In Hawaii, when it comes to real estate, you'll often encounter two types of property ownership: leasehold and fee simple. Understanding the differences between these two can help you make informed decisions when buying or investing in Hawaii real estate.

Fee simple is the most common type of property ownership in Hawaii. When you own a fee simple property, you have complete ownership of both the land and the buildings on it. You have the freedom to use, modify, and sell the property as you wish, subject to local regulations and any Covenants, Conditions or Restrictions that may come from an HOA or Condo Association. As the owner, you have full control over your property and can enjoy it for as long as you want. Most single-family homes and many condominiums in Hawaii are fee simple properties.

On the other hand, leasehold properties are different. When you buy a leasehold property, you are purchasing the rights to use the property for a specified period of time, as outlined in the lease agreement. The land itself is typically owned by a separate entity, such as a private landowner or the government. Leasehold properties usually have a long-term lease, often ranging from 30 to 99 years. However, as the lease approaches its expiration date, the property may revert back to the landowner, unless the lease is renewed. As a result leasehold properties that are closer to the Lease expiration generally reduce in price and value.

The key difference between leasehold and fee simple properties is that leasehold properties have an additional layer of ownership control. While you may own the physical buildings and improvements on the leased land, your ownership rights are limited to the duration of the lease. It's important to consider the remaining lease term, lease fees, and any restrictions outlined in the lease agreement when purchasing a leasehold property.

Leasehold properties are generally priced lower compared to fee simple properties because of the lease limitations. However, they can still offer an affordable entry point into the Hawaii real estate market. If you're considering a leasehold property, it's crucial to review the lease terms and consult with a real estate professional who can provide guidance on the specific property and its lease conditions.

Remember, every property is unique, so it's essential to thoroughly research and understand the details of the leasehold or fee simple property you're interested in before making any decisions.

Additionally, generally we only recommend Leasehold purchases for Investment Properties, and they should be bought in cash and should have a clear path to profitibility. Here is a Google Sheets Short-Term Rental Calculator that you can download that will help you determine if a property could be a valuable investment or not. Important considerations are, Average Daily Rate, Turnover Costs, Management Fees, Lease Duration/Expiration date, Lease Renegotiation Date (Loom screenshare how to use).