Hi Bill,
Why would anyone want to buy a leasehold property in Hawaii? In what type of situation would buying a leashold property be a good deal for a homeowner or investor?
Thanks,
Joe Segal
Hi Joe,
Good Question.
As an investor, you can make money on leasehold properties, but it’s not for amateurs. The price can certainly be right, but it takes a very trained eye to spot a good deal-in some ways it’s similar to dealing with a commercial property.
Investors get leasehold properties for two reasons-one is to make money off of rent, the other is to position yourself to buy the fee.
As far as the rent benefit is concerned, you have to make a lot of predictions and do a lot of math. You have to think about how the rental income, the lease rent, the cost of maintainence etc. will change over the term of the lease.
As far as buying the fee is concerned, you have to predict the behavior of the fee owner (if there is no option to buy in the contract). Is he/she likely to sell to me? When is she likely to do so?
As a home buyer (especially if this is a second home) some fee simple properties you want to live in may be unnaffordable. If your dream is to, say, live on the beach, leasehold properties may be the only affordable option. This won’t leave you richer at the end of the day, but it can make an otherwise miserable life worth living.
Bill
September 5th, 2008 at 7:30 am
Reading owners of the fee is like reading the tea leaves. Over the years I have seen many fee offerings and not many of them make any sense.
Aloha,
Keahi
May 16th, 2009 at 9:16 pm
It’s definitely a gamble. Some people have profited handsomely from fee conversions.
At this point in time there is not much of a push for lessors to offer the fee interest. If the tide changes and fee interests become available on some properties (where the fee is not currently available) some lessees might be looking at making some money.
Mike