What is a Condotel in Maui, Hawaii?
In Hawaii, a condotel, or condominium hotel, is a type of real estate property that combines the features of a traditional hotel with those of a condominium.
A condotel is typically individually owned, just like a traditional condominium, but it may also include units managed by or have the option to be managed by a hotel operator. The hotel operator rents out the unit as a hotel room when the owner is not using it, and the owner typically receives a portion of the rental income, essentially, they’re acting as property managers. In some cases, buildings considered condotels may also have timeshares or a front desk in them. Condotels are usually found in tourist areas such as Wailea, Ka’anapali, Kihei and Lahaina.
When investing in condotels, you can pretty much plan on needing to put down 30%. You might be able to get by with less, but I
wouldn’t plan on it. There aren’t a lot of banks that like to loan on these properties because its hard for them to sell off the loans. Which is typically what banks do, they sell their loans to free up capital that can be used to make other loans and to generate cash by selling the loan to another bank while retaining the right to service the loan. If they can’t sell these loans, they have to keep them in house, and by doing that they usually want a hefty down payment. In Hawaii that’s 30%.
Because of their condotel status, they will have higher tax rates associated with them and usually pretty high HOA fees as well. Some condotels even require you to use their in-house management service, preventing you from self-managing your own unit. You’ll definitely want to take all of this into consideration before investing in condotels on Maui. That said, they are your best bet if you want to invest in short term rentals on the island.
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