Oahu Short-Term Vacation Rentals - An Overview Heading Into 2024

Owning a vacation rental on Oahu can be a very sound investment. Not only can you capitalize on the incredible demand for short-term housing on the island from visitors and tourists alike, but you also have the flexibility to live in the unit and enjoy life in Hawaii. It all sounds great in theory but like any investment, you must approach it with a clear plan in mind. 

Overhead view of Waikiki, Oahu

Short vacation rentals work a bit differently on Oahu than on the mainland. They’re only allowed in very specific areas. If you buy a property anywhere else, you may not be able to offer short-term rentals. That’s why it’s important to work with professionals with knowledge of the market, so that you can best navigate all the rules and regulations that affect Oahu vacation rentals now and in the future.

Figuring out financing for buying one of these properties can present some challenges as well. There will also be tax considerations to be kept in mind when buying a vacation rental on Oahu. We’ll touch on that later on, so that you’re well-prepared for maximizing the return from your investment.

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What are STR’s on Oahu?

Vacation rentals on Oahu are also called STR’s or Short-Term Rentals. These lodgings provide accommodation to guests for less than 30 consecutive days. STRs are only allowed in resort-zoned areas on Oahu and a few apartment-zoned areas. These regulations are in place to preserve housing for long-term residents.

Rules & Regulations

STR’s must not provide guest accommodation for more than 30 consecutive days in eligible areas. There are two main types of STR’s that are allowed under the current regulations:

  • Bed and breakfast homes (B&Bs) - The permanent resident or homeowner is present on the property during the short-term stay. They’re only allowed to rent up to two rooms with a maximum of two adult occupants per room.
  • Transient vacation units (TVUs) - These are unhosted or whole home rentals where the homeowner isn’t present on the property. There can only be a maximum of two adult occupants per soon.

There also exist "Grandfathered" STRs, properties outside the resort-zoned areas, that have been in operation since before October 22, 1986, when rental restrictions were first imposed in the city. They’ve been issued a nonconforming use certificate (NUC) that must be newed every year to continue short-term renting under their grandfathered rights. No new NUCs are being issued now.

You can buy a vacation rental on Oahu that has grandfathered rights. Just check if the property has a valid certificate through the NUC database. You can assume that NUC upon purchase of the property, and continue short-term rentals under similar terms.

AirBnB / VRBO

Short-term rental booking platforms like AirBnB and VRBO are strictly regulated on Oahu. The City and County of Honolulu actively issue Notices of Violation to illegal short-term rentals. Operating one illegally can lead to serious trouble and significant fines, running from $1,000 to $10,000 per day. You can rent out an eligible property based on the conditions highlighted above if it’s located in one of the resort-zoned areas, like Waikiki, or has a grandfathered STR. If your property doesn’t meet these prerequisites, you can only rent it out through AirBnB or VRBO for a minimum of 30 days.

Waiea Living Room

Ordinance 22-7 was introduced in 2022 to increase the minimum rental period for these properties from 30 days to 90 days. This meant that property owners outside resort-zoned areas would only be able to rent their units for a minimum of 90 days through AirBnB or VRBO. However, a federal judge has granted a permanent injunction after the Hawaii Legal Short-term Rental Alliance challenged the ordinance. Short-term rentals outside resort-zoned areas can rent for a minimum of 30 days as before, as long as they opened before the ordinance was put in place in 2022.

Related: Oahu Luxury Condos | Lifestyle Guide

Resort Zones On Oahu

The vast majority of short-term rental properties are confined to the four designated resort zones on Oahu, each with its own distinct character. From the bustling, metropolitan streets of Waikiki to the picturesque serenity of Ko Olina and Turtle Bay, there’s enough variety here to suit every lifestyle.

Waikiki

Waikiki is the beating heart of Oahu. Located on the southern shore of Oahu, it's densely packed with modern high-rises and swanky hotels. This is the place to be for the best retail and dining experiences on the island. There are plenty of attractions to keep visitors busy as well. Pop into one of the many globally renowned art galleries or be amazed by the aquarium and zoo.

Satellite Map of Waikiki Resort Zone

Resort Zoned Areas in Waikiki as seen on the Short Term Rentals Area map from Honolulu.gov

Waikiki provides a great blend of city life with access to nature at a relaxed pace. Despite being the center of the action on Oahu, Waikiki never lets you forget that you're in one of the most beautiful places on the planet. Your vacation rental will be walking distance from lush green parks, golden sand beaches, and enviable ocean views. Spend your mornings enjoying water sports, days at one of the many fine retail establishments, and evenings at some of the best restaurants and bars on the island.

Turtle Bay

Turtle Bay is the gateway to Oahu’s world-famous North Shore. Located about an hour’s drive from the urban core of Honolulu, it’s spread across 1,300 acres and boasts wild coastal beaches and incomparable rock formations. It’s paradise for nature enthusiasts, with some of the best surfing spots on the island located here.

Satellite Map of Turtle Bay Resort Zone

Resort Zoned Areas in Turtle Bay as seen on the Short Term Rentals Area map from Honolulu.gov

The vacation rentals here are part of the luxury Turtle Bay oceanfront resort. It feels like every unit is on the beach itself, providing unobstructed views of the ocean as far as the eye can see. Lounge in your lanai and hear the waves wash up on the shore. With top-notch resort amenities at your disposal, Turtle Bay provides one of the finest luxury tropical lifestyles.

