Renting Versus Buying a Vacation Rental Property
One of the most common questions we are asked is, “Is it better to buy or rent a vacation rental property in Maui?” For some, the answer might be easy depending on your financial situation and/or how frequently you visit the island. For others, it may not be so simple, especially for those who have never purchased a property before.
At Epic Realty LLC, we are committed to helping simplify the process of buying or renting a vacation rental property based on your needs and goals. We have outlined some of the benefits of buying versus renting (and vice versa) below for those who may be interested.
Renting Vs Buying
Overall, renting a house for a week or two during the year is a less expensive investment than buying a vacation rental property. Renting is a short-term commitment. Buying a second home requires an ongoing investment of time and money. Renting gives you the freedom to choose different vacation destinations every year without the concerns of maintenance and upkeep.
Buying Vs Renting
There are many benefits to buying a vacation rental property if you have the means to do so. Below are a few of the advantages.
- One clear advantage is that buying a vacation rental home can serve dual purposes… You can use it as a second home and spend your own vacations there with your family, and then rent it out to guests the rest of the year.
- Another major advantage of real estate investing in general, and investing in rental properties in particular, is the fact that you gain a source of steady income. Maui has year round occupancy unlike other seasonal destinations, so we are arguably the BEST place to own an investment property.The idea is that you will be renting out your second home to guests when you aren’t using it. You’ll be making money without having to necessarily buy an “investment” property. After all, your vacation home is your second home. It just happens to make money on the side.When you buy a vacation home and use it as a short-term rental, the money you make from bookings actually helps you pay the mortgage and other expenses (property tax, insurance, maintenance, and repairs) for the place where you spend your vacations.
- In addition to making money in the short run, a vacation rental home also makes money – potentially a lot of it – in the long term.A second home is a real estate property, and real estate generally appreciates in value over time. When you are ready to sell your vacation rental property, you can usually sell it at a higher price and cash in on the profit. The best part is that you don’t have to do anything to enjoy this benefit. Natural real estate appreciation generally takes care of it.
- If you want to make even more money when selling your property, you can make modifications and improvements to push up the market value of your vacation rental (known as forced appreciation).
- Similar to your primary home or investment property, a second home also provides tax deductions. These apply to mortgage payments, property tax, rental income, insurance premium, utilities, and other rental expenses.Note: A vacation rental home can get somewhat complicated depending on the number of days you live in your property and the number of days you rent it out to guests. So, if you decide to buy a vacation rental, we recommend that you work with a professional accountant and/or a real estate attorney to assure that you are taking maximum advantage of tax deductions without breaking any tax laws.
- Investing in a vacation rental exposes you to lower risk than other types of real estate investments. First, vacation homes in top tourist destinations such as Maui, attract lots of guests, reach high occupancy rates, and can charge a high nightly rate. The combined effect is high rental income. And rental income is how investors make money from their rental properties.
- Buying a vacation rental home provides you with an easy entry into the world of real estate investment because it’s often less stressful than other real estate investment strategies, such as becoming a full-time landlord, fix-and-flip, wholesaling, etc.
- Managing a vacation rental home can be a full-time job. While some people (particularly those who live locally) take this on themselves, it is not necessary to start making money in real estate. Using a top-rated Vacation Rental Management company to handle all of the reservations, bookings, maintenance, cleaning, marketing, advertising, financial transactions, etc. is highly recommended.
At Epic Realty, we specialize in providing exceptional vacation rental management services to clients (including first time buyer’s) year-round. We handle all of the day-to-day business and upkeep so you don’t have to.
Unlike many of our larger competitors, Epic Realty is a small, boutique company. Our mission is not to be the biggest on the island. Instead, we pride ourselves in being able to provide one-on-one client support and personalized services according to each owner’s needs.
Our property management team is located near our vacation rental properties and is always available to help in person, via telephone, or by email. Our response time is unparalleled and we take each issue that arises very seriously.
As a small company, we are able to pay close attention to the overall performance and conditions of each condo. We regularly monitor and update our nightly rates based on seasonality, occupancy and performance as well as recommend upgrades or modifications to your property when necessary. Maintaining maximum occupancy year-round is our primary focus.
To see the full scope of our Vacation Rental Management services, please click on the About Us tab on our website.
If you are interested in buying a Maui vacation rental property or have questions about our vacation rental management services, please email me at Cimi.firstname.lastname@example.org or call (808) 280-0442. I am happy to answer any questions you may have. In the meantime, here are a few more tips and other information to consider before buying:
LOCATION – You have heard the old saying, “location, location, location!” These are the three most important factors in a successful real estate investment. When buying a vacation rental property, choose places where other travelers – besides you and your family and friends – would enjoy.
SHORT-TERM RENTALS LEGISLATION – Regulations on short-term rentals have been tightening in many places around the U.S., so once you’ve chosen a location for buying your second home, make sure you will be allowed to use the property as a short-term rental and make sure you won’t be taxed too heavily for it.
More people are buying vacation rentals as their first real estate investments because it’s a sound financial decision. The demand for vacation rentals is at an all-time high and continues to grow. There’s low risk, because at the end of the day, you have a second home where you can vacation for free. And with a good vacation rental management team, we can help you maximize the return on your investment.
Named Hawaii Business Magazines Top 100 Realtors for # of Transactions 2014, 2015, 2016 and 2018.