LEASEHOLD! What's That???

Leasehold property can attract attention for buyers on the MLS and usually because of the PRICE. Perhaps the photos show a home set in a beautiful tropical orchard or an oceanfront condomium priced much more competitively than other similar properties. Fee Simple is probably how you are accustomed to purchasing a residence where you own the stucture and the property underneath the structure. In leasehold purchases, the buyer is purchasing a contract for leasing the land from the owner for a certain number of years. Typically there are set points at which the rate will be renegotiated. The length of time left on the lease can affect financing. On the mainland many leases are timber, mineral or grazing leases from the state or federal government. In Hawai'i County, our MLS leasehold listings are largely agricultural land with or without a residence. The Kona Coffee Belt on the Big Island of Hawai'i is an excellent example of agricultural use of leasehold properties and offers a lifestyle that is loved by many residents. Hawaii leases usually are obtained from large trusts such as King Kamehameha, Bishop Estates or Greenwell. There are also other smaller leasehold options, many that are very prevalent in commerical businesses around the island such as downtown Kailua Kona. In addition certain condominium projects are leasehold. The listings on MLS leaseholds varies on what is actually being purchased. Usually you are purchasing the business, farming operation or residence for the amount listed. You are then obligated to accept the previous owners terms of lease and pay a leasehold rent to the owner of the land under the business or residence for whatever time is left on the lease. This would be additional to the HOA fees. Whether Fee Simple or Leasehold works best for YOU varies greatly upon your intent of use and/or comfort level of risk. Like the majority of real estate decisions..there isn't a definitive right or wrong type of purchase. The final decision should be based on your evaluation of the pros and cons involved in leasehold property