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LEARN
There are 2 levels of authority that need to be considered when determining if and how you can rent out your property on a short0term (under 30 days) basis on Oahu. Those are:
City & County of Honolulu Zoning and/or Exemptions
Specific Building’s Association Rules and Regulations
City & County of Honolulu Zoning and/or Exemptions
Under the City & County of Honolulu zoning laws there are 3 ways to rent out a property for a short-term period (under 90 days) legally.
Property needs to be zoned X6 – Resort Mixed Use
or
Building needs to be grandfathered in as a non-conforming hotel and exempt from the NUC requirement
or
Property needs to have a Non-conforming Use Certification (NUC). There are only 793 NUCs that have been issued and they are no longer issued (Last issued September 1990)
Specific Building’s Association Rules and Regulations
In addition to the City & County of Honolulu, each building’s owners association can place restrictions on the rental use of the properties in the building, including…
Minimum rental period
How the unit can be managed (i.e. individually managed and rented out through platforms such as Airbnb and VRBO or restricted to only being managed through the building’s hotel operation)
In the County of Honolulu, property tax rates for properties zoned “Hotel/Resort” or used as Vacation Rentals are taxed at a rate of $13.90 for every $1000 of assessed value (1.39%). This is higher than the standard residential rates that range from $3.5 – $10.50 (0.35-1.05%), depending on the assessed value of the property and whether it is being used as a principal residence. You can find more about property taxes in our Guide to Property Tax on Oahu, Hawaii.
The rental period of your tenants also has an implication on the taxes on that revenue. These taxes are:
1. General Excise Tax (GET) = 4.5% on gross rental revenue for all rental periods
2. Transient Accomodation Tax (TAT) = 10.25% on gross rental revenue for rental periods 180 days or less
3. Oahu Transient Accommodation Tax (OTAT) = 3% on gross rental revenue for rental periods 180 days or less
Financing some short-term rental buildings is different from conventional buildings as well. It’s best to ask your lender for their requirements as every lenders standards are different and are subject to change with market conditions but here are some things to look out for.
Some lenders require a full kitchen, usually defined as having a full-size refrigerator, a sink, and a range or 4 top stove with a separate oven)
Some lenders will only offer Adjustable Rate Mortgages (ARMs)
Most mortgages will have a higher interest rate than you expect on more conventional properties.
Disclaimer: Information on this website may not always be up to date
The content provided on this website is intended for general informational purposes only. While we strive to ensure the accuracy and timeliness of the information presented, we cannot guarantee that all the information provided is up to date at all times.
© 2018 All rights reserved