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Owning a Vacation Rental Condo on Maui - Part 2

Assuming you are legal, you now have to figure out how you are going to service that $3200/month debt. If you decide to have a property management company manage the condo for you, they will charge you twenty percent of all bookings to cover their marketing and management fees. It is nice to have someone else get the emergency calls, but twenty percent is a big cut. If your company has a good marketing program, it's possible to keep a condo rented about seventy percent of the time, but no matter what, you are going to have days between bookings, and at times during the calendar year you are going to have weeks without a booking.

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So, let's say you've got a one bedroom condo, and that you put about $10,000 into it to pay for upscale furniture, art and appliances so it could compete for the property management company's top billing. At best you can hope to get around a hundred dollars a night, for no more than twenty two or twenty three days a month – which works out to around a thousand dollars a month less than your expenses. Add to that a cleaning fee of about a hundred dollars every time someone moves out, and you could be looking at trying to rent the unit for closer to a hundred and fifty a night just to break even. With taxes of eleven and a half percent, your customer would need to be willing to pay close to a hundred and seventy a night! Take a look at the vacation rental section of our site and see how many one bedrooms are going for these amounts.

You see, you are competing with people who have owned their units for a long time and bought them for several hundred thousand less than you did, and hence don't have the same monthly mortgage as you. They can afford to rent for fifty dollars a night cheaper and still make a profit.

Buying a condo on Maui can be a great opportunity for those who can put enough cash down to keep the nightly rental fee in the competitive range, or have enough extra cash-flow to handle the shortfall, but your Maui vacation rental can be a big headache if you don't think it through before plunging in. Of course either way, you wind up owning property on the ocean, on Maui. Chances are, over the long haul, it may go up a bit in value. Happy shopping.

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