Buying Advice

Leasehold (LH) – What Is It? Why Does Hawaii Have So Much Of It?

Defined: You do not own the land beneath your property.

In Action: You pay a monthly fee to the landowner and may/may not have the option to buy the land in the future.


All land in the Hawaiian Islands was owned by Kamehameha III until legislation divided the king’s land between the royal government and the king. The new government ownership then decided to sell the majority of land to western missionaries who had financial interest in keeping the land and leasing it back to the locals for profit.


  • You may not be able to get a 30-year loan if your lease expiration date is under 30 years. I have found that lenders will lend on the number of years until the expiration date (-) 5 years. For example, your lease expires in November 2044, 25 years from now. A lender will lend you a 20-year loan.
  • The IRS does not consider the property real estate if it has less than 30 years until the lease expires.
  • Expect a 60-day close. It often takes longer for the loan process to be completed.


  • Fee offerings are highly suggested. It is almost always best to purchase the land outright if presented with the opportunity. It may never come again, and this will very often appreciate your real property’s worth exponentially.

Who Should Buy

  • Investors – You want to see a quick return on your investment with a low initial cost.
  • Lifestyle Buyers – You want an epic property in an epic location for a great bottom line.
  • Seniors – You don’t want to tie up equity in real estate and don’t have any heirs to leave the property to.
  • College Students – You need quality affordable housing and would like to make some rental income after college.

Leasehold (LH) v. Fee Simple (FS)


Property List Price Lease Rent /Month Maintenance Fee /Month

Taxes /Month

Milowai 309

LH $289,000 $622 $552


Maalaea Banyans 102 FS $595,000 $515


**Both 1-bedroom, 1-bathroom condominiums allow vacation rentals and are oceanfront and ocean view. They should rent out for approximately the same amount per night. However, Milowai 309’s lease expires on January 1, 2039. So you are likely only going to get a 14-year loan on this property. Not to discredit some lenders who may be able to lend on 90% of the lease term giving you a 17-year loan.**


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