Maui Short Term Vacation Rentals - Condos and Homes
Investment Pitfalls and The Minatoya List
This is a hot topic across the entire vacation rental market worldwide and Maui is no exception. The goal is basically to keep vacationers and other short-term visitors in the hotel districts and out of neighborhoods for various reasons ranging from crowded parking, unruly behavior, affordable housing shortage for locals, and loss of employment opportunities for hotel workers and many more. Threats to reassess properties for tax purposes at sky-high commercial rates can discourage homeowners from investing in short term rental properties. According to a recent poll over 55% of Maui residents oppose short term rentals in their neighborhoods. But all is not lost! There are fantastic vacation rental opportunities on Maui. You just need to be informed and guided by a great Realtor. There are a few important facts about Maui County zoning you need to understand when buying a property for short term rental income purposes.
The safest and generally more expensive way to avoid these problems is to only consider properties specifically zoned usually when first built to allow short term vacation rental known as “transient vacation rentals” by the Maui Planning Department. These are primarily condominiums in the hotel districts. This is where the planning folks want all “transients” to stay. For Maui these are: Hotel District (generally H-codes), Community Business District (B-2), Central Business District (B-3), Resort Commercial District (B-R) and some planned developments. For the latter, we can check to see if the planned development you are considering is ok for transient vacation rental use or not.
The next level consists of a short-term occupancy list stemming from a 2001 Maui County legal opinion by Richard Minatoya, the county legal counsel at the time also known as the Minatoya List. It lists apartment zoned properties that may operate as vacation rental properties without a permit. It contradicts Maui County Code 19.12.010-C stating apartment-zoned properties may only be rented long-term of at least 180 days of residential use. Minatoya does not list properties lawfully doing vacation rental that were originally zoned to do so. Investing in Minatoya listed property as vacation rental can be risky. The list is updated, and properties can be added as well as deleted as a result of non-vacation renting owners filing complaints and even lawsuits. The legal opinion needs to be codified into law to reduce the risk. So, if someone says vacation rental is allowed for these properties, it is not the whole story. You can get the straight scoop from me and check for properties on the list at: https://www.mauicounty.gov/DocumentCenter/View/119795/102219_Agenda-Item-E1_Short-Term-Occupancy-List-aka-Minatoya-List?bidId=
Up to the late 1980’s vacation rentals were allowed in apartment zoned properties. International investors such as Japanese benefiting from a sudden increase in the Yen started buying up many apartments and severely impacting the number of long-term rentals and affordable housing for Maui residents. So, the Maui County Council acted by passing a 1991 ordinance to terminate vacation renting of apartment-zoned properties. Wow! That created a firestorm from owners and developers of apartments specifically built and approved for vacation use. Suddenly, they could not be used as vacation rentals threatening the value of their investments and significantly reducing rental income. It is still in effect.
It was not enforced for a long time – about ten years. Then the residents who were not vacation renting their properties put the pressure on to enforce it and it was enforced until vacation renting owners got into the act. The result of the tug-of-war was the Minatoya opinion. It grandfathered in properties that had their permits and development plans issued and valid as of April 20, 1989. Also included were apartment properties operating as vacation rentals on or before March 4, 1991.
It took a long time for the list to mature and represent close to all the properties that qualify. It is possible a group of owners could challenge a listed property and have it removed. It is even possible they missed a property that should be grandfathered. It could all be changed if the council decided to codify the whole issue into a new law.
The other class of property coming under attack is Short Term Rental Homes (STRH). Owners have gone through the lengthy, expensive and often unsuccessful process of obtaining a STRH permit – about 229 of them currently. There are only 349 of them allowed in the whole county. And the entire process is being re-considered by the planning department to possibly not accept any more permit applications after a date yet to be determined and there could be a specific date when issued STRH permits would expire. On a positive note, there is also the possibility of transitioning to a Bed and Breakfast (B&B) permit.
What about just operating without a permit? This is the riskiest and by far the most expensive thought. Before there were companies specializing in tracking properties advertised for vacation rental on platforms like Airbnb and VRBO, it may have been quite common. But now Maui County employs LODGINGRevs to help identify illegal online vacation rental offerings and reservations. Do not get caught! Ouch! Civil fines are hefty. $20K for an initial gotcha and then $10K a day thereafter. Not even an option!
Maui is a premier vacation destination and there are a lot of very wonderful vacation properties here for sale. Picking the right one for vacation rental can be a daunting task. You cannot rely on the simple statement in the listing stating vacation rental: YES. We have successfully invested in vacation property here on Maui and work hard every day to know all the ins and outs for you to make sound investment decisions. And, before taking the big step in offering to buy one, we can recommend legal counsel and CPAs to lend a hand, as needed.
Owning a vacation rental on Maui can help defray the costs of you and your family living on Maui or even where you live now or plan to retire someday. You can even use it to cover the operating costs of owning one and then block days you or family and friends want to enjoy it for free! Done right, it can be heaven on earth!
Give me a call to start making the right decisions for your Maui vacation property whether you plan to vacation rent it or not.
Eric and Lisa West
PS - If you are looking for my Maui Vacation Rental ROI Calculator Spreadsheet.....just click here (The best tool to help you determine exactly what the TRUE ROI is on a vacation rental, since each field will "prompt" you to ask for that piece of data, and help you think through the numbers. Aloha!