Thinking about buying a Kauai condo or home and renting it short term? One wrong assumption can turn a dream investment into red ink. You want clear steps, local rules, and realistic numbers so you can model returns with confidence. In this guide, you’ll learn how to confirm if a property can legally operate as a vacation rental, how Hawai‘i taxes affect your bottom line, how to model revenue and costs with seasonality, and how to calculate ROI. Let’s dive in.
Confirm legal status first
Before you look at returns, make sure the property can lawfully operate as a short‑term rental in Kauai. The county defines short‑term rentals as Transient Vacation Rentals for stays under 180 days. New TVRs are permitted only inside designated Visitor Destination Areas, and properties outside a VDA must have a valid nonconforming use certificate to operate.
- Start with the County Planning TVR page. Use the county’s list and guidance to confirm whether a property is inside a VDA or has documented nonconforming status. Operating without approval can trigger fines and a forced stop of rentals, which drops income to zero. Review Kauai’s TVR rules and lists.
- Check private rules too. Some HOAs and condo associations restrict or ban short‑term rentals even when county zoning allows it. Always review CC&Rs and house rules before you assume any rental income.
Price in Hawai‘i taxes
Your gross rate is not your net. Hawai‘i vacation rentals face several taxes that either pass through to guests or affect your operating cash flow.
- Transient Accommodations Tax. The state TAT is 10.25% today and Kauai adds a 3% county TAT. Owners must register and remit both. See Kauai’s county TAT information.
- Green Fee starting 2026. Hawai‘i enacted a 0.75% increase to the state TAT that is scheduled to begin January 1, 2026. Model this higher tax in your forward projections. Read the Governor’s announcement.
- General Excise Tax. Hawai‘i’s GET applies to rental income and common pass‑on rates on Kauai are about 4.712%. GET is separate from TAT and typically applies to gross receipts. Review GET guidance and county surcharge basics.
- Property tax class. Kauai classifies vacation rentals differently than owner‑occupied homes, and the rate is higher. Confirm the property’s current class and model taxes using county rates. Check Kauai’s real property tax rates.
Model revenue with Kauai seasonality
Kauai demand is seasonal. Winter holidays, spring break, and summer tend to be strongest, while shoulder months often see softer occupancy. Your annual results depend on capturing peak season rates and filling shoulder periods.
- Build a monthly model. Use monthly average daily rate and occupancy, not a single annual average. Hawai‘i’s visitor industry reports publish island‑level vacation rental occupancy and ADR signals you can use to shape your inputs. Use DBEDT’s vacation rental performance reports.
- Reality check against hotels and comps. Vacation rentals often trail hotel occupancy, but whole‑home or multi‑bedroom units can command strong ADR with group travel. Use local data providers and manager input to refine your assumptions by neighborhood and unit type.
Build a realistic expense budget
Your expense line is where many Kauai STR models go sideways. Include the full operating picture.
Management and platforms
- Full‑service STR management commonly ranges from 15% to 30% of gross rent, with market medians near 25%. Lighter co‑host options can be lower but may add per‑booking fees. Confirm the exact scope and cost in writing.
- Listing platforms may charge host service fees. Check current schedules and decide whether to list across multiple channels.
Turnover, cleaning, and supplies
- Cleaning per stay varies with size and scope. Whole‑home cleanings on Kauai can be substantial. Include laundry, consumables, and periodic deep cleans. If you retain any cleaning fee, model it as income and the cleaning as an expense.
Insurance and liability
- Standard homeowners policies often exclude short‑term rental activity. Price a dedicated STR or commercial policy and adjust for amenities like pools or hot tubs. Premiums on island can be higher than on the mainland.
Utilities, HOA, maintenance, and reserves
- Budget for electricity, water, sewer, cable or internet, and landscaping. Condos may include some utilities in HOA dues. Add a reserve for repairs and capital items, commonly 5% to 10% of gross revenue or based on a fixed annual amount.
- Verify HOA dues, what they cover, and any special assessments. Confirm that short‑term rentals are permitted under current rules.
