Hawaii Real Estate Investing: Leasehold Properties
For many potential Maui home buyers, Leasehold properties have the alluring appeal of being priced lower than Fee-Simple comparable properties (read here for more info regarding Fee Simple vs. Leasehold), yet offer amenities/locations that would be unaffordable on a Fee Simple property. For example, let’s take a look at Kamaole Nalu and Royal Mauian, two properties that are literally next to each other but one is Leasehold and the other is Fee Simple.
Kamaole Nalu Leasehold Condo For Sale
Kamaole Nalu is a condo complex sitting on 2/3 of an oceanfront acre in Kihei, consisting of 36 units, all of which are 2 bedroom / 2 bathroom (774 square feet). A unit currently for sale (MLS# 339998) is listed for $295,000 and another unit sold two months ago sold for $325,000. As a leasehold property, the current lease is approximately $650 per month and will be renegotiated in 2015, a follow up renegotiation in 2025, with an expiration date of 07/2035. So is this a good value for an oceanfront Kihei condo? Let’s compare it to its neighbor.
Royal Mauian Fee Simple Condo For Sale
Royal Mauian sits atop 2.2 acres, beachfront on Kam I/II. Units range from 1 bedroom / 1 bathroom (590-610 square feet), 2 bedroom / 2 bathroom (806-864 square feet), and 3 bedroom / 2 bathroom (1324 square feet). A Royal Mauian comparable unit is currently for sale (MLS# 344005), listed at $1,149,000 and a 2 bedroom / 2 bathroom unit sold two months ago for $1,300,000.
So is the Fee Simple ownership worth the extra million dollars? It really depends on your position. If you are looking to enjoy a property that otherwise would be out of range, then a Leasehold presents a great value. If you are cautious and would prefer a Fee Simple ownership, knowing that you own it outright, it’s certainly understandable.
For more information on Leasehold properties or real estate investment opportunities, contact Mariah at Mariah@HawaiiLife.com or Alex at Alex@HawaiiLife.com
Tags: fee simple, hawaii real estate, leasehold, maui condo sales, Maui real estate
Great explanation on the difference between a Fee Simple and Leasehold position is on these two condo’s. That is crazy the difference in price….I think I will stick with leasing the land and saving a few bucks.
My question is what happens when the entire lease is up in 2035?
I will definitely give you guys a call if I end up buying some real estate in Maui.
Aloha Cody. Typically what happens at the end of the lease term, it is renegotiated to extend it for another full term (30-35 years, with lease terms renegotiated every 10 years or so to keep lease rates at current market values). If/when it becomes a legal issue, courts have been ruling in favor of extending the lease, forcing the landlord to lease the land. There has only been one decision is which it was ruled in favor of the land owner. I’m a big fan of your blog, thanks for visiting/commenting, Cody.
Wow! What a huge difference in price!
Where I live, everything is fee simple… so the idea of purchasing a property where the land is merely leased is scary! But I guess it must work our well for a lot of people, otherwise they wouldn’t be doing it, right?
It’s totally understandable, Leasehold properties are not for everyone (not for me). For many retirees, it works out great: ‘owning’ and enjoying beachfront/oceanfront/luxury condos that would otherwise be unaffordable.
Fabulous post about real estate, thumbs up!
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