There's good news, and bad news here.
The good news is that there are some select homes on Kauai that you can use as a vacation rental. The bad news is that there aren't very many of them.
When people hear or read agents like myself talking about a house having a vacation rental license it's easy to make the mistake of thinking that you can apply for and get a vacation rental license and use it to vacation rent out the home you're buying on Kauai. That is not accurate.
In 2010 the County of Kauai decided that only homes and condos located within a Visitor Destination Area could be used as vacation rentals. There are several of these on Kauai and they are Princeville, parts of the shoreline in Kapaa, and large sections of Poipu and the Koloa. The County of Kauai made an exception for homes where the owners had a business using them as vacation rentals. With those home the County allowed them to apply for a vacation rental license.
Since that time the County of Kauai has not given out a vacation rental license. We often refer to a home with a vacation rental license as a TVR (Transient Vacation Rental). When I'm first talking to my clients about it I will often say to them, "either a house has a vacation rental license, or it doesn't. If i doesn't have one now, it's not getting one". Now at some time in the future the County of Kauai could change there laws and this could become a non-issue, but for now this is how it is.
Let me know if you have any questions!
I'm always happy to help! Aloha,