Usually if someone comes to me wanting to buy a coffee farm or macadamia nut farm in Hawaii, I refer them to a colleague located closer to where most of the farms would be. But lots of ocean view homes on acreage that otherwise compete with properties I list and sell have a bit of coffee or other crops, so for the second time this year, I found myself looking at coffee beans on the tree and enjoying a cup fresh from the farm.
Why Are So Many Coffee Farms “Leasehold” Instead Of Fee Simple?
As explained in several articles here on the website, some large landowners in Hawaii only offer long term leases on their land rather than selling the parcels outright. With approximately 70% of the agricultural land in the Kona coffee belt belonging to the trust Kamehameha Schools Bishop Estate, if you are looking specifically for a coffee farm, you will likely be looking at some KSBE leaseholds.
Your lease requires the property to be in agricultural production and may have other terms and restrictions. For example, one listing on the market includes a 2,638 sq ft ocean view residence on 19.5 acres of leasehold land, but only 11.5 acres are planted in coffee. Thatʻs because in addition to the acre or so containing the residence and farm buildings, there is a conservation easement for ʻohia forest on the land.
While the residences on some leasehold coffee farms qualify as the proverbial “coffee shack,” some compete in quality with those in a residential gated community on the Kona or Kohala Coast. In other words, knowledgeable owners have no reservations about investing serious capital in improvements to a leasehold property. But because you are not paying for the underlying land value, you can acquire these homes at a significant discount to an equivalent fee simple property.
Multiple Streams Of Income: Kona Coffee & Bed-and-Breakfast
If you are looking for an income property with more than one revenue stream, the coffee farm that also has a bed-and-breakfast license is a rare commodity. Remember, Hawaii County passed a bill restricting short term vacation rentals that will make it more difficult for you to offer overnight accommodations on ag-zoned property. Right now hosted rentals are excluded, but will almost certainly be regulated in the near future. Thatʻs why an existing B&B permit, which will transfer with the property to a new owner, has added value.
So how does this combination sound: 6 acres planted in coffee under the Lyman Coffee Farm label, a licensed bed-and-breakfast, and a separate main residence? This is a fee simple property and has the potential to generate even more revenue with an investment to make the accommodations attractive to a more upscale market.
I am currently a little over-caffeinated after a week touring coffee farms, but give me a few days to recover, and Iʻd be happy to show you some of the options.