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Lease Hold???

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  • Lease Hold???

    Hello, I just introduced myself in the newcomer's I mentioned, it looks like my family and I will be moving to Oahu shortly. We are probably going to be there for quite a few years, so it's seems smartest for us to buy a home. I've been researching the realty sites, and I think I have a basic understanding of the difference between Lease Hold and Fee Simple real estate transactions. But, what confuses me, is "what exactly are you buying with a Lease Hold purchase"? At the end of the lease term, you must give back the property/home--true? I am looking at a house on the Windward side (lease expires 2026), but the monthly land lease fee alone is $2250! I'm assuming that this doesn't include the cost of the mortgage. Correct me if I'm wrong, but I don't think a Lease Hold purchase isn't the way to go. Why would anyone do this?

  • #2
    Re: Lease Hold???

    I just wanted to welcome you to Hawai'i Threads! There are many others here who can answer your questions about Real's my advice, Stay away from Kapolei...too much traffic. Oh! Try looking in forclosers, cheaper. My own kids looking to buy a lot with old homes or an up and down and fix it up. The new homes are smaller and the lots can't even be considered a yard these days. Most of all, please check out the background from Honolulu Police Dept. of the various crimes in the areas you are looking at. We have our problems in Hawai'i but there are communities that don't take any BS from ciminals and they have strong family activities as well as Public Schools that can make a difference in anyones life. Good Luck!
    Be AKAMAI ~ KOKUA Hawai`i!
    Philippians 4:13 --- I can do all things through Christ who strengthens me.


    • #3
      Re: Lease Hold???

      Leasehold is most attractive if you're at the beginning of a long lease (say, 99 years) and you don't expect to outlive the term. It becomes progressively less so if you buy in later as the lease term gets shorter and shorter, especially because the land owner will almost always jack up the lease rent significantly when it's time to renegotiate. Lots and lots of leaseholders are only just now realizing that it's not a great deal if you have to renegotiate your lease when you're 70 years old.


      • #4
        Re: Lease Hold???

        Aloha Bar,

        Fee Simple vs. Leasehold

        Fee Simple is the type of ownership that most of you are accustomed to. You purchase property, receive title and it’s yours or your heirs forever, or until such time as the property is disposed of. Leasehold, conversely, is the property to which title remains yours for a specified period of time, at the end of which the property reverts tot the part that hold title in Fee Simple.

        The most common of the Leasehold title is to convey land upon which improvements have been made or are to be made, such as a condominium or a single family residence. The lease is usually for a period of time in excess of fifty years during which time you may exercise the rights of ownership as if you held title in fee.

        Your probable immediate negative reaction to this type of purchase may be erased by a little insight into reasons for and benefits of conveying this type of title to you.

        The first reason is that the Fee holder wishes the property to remain in his estate but would like to derive some income from the property. Secondly and predominantly, it makes the property affordable.

        Let’s take for example a three acre parcel of land, oceanfront and zoned apartment. The market price for the land alone is four million dollars. The developer constructs forty condominium apartments of equal size and sells them Leasehold on a seventy five year lease. The lease payments are fixed for a term of thirty years at which time the lease is renegotiated. The fixed payments are $200 for the first en years, $250 for the second ten years and $300 for the third ten years. Now compare these monthly payments to the payment that you would make if you had purchased the apartment fee simple. The price would be $100,000 more for each apartment, your down payment would be at least $20,000 more and you would be financing an additional $80,000 representing an additional monthly payment of over $1,000 depending on the interest rate. This higher down payment and monthly payment could well take the property out of the affordable price range for you.

        There are tax benefits in purchasing Leasehold properties. However, taxes are unique to the individual and it is suggested that you seek advise from a tax consultant.
        Hope this helps. If you need any assistance with financing, or have any questions or comments, please feel free to drop me an email.