Financing costs
- Lenders usually treat STRs as investment properties that require larger down payments and carry rate premiums compared with primary residences. Use your lender’s letter for exact terms since debt service can make or break cash flow.
Crunch the ROI numbers
Use standard rental metrics. Keep taxes that are passed to guests separate from owner net where appropriate, and be consistent across scenarios.
- Gross Annual Rental Revenue = ADR × Occupied Nights
- Occupied Nights = 365 × occupancy rate
- Gross Operating Income = gross revenue plus any ancillary income you retain
- Operating Expenses = management, cleaning, utilities, insurance, property taxes, HOA, maintenance and reserves, platform fees, marketing, accounting
- Net Operating Income = Gross Operating Income minus Operating Expenses
- Cap Rate = NOI divided by purchase price
- Annual Debt Service = annual principal and interest
- Cash Flow Before Tax = NOI minus Annual Debt Service
- Cash‑on‑Cash Return = CFBT divided by total cash invested
- Break‑even Occupancy = occupancy where NOI minus debt service equals zero
Sample calculation (hypothetical)
- Price: 1,000,000 dollars
- ADR: 500 dollars, Occupancy: 50% (183 nights)
- Gross revenue: 91,500 dollars
- Management fee at 25%: 22,875 dollars
- Cleaning: 150 dollars per turnover, 60 turnovers equals 9,000 dollars
- Insurance, utilities, HOA, maintenance, marketing: 20,000 dollars
- Property taxes: 11,000 dollars
- NOI: 91,500 minus 62,875 equals 28,625 dollars
- Debt service: 56,616 dollars
- Cash flow before tax: negative 27,991 dollars The takeaway is sensitivity. Slightly higher ADR or occupancy, lower management costs, a different tax class, or better financing can flip the result. Always test multiple scenarios.
Plan scenarios and break‑even
Run at least three versions of your model.
- Conservative: lower ADR, lower occupancy, higher expenses, include upcoming tax increases.
- Base case: market medians by month, realistic expense quotes, current financing terms.
- Optimistic: peak‑season ADR, higher occupancy, refined operations.
- Calculate break‑even occupancy for your exact expense and loan terms. If break‑even is above what your comp set has achieved historically, reconsider or reprice.
Due‑diligence checklist for Kauai STRs
Use this list before you write an offer or remove contingencies.
- Verify legal eligibility through the County Planning TVR resources, including the approved lists and the property’s file.
- Confirm HOA or condo rules allow short‑term rentals and note any minimum stay or blackout periods.
- Pull recent county property tax bills and confirm tax class with the assessor using current rate tables.
- Ask for compliance history, including any complaints, fines, or cease and desist notices.
- Gather local ADR and occupancy by month from reliable data sources and managers for your specific unit type.
- Get written quotes for management, cleaning, insurance, utilities, HOA dues, and routine maintenance.
- Obtain lender terms for an investment property loan and confirm the property’s intended use is acceptable.
- Register for required tax accounts and confirm filing cadence for TAT, county TAT, and GET. Start with Hawai‘i tax licensing guidance.
Ready to run the numbers on a South Shore condo or a resort‑area home? If you want a model tailored to a specific property, market comps, and introductions to trusted local vendors, reach out to Susan Higgins for concierge‑level guidance.
FAQs
What makes a short‑term rental legal on Kauai?
- A property must be inside a Visitor Destination Area or have a valid nonconforming TVR certificate, and you should confirm status using the County Planning TVR resources.
How do TAT and GET affect my pricing?
- Most vacation rentals pass TAT and GET to guests, but you must register and remit both, so include them in your rate strategy and cash‑flow model.
Where can I find Kauai ADR and occupancy data?
- Hawai‘i’s DBEDT publishes monthly vacation rental performance reports with island‑level signals that help shape realistic ADR and occupancy inputs.
Do HOA rules override county permits?
- Yes, private HOAs and condo associations can restrict or prohibit short‑term rentals even when county rules allow them, so always review CC&Rs.
How will the 2026 Green Fee change my returns?
- The state TAT is scheduled to increase by 0.75% on January 1, 2026, so model slightly higher tax cost and confirm the effective rate in your forward scenarios.
