majority of people. If you are eager to make this come true by earning a passive income at the same time, then purchasing a property with a beautiful view of the sea is ideal in Honolulu!

Airbnb rental arbitrage is preferred by investors who have a limited budget to purchase a property, which means you can do Airbnb by just renting it! As long as you adhere to the Airbnb rules in Honolulu, there should be no problems of breaching the laws. However, the main question is: will Airbnb properties be profitable in that area?

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“One of the best places to purchase an investment property is arguably metro Honolulu. The area has a modest growth but has the strongest job market of all the islands.

– Home River Group on Honolulu Property Investment

Let’s not get carried away by a property’s design or its proximity to major tourist areas because the primary step is to determine profitability. In this article, we’ll discuss the metrics in order to gauge the best property investment, specifically when buying a property investment in Honolulu.

This includes the best website recommendations for property investment, the prices and properties for sale in Honolulu, along with each property type’s gross rental yield, cash-on-cash return, and annual revenue.

Pros of buying an Airbnb Property in Honolulu

The capital and most populous city in Hawaii, Honolulu, is located on the southeastern shores of the island and is widely known for its tropical weather, dreamy landscapes and cultural diversity. However, there’s more to learn about why we recommend purchasing a property in this city. Here are some of the major reasons why you should consider buying a property for Airbnb in Honolulu:

1. Enjoy the natural scenery of this touristy city

If you want to invest in tourist accommodations, then, allow me to tell you that Honolulu is a great place for you! Being a tourist destination by excellence, Honolulu receives a great number of visitors each month, especially during its peak season which goes from December to February. In tourist season, this city welcomes more than 850K visitors monthly!

2. The property tax rate is low!

Property taxes can give headaches to homeowners from time to time, but don’t worry too much about paying high rates in Honolulu! Overall, the county has one of the lowest taxes rates in the nation, being this 0.35% of assessed value.

3. Low crime rate

While one should always be aware of their surroundings when visiting a city, one will feel safe when exploring Honolulu! Of course, crime happens, but the crime rates here are lower than in many other cities as it’s not that common. With this being said, it’s always a good option to get a security system for your home!

What to Expect When Purchasing a Property in Honolulu?

Now that we know the pros of investing in Honolulu, let’s take a quick look at some of the cons. It’s always better to look at the two sides of each coin in order to properly set your expectations!

1. Finding affordable properties is difficult

Investors with a limited budget will have a difficult time finding affordable houses in Honolulu as they are quite expensive. The average housing price in Honolulu is $805K with a 1-year change value of 5.5% according to Zillow Index.

2. High cost of living

In addition to an expensive real estate market, the cost of living is also another downside in Honolulu. Sadly, the cost of living in this city is 95% higher than the national average.

airbnb property investment Honolulu

airbnb property investment Honolulu

Source: Payscale

Best Neighborhoods for Airbnb in Honolulu 

Let’s take a closer look at the important Airbnb key metrics to discover which is the most profitable neighborhood in Honolulu. Filtered for a 1-bedroom apartment, here is a brief overview of some of the most recommended and profitable neighborhoods:

1. Waikiki
  • Annual Revenue: $71,092
  • Occupancy Rate: 94%
  • Average Daily Rate: $174
2. Ala Moana
  • Annual Revenue: $91,016
  • Occupancy Rate: 86%
  • Average Daily Rate: $247
3. Kaimuki
  • Annual Revenue: $64,096
  • Occupancy Rate: 85%
  • Average Daily Rate: $192

Is Property Investment Profitable in Honolulu, HI?

Using an Airbnb income calculator, it was discovered that a 2-bedroom apartment in Honolulu can generate an annual revenue of $74,479 with a steady occupancy rate of 75% and a nightly rate of $227.

airbnb property investment Honolulu

airbnb property investment Honolulu

Beachfront homes & Townhouses for Sale in Honolulu, Hawaii

Buying a beach house property will not only let you have access to a delightful vacation spot, but it can also bring an excellent return on investment and become a reliable income stream! It may be difficult to find the best properties that have the potential to produce high yields and capital growth, and this article will certainly help you through! 

Here are some of the profitable properties in Honolulu, along with the calculated gross rental yield, cash-on-cash return, and annual revenue.

airbnb property investment Honolulu
airbnb property investment Honolulu

410 Atkinson Dr Unit 745, Honolulu, HI 96814

1. Studio-type Property for Sale Honolulu
  • 0.4 miles to President George Washington Middle School
  • Asking Price: $153,000
GROSS RENTAL YIELD 26.28%
ANNUAL REVENUE $40,201
CASH ON CASH RETURN 53.06%
airbnb property investment Honolulu
airbnb property investment Honolulu

2240 Kuhio Ave Apt 1005, Honolulu, HI 96815

2. 1-Bedroom Type Property for Sale Honolulu
  • 0.7 miles Kaimuki High School
  • Asking Price: $175,000
GROSS RENTAL YIELD 27.22%
ANNUAL REVENUE $47,631
CASH ON CASH RETURN 55.89%
airbnb property investment Honolulu
2-bedroom Honolulu

2140 10th Ave Apt 501A, Honolulu, HI 96816

3. 2-Bedroom Type Property for Sale Honolulu
  • 0.1 miles to Palolo Elementary School
  • Asking Price: $295,000
GROSS RENTAL YIELD 25.07%
ANNUAL REVENUE $73,950
CASH ON CASH RETURN 49.44%
3-bedroom Honolulu
3-bedroom Honolulu

