238 Waikiki Condo Hotels for Sale

Note 1: The words 'condotel' and 'condo hotel' will be used interchangeably.
Note 2: The word 'short-term vacation rental' refers to rentals from just 1 day - like a hotel - for the purposes of this post.
Note 3: If you want to see this exact same information, but with photos and no property listings, then click here.

This is THE ultimate guide to short-term vacation rental condos in Honolulu, which allow for rentals from just 1 day, just like a hotel (also referred to as transient vacation units). The vast majority of these condos are in Waikiki and are popular among investors as well as 2nd home buyers looking to generate income when not vacationing in Hawaii.

This overview highlights close to everything you should know about short-term vacation rental condos in Honolulu, followed by a comprehensive list of all the condo buildings that allow short-term vacation rentals. If you are interested in seeing condos for sale - including condos that do not allow for short-term vacation rentals - check out our Waikiki condos for sale page or our Honolulu condos for sale page.


Requirements to Run a Short-Term Vacation Rental Business
1 (and only 1) of these 3 criteria must be met for an owner to legally be allowed to run a short-term vacation rental business in Waikiki:
1) Parcel is zoned ‘Resort Hotel’,
2) owner holds a valid nonconforming use certificate (NUC), or
3) property has a current active hotel operation and the property is also exempt from requiring owners to hold a valid NUC (exempt buildings are determined by the Department of Planning & Permitting. This branch has an unofficial document created by their staff around year 1990, which highlights buildings that are exempt – we have reviewed this document. The document has not been used for enforcement purposes, but if there was a complaint or inquiry about any particular property, they would use it as a resource for their investigation).

Note: If a condo association changes their rules, as to the minimum number of days unit owners are allowed to rent out their unit, then such association rental rules will override the possible rights to run a short-term vacation rental business, as outlined in point 1-3 above.
Example: If the association of a condo changes their house rules to require minimum rentals of 30 days, then an owner of a unit that fulfill criteria 1, 2 or 3 from the above would not be allowed to run a short-term vacation rental business.

Hotel Definition: Building that contains lodging and/or dwelling  units offering transient accommodations, and a lobby, clerk’s desk or counter with 24 hour clerk service, and facilities for registration and keeping of records relating to hotel guests.

Unit Classification (for real property tax purposes)
Each unit, within a building, will, for tax purposes, be classified as either ‘Residential’ or ‘Hotel & Resort. An owner running a short-term vacation rental business is required to update the Real Property Assessment Division of such short-term rental activities if the unit isn't currently classified as Hotel & Resort, so the Real Property Assessment Division can properly classify  the unit as “Hotel & Resort”. This used to be done with a form named the "Declaration Regarding Condominium Use", which is obsolete since July 2017. Currently (July 2017) there are no clear guidelines as to forms to fill out to reclassify from Residential to Hotel & Resort. We suggest calling Honolulu's Real Property Assessment Division - (808) 768-3799 - and telling them about your plans.
If the unit is already classified as "Hotel & Resort" - upon taking ownership - the owner does not have to fill out Petition to Dedicate Property for Residentia Use, if the owner plans to run short-term vacation rentals.

However, according to the Revised Ordinances of Honolulu Section 8.7.1(h),  if an owner holds a valid NUC then the property shall be classified based on the underlying zoning. In other words, an owner of a condo in Waikiki on a parcel zoned "Apartment" with a valid NUC, can keep the "Residential" classification, thus paying the much preferred "Residential" or "Residential A" tax rate - learn more about taxes here.

If an owner of a unit classified as "Hotel & Resort" does not run short-term vacation rentals, then the owner can file for a petition to get re-classified to 'Residential' status by filing the Petition to Dedicate Property for Residential Use prior to September 1st, 2017 and such dedication is good for 5 years. Learn more about the petition right here.

Taxes (Honolulu County)
Property Taxes
A unit classified as ‘Hotel & Resort’ is taxed 1.29% of assessed value, whereas a unit classified as ‘Residential’ is taxed either:
1) The "Residential" tax rate, which is 0.35% of assessed value for owners who can claim the homeowners exemption or
2) The "Residential A" tax rate, which is 0.45% of assessed value up to $1,000,000 and 0.9% of assessed value above $1,000,000, which is for owners who cannot claim the home exemption (2nd home owners, investors etc).

