Hawaii is unique from the majority of other states in the union in that it offers some of its property in the form of “Leasehold” ownership. For more information on “Leasehold” vs. “Fee Simple” ownership, visit our post on the topic.
Some people are leery of the prospect of purchasing a leasehold property, knowing that their right to use of the land expires with the lease. However, depending on your personal situation, leasehold may be a smart option for you. A lot depends on the terms of the lease (how much longer you would have use of the property) and your long-term goals.
For those buyers for whom “lifestyle” is a high priority, leasehold can be a great option as leasehold properties tend to have much higher square footage (as compared to their Fee Simple counterparts) and the buildings often boast many amenities. Typically, leasehold buyers get more room and more amenities for their dollar.
Leasehold can be great for investors who can purchase the property for a lower sales price and rent it out. If the property is located in an area that’s zoned for vacation rentals or in a luxury building that garners high monthly rents for longer term rentals, the numbers can work for certain investors. A lot depends on the lease term and the renegotiation date. Savvy investors know how to crunch the numbers to determine if there is profit to be earned after maintenance fees, lease rent, taxes, and other expenses.
Leasehold can also be a viable option for couples who are dealing with caring for ailing parents. Often these same couples may be simultaneously putting their children through college and they may not want to carry the debt load associated with comparable sized Fee Simple properties. Leasehold properties may give them the space they need to bring mom/dad into their home AND get them a central Honolulu location near doctors and other senior-related services. Again it all gets down to the numbers, and they vary from property to property and person to person.
Leasehold properties on the Gold Coast of Waikiki can be particularly compelling to people who would like to enjoy the luxury and beauty the Gold Coast offers, but who may not be able to afford it at Fee Simple pricing. In this case, leasehold is all about lifestyle!
This type of property ownership is definitely not for everybody. But it may be for you...Working with a trusted realtor, financial planner, and your family, you may determine that leasehold is a promising option for your own situation.
Have questions or want a further detailed information packet on purchasing leasehold property in the state of Hawaii ? Contact me today!