When people think about buying a short-term vacation rental here on the Big Island of Hawaii, they always want to know one thing:
“Dan, will it cash flow?”
But how will you know—and will you have the right real estate professional to guide you?
Over the years, I’ve said this many times: rarely do short-term vacation rentals cash flow here on the island. That’s mostly due to the high purchase prices and high HOA fees. You simply can’t generate enough rental income to offset those costs—especially if you’re financing the purchase.
Statistics show that about 60% of buyers in 2024 are using a loan, so if you’re planning to do the same, just know ahead of time:
You likely won’t cash flow.
You’ll be in the red.
How far in the red depends on your down payment. To save you time and frustration, most condos in the Waikoloa Beach area—our lower price range—are about $1 million. You’d need to put 50–60% down just to make it cash flow.
I’m not kidding. That’s what it takes.
If you’re thinking, “Well, I’ll just do 25%, 35%, or even 40% down,” it still won’t cash flow.
You can’t charge a high enough nightly rate or get enough occupancy to break even—let alone turn a profit.
That said, you can have an incredible second home to enjoy the Hawaiian lifestyle.
How We Help
When you’re thinking about making this investment, you need a real estate professional who specializes in short-term rentals.
That’s what we do.
One of our key services is building a detailed pro forma for any unit you’re considering. We break it down like this:
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Cost to own: utilities, HOA, taxes, insurance
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Cost to rent: cleaning, management, booking fees, etc.
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Rental revenue: realistic, not inflated
We combine the ownership and rental expenses, subtract that from projected revenue, and show you the net result—whether that’s a positive return or a loss.
If you’re using all cash, you might see about a 3% return—just from rental revenue. That doesn’t include appreciation.
Now, some people don’t count appreciation in the pro forma—they view it as “gravy.” Others see it as real and want to factor it in. If that’s you, and you expect about 6% appreciation, then your total return could be 9%.
You don’t have to look at it that way, but we want to give you all the data so you can make an informed decision.
So again, if you want a real estate team that understands this market and can build pro formas to guide your decisions, reach out to us at The Hawaii Team.
Check us out at thehawaiiteam.com.
