One of the most important distinctions in Hawaii real estate is the difference between leasehold and fee simple ownership. This concept is unique to Hawaii among the 50 states and can significantly affect your property value, financing options, and long-term investment.

Fee simple ownership means you own both the building and the land beneath it outright. This is the standard form of ownership on the mainland and is generally preferred by buyers and lenders. Fee simple properties on Oahu tend to hold their value better and are easier to finance.

Leasehold ownership means you own the building or improvements but lease the land from a landowner for a specified period. When the lease expires, ownership of the improvements reverts to the landowner unless the lease is renewed. Monthly lease rent is paid in addition to your mortgage, HOA fees, and property taxes.

Leasehold properties on Oahu are typically priced significantly lower than comparable fee simple properties, which can make them attractive to budget-conscious buyers. However, the lower purchase price comes with ongoing lease rent payments and the risk that lease rent may increase over time.

Financing leasehold properties can be challenging. Many lenders require a minimum remaining lease term, often 30 years beyond the mortgage term. As leases approach expiration, the property becomes increasingly difficult to finance and may lose substantial value.

Some leasehold properties on Oahu have been converted to fee simple through lease-to-fee conversion programs. If you are considering a leasehold property, research whether conversion is possible and at what cost. A successful conversion can dramatically increase the property's value.

Kristy and Austin Home Group helps buyers understand the full implications of leasehold versus fee simple ownership on Oahu. We analyze lease terms, conversion potential, and long-term financial impact to ensure you make an informed decision.