Home Buying in Hawaii>Question Details

Jen,  in 85218

In Hawaii, what does "Leasehold" mean.Are these a good investment?

Asked by Jen, 85218 Sun Sep 14, 2008

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Leasehold properties are common on Oahu and many of them have or will be converting from leasehold to fee simple. Leasehold properties can be bought and sold like time shares in, a sense, you are buying and selling the right to use the property as opposed to owning it out right with the title in hand.

Now every leasehold property is different. The length of the lease, usually 99 years or less and how much time is left on that lease determines in part the price of the transaction. Location also calculates highly into the equation and amenities are not so important but can affect pricing.

How would someone benefit from buying lease hold, especially if you don't own the property? Well for starters lease hold properties generally cost considerably less than similar fee simple properties. Since the average time a consumer lives at any given residence is seven years it seems perfectly reasonable that the average consumer would not out live the terms of the lease and would pay substantially less money for the same type of property, local, and amenities than they would if they owned the properties outright.

On certain parts of Oahu it's not unusual to find a 10,000sq foot parcel of raw land offered as lease hold for several million dollars. Potential lessees would of course be able to build on the property but any structure on the property at the end of the lease would transfer to the holder of the land title not the lessee. None the less the profit potential is there for both parties to be quite satisfied with the terms.

Leasehold make excellent investment properties and can generate significant rental revenues from subleting but as time goes buy the real value of the property is affected by the time left on the lease. Many leasehold condos are on the verge of having their leases expire, which can mean one of three outcomes for the lessee: One is the loss of the property, two the lease is extended or three, the property is converted to fee simple and sold. Often times the lease holders are offered first right of refusal to purchase the property outright which in some cases is offered below market value. Unfortunately, this information is often withheld from the public for a number of reasons and it complicates the risk level of a leasehold property in the twilight of it's lease.

Regardless of whether you own a property or not, profit can be made from it's use.
1 vote Thank Flag Link Mon Sep 29, 2008
Leasehold means that you don't really own the land, you are just "renting" it. I have not had any clients come to me and say " I want to buy a leasehold property". I would recommend buying Fee Simple, which is the alternative of Leasehold. Fee Simple generally costs more, but it's worth it. There are plenty of options here on Maui, without having to resort to buying a leasehold house or condo. Let me know if you have further questions.
Aloha from Maui - the Hunter
1 vote Thank Flag Link Wed Sep 17, 2008

Call me at 808 723 0900. The home can be sold with or without the lease. That is, you can sell the home itself, but of course the lease (land) belongs to someone else. Whoever buys the home will have to pay the lease rent unless it (the land) is offered for sale (most are offered for sale eventually, over 90% in Honolulu).

Call me at 808 723 0900 if you have any questions.

0 votes Thank Flag Link Fri Nov 23, 2012
if you own a leasehold property, and is unable to purchase the lease but the home on the land is your can the home be sold with the lease.
0 votes Thank Flag Link Fri Nov 23, 2012
Buying a leasehold can be a good investment, but it takes some experience to know which ones ARE actually good investments. Our CEO Bill Chee writes about how leasehold purchases should be reserved for experienced investors in the link below.
0 votes Thank Flag Link Thu Sep 25, 2008
Leasehold properties generally depreciate in value the closer you get to the end of the leasehold period, so it's not something you would usually think of as an investment but rather as a more affordable place to reside in Hawai'i especially if you think you will expire before the leasehold.

A total of 23,754 single family leased fee conversions were identified in Hawaii. Most of these conversions occurred during two time periods - 1979 - 1982 and 1986-1990. All but 295 of these leased fee conversions have been on Oahu.

The five largest sellers of leased fee interests have been: Bishop Estate with 13,616 (57.3%), Castle Estate with 3,996 (16.8%), Robinson Estate with 2,256 (9.5%), Campbell Estate with 1,583 (6.7%), and Queen's Hospital with 834 (3.5%).
0 votes Thank Flag Link Sun Sep 14, 2008
Aloha, Jen... Katie Minkus, here, Broker-in-Charge of Lava Rock Realty on the beautiful Big Island of Hawaii. We still have quite a bit of leasehold land available on the BI - most of it is larger acreage, agricultural land. Basically with leasehold you have the right to use the land and the structures until the end of the lease term, and is like renting in that way. However, it's not true that you automatically have to leave the property once the lease is over, quite often the landowner doesn't want to repossess the land and will extend another lease for 25, 50 or 99 years. This is especially true when the landowner is one of the "big 5" in Hawaii, including Kamahameha Schools, Bishop Estates, etc. Whether or not it's a good investment really depends on the individual situation - what are your objectives in purchasing and working/living on the land, how long do you want to stay, what does this opportunity offer you financially that is in alignment with your future financial goals? There's a lot to consider.

Please feel free to email me: katie@lavarockrealty.com if you'd like any further information or advice.

Warm aloha,
Katie Minkus, R(BIC)
It Takes Courage to Live on a Rock!!
0 votes Thank Flag Link Sun Sep 14, 2008
Leasehold means that there is a hold on the land, or that you rent it. It can be a good value, but you have to consider it carefully. At the end of the lease term, you have to leave. The property reverts to the land owner,
Generally, your costs are lower when buying this type of property, but the lease rent renegotiates or adjust at set intervals and you have to leave at the end of the leasehold term. It is possible to buy the land and in most cases the land becomes available for sale. When you purchase it, it is now called fee simple.
Lease rent can vary from $100 per month to $10,000 per month depending on the land value.
Call 808 723 0900 or email me if you have more questions. I can send you examples of properties for sale.
The most well known one is probably 4999 Kahala, the townhome complex next to the Kahala Hotel.
0 votes Thank Flag Link Sun Sep 14, 2008
Why is this the most well known? Why are there always properties for sale there? Would you recommend it for someone only thinking of being in HI for another two years and looking for something with central air and more space (reasons for wanting to move and considering a LH).Whats the history of 4999 Kahala?
Flag Sun Aug 23, 2015
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