1251 Heulu St Apt 606, Honolulu, HI 96822

4. 3-Bedroom Type Property for Sale Honolulu
  • 0.2 miles President Theodore Roosevelt High School
  • Asking Price: $240,000
GROSS RENTAL YIELD 28.11%
ANNUAL REVENUE $67,470
CASH ON CASH RETURN 58.57%
4-bedroom Honolulu
4-bedroom Honolulu

94-125 Pahu St Apt 37, Waipahu, HI 96797

5. 4-Bedroom Type Property for Sale Honolulu
  • 0.5 miles to Waipahu Intermediate School
  • Asking Price: $385,000
GROSS RENTAL YIELD 28.03%
ANNUAL REVENUE $107,908
CASH ON CASH RETURN 58.32%

Conclusion

Undoubtedly, Honolulu is an iconic vacation destination that draws millions of visitors throughout the year, hence, it can generate a nice cash flow for property investors as long as the right neighborhood is targeted and potential revenue is calculated using an Airbnb rental arbitrage calculator. However, it’s not a suited market for investors who have a tight budget since finding cheap properties is certainly difficult.

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Airbnb Rules All About Airbnb

Airbnb Rules in Honolulu, Hawaii

Hawaii’s beautiful scenery and sweet climate have made it to the record of being one of the most visited states in America. With over 9.4 million visitors, property investors have been eyeing great property deals and the Airbnb business has been a great source of income. In order for future hosts to successfully start an Airbnb business in Hawaii, it’s important to learn about its legality, step-by-step process, and most of all – profitability!

In this article, we featured Airbnb regulations in Hawaii, along with the new Airbnb laws in O’ahu. Continue reading and learn more about the Airbnb laws in Hawaii.

Is Airbnb legal in Honolulu, Hawaii? 

To cut the story short, yes – Airbnb is legal in Hawaii! While short-term regulations have been regulated since 1989 in the City & County of Honolulu in Hawaii, there have been recent restrictions and upcoming regulations. Here’s what you need to know before you invest in an Airbnb in Honolulu:

1.  Based on Bill 41 (21) CD2, or Ordinance 22-7, the registration for new short-term rentals has been temporarily suspended until further notice.

2. Only the hosts with a registration number are able to publish listings on the platform.

How much can I make by running an Airbnb in Honolulu?

Currently, there are 3,664 Airbnb listings in Honolulu, with 90% of entire houses earning up to $4,886 a month. The Average Occupancy Rate in Honolulu is 89% and the average daily rate is $151. According to vacation rental market analytics source Airbtics, a 2-bedroom apartment in Honolulu can make up to $47,987 annually. Check out our Airbnb Profit Calculator

airbnb rules honolulu hawaii

New Short-term Rental Laws in Honolulu

  1. Ordinance 22-7 (Bill 41) limits rental bookings lasting fewer than 90 days to designated areas and will take effect on October 23, 2022.
  2. Vacation rentals in designated resort areas, including Ko Olina, Turtle Bay, and parts of Waikiki are NOT included in Ordinance 22-7.
  3. Non-conforming use certificates (NUCs) must comply with the new annual renewal after their existing renewal period expires.
  4. All STRs must provide registration or NUC number & tax map key on advertisements.
  5. Any advertisement of a rental or dwelling unit that is not a registered STR may not include daily or less than three-month rental rates and must include the statement: “this property may not be rented for less than 90 consecutive days.  Rental prices will not be reduced or adjusted based on the number of days the rental is actually used or occupied.”

New Rules for Vacation Rentals in Oahu, Hawaii

Since the announcement of the City & Council of Honolulu regarding Ordinance 22-7, many vacation rental owners and hosts have filed lawsuits against the said law. 

  • According to Bill 89, also known as Ordinance 19-18, there will be a limit on Bed and Breakfasts (B&Bs) on the island. Specifically, no more than 0.5% of the total number of dwelling units in each regional area on O‘ahu can be used as B&Bs.

  • The new laws also dictate that new B&B owners can rent two bedrooms to guests. The business owners are also expected to reside at home with guests by law.
how much can you make on airbnb

Hosts & Property investors in Hawaii

Since the announcement of the City & Council of Honolulu regarding Ordinance 22-7, many vacation rental owners don’t see the point of calling it a “short-term rental” business because of the minimum 90-days law. According to one of the local real estate agents in the area, they had to return lease arbitrages in Waikiki to the lessor because there are way too many hotels and STRs are being overlooked.

“ Honolulu has been very aggressive in their efforts to limit the available inventory of short-term rentals. In my opinion, even without this new law, it is not a great market because the numbers don't pencil out. There are way too many hotels on the island.”
- Mark Waite
Real Estate Broker in Wailea, Hawaii

Conclusion 

To summarize, knowing the Airbnb rules & its potential profit in Honolulu is still important before investing in an Airbnb within the area. While gauging the personal experiences of various local hosts should also be considered in your decision-making process, accurate data should still be the foundation of your investment.

In my personal opinion, the biggest advantage of running a short-term rental is high return! I’ve talked to hundreds of Airbnb hosts over the past years and frequently met hosts making 15 – 30% gross rental yields, and 10-20% net. It’s also fun to do!

Airbtics
Airbnb Data
Airbnb Data

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