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Understanding the operating expenses of a Maui Vacation Rental Condo



Many potential vacation rental owners don't understand the costs assocated with operating a vacation rental condo on Maui. They hear that a unit rents at $200 a night and do the quick math in their head. $200 x 30 = $6000 a month, well the simple math is right, but their are many operating expenses that must be paid from this gross income.
If you will be getting a mortgage to purchase a vacation rental condo and need to get a break even on the monthly cash flow after paying your mortgage payment, it generally will require a cash down payment of around 50% to 60%.
The rental income will help you purchase your Maui dream condo, but if won't pay for it on it's own.

The operating expenses that you should plan on are as follows.
Mortgage Payment
On vacation rental property a 20% plus downpayment is generally required
Occupancy
The occupancy will vary depending on the season and the desirability of the property. Our "high" season is Dec. 15 to April 15th you will have higher occupancy during this period, some prime units can near 100% occupancy during this time of year. The balance of the year prime units can average 50-60% Less than prime units can average less than half of a prime unit. A prime unit is highly up-graded unit that is located oceanfront or has an outstanding ocean view
Condo Assocation Fee
The condo fees vary - they pay for the operations of the complex.
Rental Management Fee
This will vary between management firms will the services they provide. the range is 20% to 55%
Electric
Interior electric - sometimes included in the condo assocation fee
Phone
You should have a long distance call blocker - the phone company can do this for you. Your phone bill will run around $30 month
Cable - Internet Service
Basic cable is generally included in the condo fee, but you may want to add high speed internet access - about $40 month
Cleaning Between Guests
This will vary depending on the size of your unit, it is sometimes included at the higher range of management fee - $60 to $150 per cleaning
Interior Insurance
The building will be insured by the assocation but you should also have insurance for interior contents and personal liability. Sometimes you can do this by adding a rider to your homeowners policy
Land Lease
If the property is Leasehold you will have a monthly land lease payment
Property Taxes
You can find information on maui property taxes at http://www.maui411.com/wwr.html
Repairs and Reserves
You should set aside some funds for repairs and replacments of items that wear out
You can see a sample worksheet of how the operating expenses on a typical vacation condo works out by clicking on this link>> Sample Vacation Rental Expense Worksheet