Ko Olina

Ko Olina provides the ideal Hawaii oceanside lifestyle. While not as far as Turtle Bay, it’s far enough removed from the hustle and bustle of Waikiki that it feels like the perfect getaway even for those in the urban core. You have miles of white sand beaches, a championship golf course, easy access to Kapolei for retail, dining, and big box stores.

Satellite Map of Ko Olina Resort Zone

Despite being described as resort zoned on Honolulu.gov, only the leftmost zone near the beaches in the above image is home to vacation properties that can be rented on a short-term basis. Resort Zoned Areas in Ko Olina as seen on the Short Term Rentals Area map from Honolulu.gov

Enjoy memorable experiences with your family at Disney’s Aulani resort, located right here on Ko Olina, or just walk over to the Four Seasons and Marriott to be pampered by their world-class service. It feels as if the clock ticks ever so slowly here, enabling you to soak in the sights and sounds of oceanside living. Walk the long and winding seaside pathways to explore the four jewel-like lagoons, play a round of golf, enjoy 5-star service, or just wind down on your lanai with a good book as the sound of the waves gently soothes you. Getting away from it all has never felt so good.

Makaha

Situated on Oahu’s western coast, Makaha is a surfer’s paradise. The waves here are the stuff of legends for surfers. Makaha is highly regarded in the surfing world and is the favorite spot of many experienced surfers. The beauty of its beaches is second to none and Makaha also remains a popular spot for other ocean activities like diving and snorkeling.

Satellite Map of Makaha Resort Zone

Resort Zoned Areas in Makaha as seen on the Short Term Rentals Area map from Honolulu.gov

Makaha is also loved for its remote and secluded location. It lets you escape the crowds and immerse yourself in Oahu’s pristine natural beauty. If you prefer being away from touristy areas, prefer less crowded environments, and want a more relaxed living experience with gorgeous views and great surfing, you can’t go wrong with Makaha.

Related: Are There Downsides to Owning Oahu Vacation Rentals?

Financial Planning

There are financial considerations to be mindful of when buying a vacation rental on Oahu. You'll typically be required to pay a higher down payment when buying a vacation rental compared to a primary home loan. Lenders may have different terms for loans on second homes and investment properties. Some may even prohibit rentals, so it's important to pick lenders that don't restrict your ability to rent the property.

Lenders will also weigh the higher risk you're taking on an investment property. They may require that you retain up to six months of living expenses in addition to the payment on the second property before approving. Such conditions can considerably limit the properties that you may consider buying.

Amenities at Victoria Place

The financial planning for an investment property doesn't end here. You're also responsible for the utilities, maintenance and upkeep costs. Whether that’s preparing the unit for the next guest or fixing up one of the many issues that will inevitably come up during your ownership of the property. Do you have enough financial runway to keep up with those expenses, even during periods of low demand? Do you have a team in place that can handle maintenance issues even when you’re off island? Take your time to deliberate on these matters so that you can make an informed investment decision.

Related: Financing Options For Hawaii Real Estate Investments 

Tax Considerations

While property taxes are one of the few certainties in life, vacation rental owners on Oahu are also required to pay specific taxes on the rental income that their property generates. However, these taxes are typically baked into the rental fees paid by guests. Hosts are also required to obtain a Certificate of Registration from the Hawaii Department of Taxation. The Tax ID must be posted on the online listing for short-term rentals. Taxes on income generated by investment homes are primarily of three types:

  • General Excise Tax: This is also referred to as the Hawaii Sales Tax. The General Excise Tax (GET) has a base rate of 4% with a 0.5% additional surcharge on Oahu. You’ll thus be required to pay a total GET of 4.5% on the gross rental income of your vacation rental.
  • Transient Accommodations Tax: The Transient Accommodations Tax (TAT) is charged on short-term rentals with a rental period of fewer than 180 days. The TAT is charged at 10.25% of the gross rental income.
  • Oahu Transient Accommodations Tax: Lastly, homeowners on Oahu who provide short-term rentals are also required to pay the Oahu Transient Accommodations Tax (OTAT) on all income generated from rental periods of fewer than 180 days. OTAT is lived at a rate of 3%. 

Related: ABC’s of Oahu Real Estate Investing

Reach Out 

Short-term vacation rentals on Oahu can be a great investment, provided that you do your due diligence and remain on the right side of the law. They’re only allowed in specific areas on the island with strict conditions on occupancy limits and the duration of rentals. Property owners must also comply with all regulations concerning short-term rentals as well as pay the relevant taxes. 

Finding the right property that makes guests want to book your place over hundreds of others requires careful consideration of locations, amenities, lifestyle activities, and access to nature. It can also be tough to navigate the regulatory landscape on Oahu vacation rentals on your own. We’ve helped clients make sound investments in short-term vacation rentals on Oahu for more than two decades. Let our experience be your guiding light. Fill out the form below for a free consultation or give us a call at 1-(808) 745-1602. Let’s discuss how we can make your Oahu investment journey successful.

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