A rental property purchase can be a great way to enter the Kauai real estate market. Many clients want to own a property on Kauai to use for personal vacations and then rent it the rest of the year to cover their costs. In order to determine what might be right for you, here is a breakdown of common EXPENSES :
(please note: this is only an overview of common expenses. Overhead expenses can and will vary from property to property. And, as always, please consult with your financial advisor to determine what makes sense for you.)
- Mortgage (or not if paid CASH)
- General Excise TAX (GET) 4.712%
- Transient Accommodations Tax (TAT) 10.25%
* GET and TAT are generally charged to the guests renting.
- Homeowners Association fees (HOA) between $500-$2,200 (depends on the project chosen)
- Hurricane Insurance is generally covered in the HOA, but you should also add a Personal Property & Liability insurance for the inside of your unit (condo policy).
- Real Property tax. Click on link for rates per category:
- Property management fees about 25% (depends on the property management chosen, unless you decide to manage yourself through VRBO and other sites, but if you live off island, you’ll need an on-island contact person). Click on the link for more info: http://cca.hawaii.gov/rico/files/2014/03/MARCH-2014-Information-for-Owners-of-Rental-Properties.pdf
- Expenses to maintain the property like cleaning, furniture, repairs, soaps, etc. however, guests usually pay for part or all the cleaning in their rental cost. This can and will vary.
- Cable & water are generally included in HOA.
- Electricity is generally NOT included in HOA and vary upon unit & usage.
Again, only you and your financial advisor can determine what is right for you.
Lastly, if you do purchase on Kauai, please know that when you sell a property in Hawaii those may apply:
* HARPTA 7.25% (For Hawaii non resident. It is a state withholding of the income tax if there is a capital gain when you sell it and once taxes are paid, excess funds may be returned to the owner.)
* FIRPTA 15% (For foreign sellers. It is a state withholding of the income tax if there is a capital gain when you sell it and once taxes are paid, excess funds may be returned to the owner.)