Investing in Vacation Rental Property: Is it a good idea in Hawaii?

The past eighteen to twenty months have seen one of Hawaii’s most precious features – it’s tourism – decline. Consequently, there’s been a knock-on effect on real estate prices.  Valuations of Hawaii condos for sale have either declined, or ticked higher only marginally. More importantly, demand for vacation rentals dipped too. However, of late, things seem to be picking-up. And with a broader economic recovery in sight, it’s clear that home prices will start moving higher too. For anyone looking to invest in real estate, a move into Hawaii’s vacation rental segment might make sense now.

The Trend if Your Friend

According to Q2-2021 house price appreciation data, compiled by the Federal Housing Finance Agency (FHFA), at 7.99, Hawaii’s House Price Index ranked 42 out of 51 – indicating a comparatively lower rate of home price appreciation. This means that, whether you are planning to invest in a beach house in Hawaii, or a condo as a vacation rental property, real estate values are at their historic low.

This trend, of temporary low property value appreciation, may be a brief setback for those already in the market. However, that trend is certainly a friend for prospective Hawaii real estate investors. It’s a sign that, if you are willing to buy low, there are Hawaii condos for sale, as well as single-family and multi-family beach front units, that make it a wise move to invest in them as vacation rental properties.

More Friendly Trends

And the long-term Hawaii real estate price appreciation trends confirm that thesis too. Back in December 2019, at the onset of the COVID-19 crisis, the average price of a Hawaii condo stood at $514K. More recently (Sep 2021), that index has continued to trend higher – to $573K. That’s nearly a 11.5% rate of return in less than 2-years! 

And, when you compare that trend to a multi-decade trend of CAGR for the S&P 500 (of 10.32%), it’s easy to see why investing in a beach house in Hawaii makes better sense – lower volatility (compared to stock markets), and faster ROI!

Why Invest Now?

The simple answer: Because change is in the air! And one easy way to put numbers to that change is to analyze the recent visitor statistics from Hawaii’s Department of Business, Economic Development & Tourism. And there too, the trends are friendly towards investors in the Aloha State’s real estate market.


Clearly, travel to the State is picking up, and with that surge, comes a need for rental accommodation – for short, intermediate, and long-term stays. So, as visitor ship continues to trend higher, the demand for rental real estate will also rise. However, that’s not the only reason that you might actively start looking for Hawaii condos for sale now.

Ultra-low mortgage rates make financing that purchase more attractive now, than it’s ever been in recent memory. But there are indications that those low rates may soon be trending higher. So, whether you wish to invest in Hawaii real estate as your own personal vacation home, or as a vacation rental property – now’s your time to make that move!