What are the Risks Involved with Investing in Short Term Rentals on Maui?
We know that if you buy right and manage correctly STRs on Maui can be very lucrative. But let’s talk about some of the risks involved with investing in short term rentals on Maui.
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Maui is extremely tourism dependent. This is what leads to great returns, however, if there are factors that shut down tourism, like say pandemics, hurricanes, tsunamis, acts of war or anything else, then those units sit vacant. And that can cost owners A LOT of money.
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Property upkeep. Everyone knows that Maui is expensive. Well, handymen, cleaners, plumbers, electricians and supplies are expensive here too. And the wear and tear that short term rentals see is quite significant. For example, I’m replacing my 3rd A/C in 5 years in one of my units right now. You can’t wait to get someone to come out and fix these things, it could take weeks to get someone out there. So when something goes bad, you get someone in, pull out the old one and put in the new one. It’s costing me $1,000 every time I have to replace an air conditioner, but the cost of bad reviews is even higher.
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Let’s talk about reviews. STRs live and DIE off of their guest reviews. If you’re not a 5 star superhost, you’re already left behind. This means bending over backwards for your guests. If you hire bad property management or you’re not responsive to your guests, you run the risk of poor reviews. When you have poor reviews you get poor occupancy rates and poor nightly rates. It’s hard to climb out of that hole.
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All STRs are regulated by the county of Maui. This means if taxes go up, you gotta pay up. If they want to change the rules regarding your permit, you’re at their mercy.
So how can you avoid these risks, well certainly you can’t avoid them all, but having knowledgeable boots on the ground is your best line of defense. Make sure your realtor understands STRs and all the intricacies that go with them in the Maui market and make sure you have a really good relationship with your cleaners, handymen, etc. They’ll need to be your best friends.
