Financing Vacation Rentals

For many potential investors, the idea of purchasing a Maui condo to be used as a vacation rental serves as the perfect melee of business and pleasure. However, in the past few years, financing has been a big obstacle due to (arguably unnecessary) VERY stringent lending qualifying criteria. Potential buyers must keep in mind that properties that allow vacation rentals fall into the category of unwarrantable or condotel - and most lenders see these types of properties as unreasonably high risks and then either do NOT finance these properties (most mainland lenders will fall in this category) or require higher-than-typical down payments. There are only a few properties such as Honua Kai where some lenders have accepted as low as 25% down, but the norm is more in the 30-35% range as a minimum. 

But as the market continues to improve and lenders and buyers  are gaining more confidence, some Hawaii-based lenders are offering more attractive loan products and are lowering the qualifying criteria. One large Hawaii financial institution recently announced that many Maui condotels  could be purchased for as little as 20% and that maximum down payment requirement would be 30%. And foreign nationals, which are a large sector of the Maui real estate buyer base, are also able to qualify for financing with 30% down - of course, each case/individual is unique and most be qualified on a case-by-case basis.

Another leading mortgage banker announced that financing for condotels/non-warrantables would be available for qualified individuals under the following scenarios:

80% LTV if Owner-Occupancy 51-100%

75% LTV if Owner-Occupancy 30-50%

70% LTV if Owner-Occupancy  0-29% * Most condotels fall in this category

The Maui real estate market is considerably more complex than the rest of North America and full of unique intricacies, as such it becomes critical to have the proper representation of a qualified Hawaii-based lender, Maui Realtor and team of professionals to guide a smooth transaction. For those considering purchasing a Maui vacation rental condominium, contact us for a private consultation.