Fee Simple or Leasehold Ownership in Hawaii
Fee Simple FS: Ownership of land and the buildings on such land (as opposed to leasehold where property reverts to the owner when the lease expires)
A Fee Simple (or fee simple absolute) is an estate in land a form of freehold ownership. It is the most common way real estate is owned in common law countries, and is ordinarily the most complete ownership interest that can be had in real property .
LEASEHOLD - LH
"Leasehold Condominiums" where the development is built on leased land ( based on Ground Lease contract between Landowner )Lessor) and Buyer(Lessee ).
Leaseholds are properties where an owner/landlord (Lessor) leases real estate to buyers (Lessees) for specific time periods. The lessee is permitted to occupy the property for the lease period and pays the lease rent.The lessee is also responsible for paying the property taxes,maintenance fees,AOAO or HOA fees,etc. The Lessee Does NOT own the Land!
LEASEHOLD - FA – Fee Available or FP Fee - Purchase
The Landowner's interest in LH property is called Lease Fee Interest. The Conversion of Leasehold Property to Fee Simple property involves purchasing of the landlord's leased fee interest(s) and/or any potential sandvich lease.The past average Fee Interest purchase for Waikiki 1 bedroom LH condo unit was $70,000 to $100,000
What to Know when Buying Leasehold Property in Hawaii
1.Check the time period remaining on the lease. Leases that started 50 or 99 years ago may be nearing the end of their lease terms. Leasehold property prices generally decline as their lease terms approach expiration. If you see a condo on the market for $50,000, it may have just a few years left on the lease.
2.Lease renegotiation dates. When a property was initially built, for example a building constructed in the 1960's, the monthly lease rent may have been $50. Periodically, the lease terms can be renegotiated, based on market values. The lease rent for that same property today might be $350.
3.If you anticipate needing a loan for the purchase, check with your lender to see if they will make a loan on the property. Mortgage companies usually require that the lease be at least five years longer than the loan. For example, to get a 30 year mortgage on a leasehold property, the lender would want to see at least 35 years remaining on the lease term.
4.Find out if the lessor offering the fee simple interest. If the fee is available, what's the price?
5.Monthly lease rent. Find out how much it will cost per month. For Example: The Kahala Beach Honolulu condo $2,200+/m lease rent can cover purchase mortgage payments for $400,000 2 bedroom Waikiki Fee Simple condo.
6. Expiration of the Lease Most Common Outcomes:
1.The property reverts to the lessor. The lessee must surrender the property and move out by end of the lease.
2.The lessor sells the fee interest to the lessee and the lessee become the fee simple owner of the property.
Not all leaseholds are bad and vary from building to building. Long lease properties with cheap lease rent are good for rental investment cash flow or to control fixed housing expenses.
Aloha, Karel Kon - Principal Broker http://www.BestRealtyInc.com