So you're scrolling through Hawaii listings and suddenly spot what looks like your dream condo in Waikiki for literally half the price of everything else. Before you start planning the housewarming party, let's talk about why that price tag might be too good to be true.

Welcome to the world of leasehold properties—a unique aspect of Hawaii real estate that can honestly be pretty confusing if you're not familiar with it.

The Basics: What's the Difference?

Fee Simple is what most people picture when they think about buying property. You purchase the land AND everything on it. It's yours. You pay your mortgage, property taxes, and maintenance fees, and you've got complete ownership. You can sell it, rent it out, pass it to your kids—whatever you want. This is how about 98% of Hawaii real estate works, and it's the most straightforward type of ownership out there.

Leasehold is a different beast entirely. With leasehold, you're buying the structure (the condo or house), but the actual land beneath it? You're leasing that from someone else. Think of it like leasing a car—you've got the right to use it for a specific period, but at the end of the day, you don't own it. Currently, only about 2% of single-family homes on Oahu are leasehold, though roughly 10% of condos on the market fall into this category.

Where Did This Even Come From?

Hawaii's leasehold system has its roots in the Great Mahele of 1848, when King Kamehameha III divided land ownership in Hawaii, and the Kuleana Act of 1850, which established fee simple titles. Before European contact, private land ownership didn't exist here—land belonged to the king and was managed by the ali'i (chiefs) for the benefit of everyone.

After these historic land divisions, much of the land ended up in the hands of major trusts like the Bishop Estate (now Kamehameha Schools), Queen Emma Foundation, and Liliuokalani Trust. These trusts chose to lease rather than sell the land, which is why we still have leasehold properties today.

The Price Tag Reality Check

Here's where things get real: leasehold properties can be about 25% cheaper than comparable fee simple properties. We're talking condos that might be $300,000 versus $750,000 for something similar in fee simple. That's a hell of a difference.

But before you jump on that deal, understand what you're actually paying for. With leasehold, you'll have monthly or annual lease rent on top of your mortgage, HOA fees, and property taxes. And here's the kicker—that lease rent gets renegotiated periodically (often every 10 years) based on the current land value, and in Hawaii, where land values generally go up, your lease rent is probably going up too. Sometimes significantly. We're talking potentially doubling or even tripling.

What Happens When the Lease Ends?

This is where leasehold ownership gets a bit nerve-wracking. At the end of the lease term, a few things can happen: the fee owner might offer to sell you the land (best case scenario), they might renegotiate and extend your lease for another chunk of years, or—worst case—they could take back the entire property and you'd walk away with nothing.

Yeah, you read that right. In the absolute worst-case scenario, you could lose your entire investment. This is why leasehold properties actually decrease in value as they get closer to lease expiration.

The Financing Factor

Getting a loan for leasehold property isn't impossible, but it's definitely more complicated than fee simple. Most mortgage companies require that the lease extends at least five years beyond your loan term—so for a 30-year mortgage, you'd need at least 35 years remaining on the lease. The closer you get to lease expiration, the harder financing becomes.

So Who Should Consider Leasehold?

Look, I'm not going to sugarcoat it—for most buyers, fee simple is the way to go. But leasehold isn't necessarily a bad choice for everyone. It might make sense if you're:

A retiree or seasonal resident who wants to spend winters in Hawaii without breaking the bank and isn't worried about building long-term equity. If you've got 20-30 years left on a lease and you're in your retirement years, the math might work in your favor.

An investor with a solid game plan who can generate strong rental income that more than covers the lease rent and can accept that your returns will come from cash flow rather than appreciation.

Someone who just needs affordable access to paradise and understands and accepts the risks involved. If you're aware of what you're getting into and the numbers work for your situation, go for it.

The Bottom Line

Most leasehold condos in Hawaii are concentrated in areas like Waikiki, Downtown Honolulu, Makiki, and the University area, with a handful in Pearl City, Kahala, and Windward Oahu. If you're shopping in these neighborhoods and see prices that seem suspiciously low, now you know why.

Here's my honest advice: unless you have a specific reason why leasehold makes sense for your situation, stick with fee simple. Yes, it costs more upfront, but you're buying actual ownership. Hawaii has some of the best property appreciation rates in the country—why would you want to miss out on that? (And if you're thinking about selling your current property to make a move, we can help with that too.)

That said, every buyer's situation is unique. If you're seriously considering a leasehold property, do your homework. Read that lease agreement thoroughly (and I mean really read it—all the fine print). Understand exactly when the lease expires, how the rent gets renegotiated, what happens at the end of the term, and run the numbers to see if it truly makes financial sense for your goals.

And of course, talk to us. We can help you navigate the pros and cons specific to the property you're eyeing and make sure you're going into this with eyes wide open. Book a free consultation and let's figure out what makes sense for your situation.

The Hawaii real estate market is incredible, but it's also unique. Whether you go fee simple or leasehold, make sure you understand exactly what you're buying. Your future self will thank you.

Questions? Let's talk. We're here to help you find the right property—and the right ownership structure—for your Hawaii dreams. Browse available properties, get your home's value if you're thinking of selling, or schedule a free consultation with our team.