On October 1st of a given year, the tax office determines the unit’s classification, which applies for the following fiscal year. Example: October 1st, 2017 the classification is determined for fiscal year 2018 (July 1st 2018 - June 30th 2019).

Rental Income Taxes
All short-term rental income is subject 2 separate tax components:
a) GET – general excise tax – of 4.5% (applies to all rentals).
b) TAT – transient accommodation tax – of 9.25% (applies to all rentals less than 180 days).

Waikiki Business Improvement District (annual charge)
This association levies an annual fee on all units classified as “Hotel & Resort” in Waikiki only and will show on the property tax bill.
PS! You may have seen the Aloha Ambassadors in yellow shirts walking around Waikiki. They represent an example of what the funds are used for.

The calculation various each year, but here is a recent example:
District 1: $0.46 / $1,000 of assessed value – Kuhio Ave, Kalakaua Ave and all streets in between.
District 2: $0.1533 / $1,000 of assessed value – Streets towards the ocean side of Kalakaua Ave, but before Ala Moana Blvd area.
District 3: $0.115 / $1,000 of assessed value – Ala Moana Blvd area.

Nonconforming Use Certificate (NUC)
AN NUC  is a certificate, which allows an owner to run a short-term vacation rental business, despite a parcel not being zoned ‘Resort Hotel’. Up until year 1986 the Department of Planning & Permitting in Honolulu would issue NUC’s. When the department ceased to issue these certificates, a number of owners who had previously been issued such certificates had them grandfathered in. Owners have since been able to keep their certificate, subject  to ongoing renewal every even numbered calendar year. Should an owner be late in filing for a renewal with the Code Compliance Branch, the certificate is lost for good. As of writing, there are around 600 nonconforming certificates issued for a small group of buildings across Waikiki and about 100 certificates for properties outside Waikiki (mainly on Oahu’s North Shore and Kailua). See this comprehensive list of residential properties holding nonconforming use certificates in Waikiki and across Oahu.

Financing
Some banks will typically lend on condo hotel units if the unit has a full kitchen. Requirements to be considered a full kitchen varies a bit among lenders, but it is common that lenders require a full size refrigerator, a sink and a 4 burner built-in cooktop with oven.  Some lenders may be OK with just 2 burner built-in cooktop and other lenders may require a freezer with its own door.

Most banks will not lend on a property if it lacks a full kitchen (called a lodging unit), though there are sometimes exceptions, such as Finance Factors, which, will consider lending on lodging units (as of year 2017).

Local banks in Hawaii frequently change their appetite for lending on short-term vacation rental condos and their willingness to lend also depend on the property in question. In many cases, there is at least 1 local bank prepared to lend, subject to the unit having a full kitchen. Large mainland banks are typically not willing to lend on short-term vacation rental condos, though some less traditional lenders may on occasion lend, such as Guaranteed Rate or First Foundation.

Banks typically required the cash down payment be 30% or more and the overall loan terms may not be as attractive as terms offered by conventional financing. Therefore, if you need financing, it may be worthwhile to speak with a lender early in the process and establish a) can you get a loan on building(s) of interest to you and b) what are the expected loan terms.

Property Management (Hotel Operation, 3rd Party Rental Agency or Owner Managed)
Hotel Operator
Pros: Strong marketing presence and name recognition, potentially making it easier to charge a higher daily rental rate and keep a higher occupancy rate. Very familiar with managing rentals in building.
Cons: Typically charges a higher management fee (~50% on gross rental income is common) and an owner is subject to the hotel operator’s requirements, such as keeping unit up to a certain standard, which may on occasions require remodel / upgrade work at the owner’s expense, potential longer lock-in periods (an owner may not easily be able to pull out of a contract with the hotel operator).

3rd Party Rental Agency
Pros: Typically charges a lower management fee (~20 – 25% is common) and may be more flexible on the unit’s standard and overall less restrictions.
Cons: Marketing efforts may not have as great a reach, potentially making it difficult get top $ rental income and leading to a lower occupancy rate.

