I am sitting here in Maui enjoying a condo just across from the beach. The condo is one of hundreds that are here on the islands which are available by the week. A well run vacation rental can be a great money maker that lets you have a condo or a house in a great location for up to 14 days a year basically for free.
Basically there are a couple of things to keep in mind, both have to do with 14 days. The first is how often it is rented each year. If you rent your property for more than 14 days each year, it triggers tax rules for rental property. If you use it 14 days each year or less yourself then you get the better deductions like depreciation if you want them.
There are another set of local rules that have to do with sales taxes and hotel taxes. Hawaii is considering legislation to force vacation rental owners to use a local property manager because they believe the mainland owners are renting properties and not paying taxes.
Nothing good can come of this. The assumption is that more people are cheating than following the rules. If that is the case then maybe the rules should be reviewed. As an agent, forcing owners to use a local property manager only will increase the cost and decrease the benefit of owning a vacation rental. Generally these increased costs drive down value. Driving down value drives down price. When you drive down price, you drive down property taxes and real estate sales commissions.
All of this sounds counter productive to long term revenue generation which is what Hawaii is really looking for isn't it?
This is a case where I don't know the good answer. The hotel industry of course wants a fair playing field and if they have to pay a hotel tax, then the condo owners should pay some taxes too. I get that.
The reality is that the income from the tourism, food, drink, souvenir and tour sales is money they don't want to lose either. If Hawaii is going to force the owners to use a local property manager, then they may need to cap the rates much like many areas do for Taxi cab drivers or smog check stations. Say some fixed cost of $20 per rental when the owner finds the renter? How much more work could collecting the checks be for the property manager than smoking an old car?
Your thoughts?
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