Leasehold property: One is leasing the land from the owner for a certain number of years at a set rate, typically with set points at which the rate will be renegotiated. . On the mainland many leases are timber or grazing leases from the state or federal government.

In Hawai'i County MLS leasehold listings are largerly agricultural land with or without a residence. The coffee belt on the Big Island of Hawai'i is an excellent example of agricultural use of leasehold properties and offers a lifestyle that is loved by those who enjoy farming! Leases usually are obtained from large trusts such as King Kamehameha, Bishop Estates or Greenwell. There are also other smaller leasehold options, many that are very prevalent in commerical businesses around the island. In addition certain condominium projects are leasehold.

The price on the MLS varies on what you are actually purchasing. Usually you are purchasing the business, or residence for the amount listed. You are then obligated to accept the previous owners terms of lease and pay a leasehold rent to the owner of the land under the business or residence. In condominiums this would be additional to the HOA fees. . Which works best for you varies upon your intent of use and/or comfort level of risk on whether to purchase a leasehold or fee simple property.

Hi Monica,
From your question I can't tell which property you inquired about, but it says "Home Buying in Hilo" so I'm guessing you are looking at property here on the Big Island.

Most property on this island is sold "fee simple" which is how you are accustomed to buying property on the Mainland. You are actually buying the land, not just the home on it. For historical reasons, in some areas of Hawaii this was not the common practice. Until recently up to 85% of all non-governmental land in Hawaii was occupied under long-term lease, according to the statistics! The Hilo and South Kona districts have more leasehold properties than do other districts on the Big Island.

Sometimes buyers see what looks like a great deal compared with similar properties, and the reason is that there is a short time remaining on the lease and no option to purchase it.

If you are still looking on the Big Island, feel free to contact me for more details.
Aloha
Beth

Hi Monica,

A leasehold is a hold on the land. It is also the ownership on the land. Sometimes it is offered for sale; you'll see a figure called the "fee" or leasehold purchase. That is the amount to purchase the land. Most often, when someone purchases the home, they purchase the fee at the same time. This makes the property fee simple, and you can get 30-year financing. This means you own the entire estate or property.
If you purchase it as a leasehold, you pay rent on the lease at a rate previously set by an appraisal. That rate generally changes every 10 years with a new appraisal. You can only get financing up to 5 years before the expiration of the lease....so, if the lease expires in 2034, your lender will only loan you money up to 2029, or a 20-year loan.
At the end of the lease, technically, you forfeit the right to live on that land and must move. In a some cases, people have actually had to move. Over 90% of the time, I would estimate, the person that lives the property purchases the fee and converts it to fee simple, or sells to another person.
Call or email if you have questions. Leasehold property can get pretty complicated, so it is confusing sometimes.

Aloha,
Frank Diaz, (RA), MBA