It is not always clear-cut whether a hotel operator or 3rd party rental agency offer the most attractive setup for an owner. Therefore, each unit and / or building needs to be analyzed on a case by case basis. A few buildings also have restrictions on usage of 3rd party rental agencies.

Owner Managed Rentals
If an owner’s primary residence is on Oahu, the owner may manage his / her rentals, without using a licensed rental agency (subject to each condo’s governing documents). If an owner lives on another Hawaii island, the US mainland or in another country, the owner is not allowed to be the point of contact for the rentals. However, the owner may, in such case, designate a person who lives on Oahu, to act as the on-island agent. The owner is also required to designate a person to be the point of contact for emergencies and support with collection of taxes.  These roles can be managed by the same person and he / she does not have to be a licensed real estate agent.

Illegal Vacation Rentals – Fines & Enforcement
The Department of Planning & Permitting’s Rules Relating to Administration of Codes spells out that daily fines for running an illegal vacation rental range from $50 – $1,000 per day  – see details here (look for §20-3.3 i).

According to the Code Compliance Branch, almost all inspections for illegal short term (less than 30 days) transient vacation rentals are complaint driven.  When the inspector conducts a site visit, he/she will attempt to gain access to the unit and interview the occupant.  If it is determined that non-permitted (illegal) transient vacation rental operations are being conducted, the inspector will immediately issue a Notice of Violation (NOV).  Typically, the inspector will allow 30 days to correct the violation without the referral for a Notice of Order (NOO), which imposes the civil fine.  However, if the violation is recurring, the inspector will immediately refer the NOV for an NOO with immediate imposition of civil fines (usually $1,000 initial fine and if not corrected, addition civil fine will be assessed at a rate of $1,000 per day until the violation is corrected.  Regarding the use of vacation rental websites proactively, the inspector will include the research of the website to add to the preponderance of evidence to support the enforcement action taken.  However, at the present time, the DPP does not surf the net to identify listings of vacation rentals (e.g. VRBO, AirB&B, etc.) to conduct neighborhood sweeps to identify properties where illegal vacation rentals are being conducted.”

For properties zoned apartment, an inspector from the Commercial, Multi-family Code Enforcement Branch will conduct any potential inspection and take enforcement action as appropriate.

Also Good to Know
1) Most units do not have a dedicated car parking stall. Oftentimes, there will be parking available for rent within the building or nearby.
2) Several units do not have washer & dryer in the unit, but instead typically have access to community laundry.
3) A few properties on parcels zoned “Resort Hotel” have house rules in place requiring a minimum of 30 day rental or longer (ex: Foster Tower, Crescent Park). Therefore, don’t assume “Resort Hotel” zoning equals a guaranteed right to run a short-term vacation rental business.
4) Most buildings do not allow pets.
5) Rule of thumb: a) Buildings located on the ocean side of Kuhio Ave and all other buildings further towards the ocean and b) buildings located on the ocean side of Ala Moana Blvd are all zoned “Resort Hotel”.
6) On rare occasions buildings do not allow owners to occupy units full-time or do not allow owners to claim the ‘Homeowner Exemption’.
7) If the declaration of a condo states short-term vacation rentals are allowed, that does not necessarily mean short-term vacation rentals are indeed allowed, if the City & County of Honolulu rules states otherwise.

Vacation Rental Condos in Waikiki
The following is a comprehensive list of all condos in Waikiki that allow for short-term vacation rentals. The list is divided into 5 categories, with buildings organized alphabetically:
A) Parcels zoned ‘Resort Hotel’ with a hotel operation.
B) Parcels zoned ‘Resort Hotel’ without a hotel operation.
C) Parcels zoned ‘Apartment’ with a hotel operation and the Department of Planning & Permitting does not require owners to hold valid NUC’s in order to run a legal short-term vacation rental business.
D) Parcels zoned ‘Apartment’ with a hotel operation and the Department of Planning & Permitting do require owners to hold a NUC in order to legally run a short-term vacation rental business.
E) Parcels zoned ‘Apartment’ without a hotel operation (mix of buildings where some owners hold an NUC and buildings where there appears to be a significant number of short-term vacation rentals, though apparently not legal).