Real Estate of Mind - Leasehold Property

HONOLULU (HawaiiNewsNow) - As you shop for a home or investment property in Hawaii, you may encounter some listed as Leasehold.  A leasehold property may be right for you if you get all the facts. Cliff Colvin, a realtor with Coldwell Banker Pacific Properties joined us on Sunrise to tell us more about the different types of Leasehold property. (check out the video for the interview)

1.      Most properties you will find in Hawaii are Fee Simple.   

A fee simple buyer acquires ownership of the entire property, including both the land and buildings.  It's simple!

2.      When you buy a leasehold property, you are not buying the land.

When you buy a leasehold property, you are buying improvements, (i.e.. the structure) and not the land.  You pay lease rent to the owner of the land in addition to any mortgage payment you make if you've financed your purchase.  The use of the land is limited to the remaining years covered by the lease and the use, maintenance, and alteration of the leased premises are subject to any restrictions contained in the lease.

It is important to know when the expiration date of the lease for a property of interest.  This impacts the ability to get a mortgage and the determination of whether the property makes sense for you.

The land owner is often a school, hospital or other organization whose trust requires them to hold the land to generate income to benefit the wishes of the trustee.

Leasehold properties may be less expensive than Fee Simple properties because some people are uncomfortable with the uncertainly inherent in a leasehold property since ownership is limited by the term of the lease.

3.      Some Leasehold properties have the Fee Available.  

Sometimes the landowner will decide to sell their land, and this is termed Fee Available.  When this is the case, you can buy the improvements and buy the land at one time.  The property then becomes a Fee Simple property.

4.      Talk to a professional to dig into the details about a Leasehold property.

Check on a listing of interest to see if it's denoted as FS (Fee Simple) or LH (Leasehold).  If it's Leasehold, it's particularly important to talk to a real estate professional who is well versed in this type of property.  There are some interesting opportunities for buyers, which we'll discuss in the next Real Estate of Mind segment.

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