For many mainlanders and foreign nationals, the opportunity to invest in Hawaii real estate is the perfect melee of business with pleasure. Although for the most part Hawaii is not regarded as a strong short-term cash flow market, its reputation as a stalwart long-term equity market has made it a perennial favorite among those with a comparatively patient investment strategy.

However, it is critical that buyers (regardless of their nationality) perform due diligence and are well aware of any material facts that could reasonably affect their investment. As such, potential buyers and the real estate community had been closely monitoring Hawaii HB 2078 since its initial proposal in January. In a nutshell, this measure sought to require off-island vacation rental owners to use an on-island property manager, with the purpose of ensuring that appropriate taxes are collected on any rental income generated. Current transient accommodation owners and real estate professionals who realize how this legislation would have a negative effect on investment strategies and the sluggish real estate market rallied to form an organized opposition force and through their efforts, HB 2078 evolved through a series of versions (Click here to view) to a more fair measure. Ultimately, HB 2078 HD2 SD2 CD1 passed Final Reading on 05/02/2012 and is scheduled to become effective on 07/01/2012. As passed, this measure will:

“Require the owner of a transient accommodation to designate a local contact residing on the same island as where the transient accommodation is located. Furthermore, it requires that all advertisements and solicitations for transient accommodations on any website display the registration identification numbers.”

This proved to be an excellent case in which a well-organized group with an articulate plan could have a direct effect on the political process by having their voices heard by Hawaii state leaders. Of course, legislation similar to the original HB 2078 could be introduced at latter legislative sessions, but now legislators know that it will meet strong opposition. With today’s current market conditions, there are opportunities to invest in Hawaii real estate but it is incumbent upon buyers to be prudent and account for possible scenarios that could potentially hinder their profitability and long-term real estate objectives.