Buying Advice

What Is a Leasehold Property in Hawai’i?

Catching Your Eye

Often times when my clients start exploring the real estate market here on the Islands, the first question they have is, “What is a leasehold property?” Leasehold properties appear in many cases, to be quite the steal. There is a lot to consider when you are deciding if a leasehold property works for your needs. In the video below I briefly cover what a leasehold property is and why they are not as inexpensive as they appear. I will also provide an overview of what a fee simple property is in comparison to a leasehold property.

The Multiple Listing System

Zillow, Trulia and many of these sites that are enjoyable to browse homes on, are not always accurate. When I am working with a Home Buyer, one of the first things I do is create a custom search engine for them. From the MLS system I can differentiate between leasehold and fee simple properties for you. It can be frustrating for shoppers to get inundated with listings that are not giving clarity when it comes to the fees associated with the purchase.

Lease Expiration

If you decide to purchase a leasehold property, the lease expiration is an important detail to understand. Generally, when a lease expires there are 3 potential outcomes. First, a new lease could be negotiated, and a new lease expiration would be set for the future. You can expect if this is the case there will also be an increase in the lease fees. Second, the fee might come available for puchase, meaning that you could buy the land associated with the condo and convert it from a leasehold into a fee simple property. Lastly, if the landowner chooses not to renew the lease you could end up having to move off the land and out of your home.

Who Owns the Land?

When shopping leasehold properties it can be important to explore who the owner of the lease is. In some cases, it could be 1 person or entity who owns the land for an entire building. In other instances, within 1 building, you might find a mixture of leasehold properties and fee simple properties. If a leasehold property you’re interested in has an individual who owns the land for only 1 unit in a building, there might be a higher chance they could be open to selling you the land. In real estate, it is always on the table to explore ideas and negotiate so keep an open mind and dream big.

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