Think of Hawaii, and images of long sandy beaches, palm trees, and year-round sunshine spring to mind. But, the Aloha State is much more than lazy days spent by the beach.
The islands also diverse nature from rainforests to volcanoes, visitors – and investors – can spend the morning snorkeling amongst the bright corals, and in the afternoon, hike in the lush state parks.
So, Why are there so few Fractional Ownership in Hawaii listings?
With so much to discover, you might wonder why fractional property ownership hasn’t taken off on these exotic islands, rich in culture. While fractional property ownership is legal in the state, the market is largely untapped, and very few options remain available across the islands.
One problem is usage – most people that visit Hawaii can only afford to go for 1-2 weeks. Fractional ownership is usually four weeks or longer, and in some cases can be up to three months. Real estate prices of fractional ownership for that length of time are cost prohibitive in Hawaii. One example of this is Timbers Kauai, where fractional ownership runs in the $300k+ range on cost (for a just a few weeks of usage!)
I’ve seen many people try to fractional sell their condo in Hawaii. It usually fails. Why? Because buyers are turned off by a lack of presentation when it comes to real estate. Owners don’t realize how hard it is to sell a fractional property. The home must be in a perfect location. Good, solid management must be in place. The interior must be decorated to the nines. It must be near amenities. It must be a new condo. The HOA must allow it. Etc, etc. The list goes on and on and if buyers are turned off by one small detail the deal is off.
Fractional Ownership vs. Timeshares
We all know the advantages of timeshares, but many of us are still unfamiliar with the benefits investing in fractional property ownership brings.
Unlike a timeshare, where owners often have an allocated annual week, fractional ownership offers – in some cases – up to four months per year. In fact, in Hawaii, the government states that fractional ownership means the exclusive right to use the property for no less than 60 days per year, perfect for anyone from colder climates, who wants to escape to the sunshine for a few months at a time.
So fractional ownership seems to be optimal for snowbirds escaping Canada for the winter to Hawaii. So why are there no snowbird properties? It’s because buyers in that age range can usually afford a condo or a 2nd home and do not want the hassle of fractional ownership.
However, fractional ownership does give investors additional purchasing power. For those unable to commit to full ownership – or for those who can’t make use of the property year-round, this ownership model gives buyers and travelers greater flexibility.
With less complication than a timeshare and fewer commitments than owning an entire property, fractional property ownership would be well-suited to many who dream of owning a vacation home in Hawaii.
What fractional ownership is currently available in Hawaii?
We’ve selected properties available across the Hawaiian Islands, to give investors a detailed picture of what’s available right now.
Timbers Kauai is an exceptionally luxurious property; however, because of the high price tag, this option will only be available to a limited number of buyers. The spectacular location and elegance of the property aside, as a brand-new development, these units will depreciate. While the tranquility and seclusion of the residences may tempt those with a large enough budget, Timbers is not an investment property – regardless of what the real estate team says. Keep this in mind before considering an investment.
With properties on every island, Equity Residences is a great option for fractional ownership in Hawaii. With just one investment, buyers have access to an extensive portfolio of luxury properties. Investors commit to ten years, and after a decade of vacations, receive their original investment, plus any additional gains – of course – in addition to your memories of adventure across Hawaii. However, annual usage is usually only 1-3 weeks, which may not be long enough for many fractional buyers.
Montage on Maui
Located on the alluring island of Maui, the Montage Resort offers good value properties at about ⅓ of the original price – this is because depreciation has already occurred. Montage has many residences available, so there may be room for additional reductions and savings for investors. While the property offers many facilities and an enviable ocean-front location, the annual fees are high, so consider this added expense before making any moves. Also, usage is about two weeks per year.
Searching for Individual Homes and Condos?
If you’re seeking individual properties, it can be a challenge on any of the islands; this is due to poor marketing and often overpriced properties. As a result, fractional ownership for individuals’ homes and condos hasn’t caught on.
Condo hotels are also an attractive ownership option in Hawaii. Since vacation condo owners want to come for 2-3 months per year, a condo hotel can generate income for them while not in use.
Although not impossible to find, often these options appear on the market once every few months. Even searching real estate websites can prove to be difficult, as the fractional ownership properties are often in a separate section of the realtor’s site. Your best bet: call realtors on your preferred island and see if they know of any available right now.
Hawaii is a world leading tourist destination; however, the fractional ownership market remains mostly unexplored by investors. The market offers outstanding properties, which are available for those who want a slice of this exciting real estate market.
It’s important to note that when searching for a fractional ownership property in Hawaii, consider depreciation and annual service fees before purchasing a share of a property.
Are you Ready to Explore?
If Hawaii is tempting you to invest and in a quality vacation home, we offer more information on fractional property ownership in the Aloha State, contact us for more information.