This is a question that I’ve been asked twice in the last week! The answer is – of course you can. Tenant law is not that much different here than in Maui than in most areas of the continental U.S.
However, many people who ask this are thinking of renting their house out as a vacation rental which is generally not legal. In Maui, for most homes, the minimum legal lease period is 6 months. That means you could live in your house for six months a year and rent it out for the other six months. Or you could live in it for two months and rent it out for the other 10 months. However, it is not always easy to find someone who’s time schedule matches yours! The peak season is between November and April when it is cold in much of the continental U.S.
The rental market in Maui is quite strong with many people looking for places to live. Don’t think that will convert to super high rents though! While our lower end market is close to par with rents (mortgage+costs = rent), in higher end property there is a large discrepancy. Overall, there is a large number of fairly transient residents. Many people sign a 6-month lease and then will continue on a month-to-month basis. And just like anywhere else, it is important to get and verify references for any tenant.
Can I rent it out to friends and family? Of course, you can have friends and family come and stay at your house whether you are there or not. But you can not legally charge them rent. And neighbors around here start getting very suspicious if they start seeing strangers coming and going. Maui is “small town” and most residents prefer keeping vacationers in the resorts!
There are some things to consider in determining whether to rent your home or not. If you plan on renting your home, you will most likely pay a higher slightly higher mortgage rate. You will also not be able to take the homeowners tax exemption which allows us $300,000 credit. But if you are not planning on making Hawaii your residence, you won’t qualify for the homeowner exemption anyway. You should always have a local contact who can respond to any emergencies. That may be mean paying a property management company.
Most renters look to CraigsList as the most popular place to find rental properties. Rates can vary drastically from neighborhood to neighborhood. It is also a great place to find rental scams so never rent a house without meeting the owner or a licensed property manager at the house!
One thing you also often see in Maui is a home divided up with one or more rental units. One common application (and usually legal) is seen in areas where homes have a detatched ‘ohana or cottage. ‘Ohana in Hawaiian means family. So when it is used to refer to a structure, it is similar to a Mother-In-Law suite. There are detached ‘ohana’s and attached ‘ohanas (e.g. the downstairs is made into separate unit). The largest ‘ohanas are about 1000 square feet with 2 bedrooms and 2 baths but it can also be a tiny room with a hotplate! There are garages that have been converted to a studio. I’ve even seen properties that in addition to the main house, there is a detached ‘ohana, an attached ‘ohana AND a converted garage! Often times the building of the rental spaces was done without permits or renting them out is not “legal use”. Appraisers usually will appraise the value of the house based on it’s permitted building and legal conforming use. For example, rarely is a range permitted, so we often see the ranges disappear for a a day or two during an appraisal. Nonetheless, it is common for a property to support several tenants. In purchasing one of these properties, make sure to do your due diligence and understand what the legal implications may be.
If you are still dreaming of buying a fabulous property and converting it into a B&B, the good news is that there are now rules to follow. The bad news is that they are very strict and it takes a long time to get a permit with few guarantees. There are un-permitted “Transient Vacation Rentals” around but Maui County has been cracking down on them for the last few years. For more information see the County website. Bed and Breakfast Permitting Information
Of course the exception to this all of this is if your new home is in an area zoned for vacation rental use. Usually this means it is a condominium but there are a few exceptions. In this case, rentals can be for one night or longer. Typically property management on a vacation rental unit is much more expensive running from 20 to 50% of all rental income.
And yes, each county in Hawaii has very different laws regarding vacation rentals! I really don’t know enough to discuss what is legal outside Maui County.
I am not a licensed property manager and can not act as a rental agent.