Are you seeing two prices for similar condos in Honolulu and wondering what you’re missing? You’re not alone. Many Oahu listings are either leasehold or fee simple, and the difference impacts your costs, financing, and resale options. In this guide, you’ll learn how each type works in Honolulu, what lenders look for, and how to compare deals with confidence. Let’s dive in.
Leasehold vs fee simple: definitions
Fee simple means you own the land and the home or condo outright. You control how you use, sell, and transfer the property, subject to local rules, taxes, and any HOA.
Leasehold means you own the home or condo for the length of a ground lease, while a separate landowner keeps title to the land. When the lease expires, your rights depend on the lease terms and any renewal or purchase options.
Why Honolulu has more leaseholds
Hawaii’s history created more ground leases than many mainland markets. Large private landowners and trusts, former plantation lands, and state or county agencies have long leased land for housing, hotels, and redevelopment. In Honolulu, you’ll see leaseholds in parts of Waikīkī, some condo-hotel buildings, and select urban redevelopment areas like portions of Kakaʻako. Some outlying neighborhoods also include parcels tied to older lease arrangements.
Leases here are often long term, such as 30, 50, 75, or even 99 years. Many include renewal options, rent resets, and escalation formulas tied to inflation, fixed steps, or appraised land value. The lease and any condominium documents control details like use, maintenance, and what happens if there’s a default.
Price and total cost: what to expect
Leasehold properties usually list for less than similar fee simple homes. That lower price reflects your limited land interest and the uncertainty of future rent changes or lease renewal. The size of the discount depends on the remaining lease term, current ground rent, and expected rent resets.
Do not look at purchase price alone. For a full picture, include:
- Ground rent payments and expected increases.
- Any scheduled rent reset windows that can create sharp jumps.
- HOA budgets and assessments if the association passes land costs to owners.
- Insurance and property taxes per the lease and condo rules.
A helpful way to compare two properties is to estimate your “effective annual cost” over your time horizon:
- Start with the mortgage payment difference caused by the lower leasehold price.
- Add annual ground rent.
- Add an annual allowance for any expected one-time lease reset during your hold period.
This gives you a realistic head-to-head view of a leasehold vs a fee simple option.
Financing basics for leaseholds
Getting a mortgage on a leasehold is possible, but lenders look closely at the lease. Key points they review include:
- Remaining lease term relative to loan length. Lenders prefer leases that extend well beyond the mortgage maturity.
- Whether the lease allows mortgage liens and assignment to a lender.
- Rent escalation formulas and renewal terms that could increase risk.
- Any landlord rights that could limit a lender’s remedies after default.
Conventional, government, and portfolio loan programs treat leaseholds differently. Conventional investors, as well as FHA and VA programs, publish rules for leasehold eligibility. Some local or portfolio lenders may be more flexible, while short remaining lease terms often push buyers toward cash.
Appraisals and valuation
Appraisers must account for the ground lease. When the remaining term is short or the ground rent is high, market value typically drops. Appraisers try to use leasehold comparables, or they apply adjustments for the lease encumbrance. These factors can influence loan approval as well as pricing and days on market.
Resale and marketability in Honolulu
Leaseholds with shorter remaining terms draw a smaller buyer pool and may rely more on cash or specialized lenders. Uncertain renewal or the possibility of large rent increases can slow sales. Some leases include rights of first offer or first refusal, which can add steps to a transaction. All of this affects pricing, marketing time, and negotiation.
Key lease terms to review
Before you write an offer, confirm:
- Remaining term and any renewal options, including how renewal rent is set.
- Current ground rent, how it is calculated, and escalation schedule.
- Any rent reset windows tied to appraisals or market value.
- Whether the lease permits mortgages, assignments, and lender protections.
- Maintenance obligations, permitted uses, and insurance requirements.
- What happens at expiration and any purchase or removal provisions.
- Rights of first refusal, condemnation clauses, and default remedies.
When leasehold can make sense
Leasehold can be a practical fit if you:
- Want a lower entry price and accept ongoing ground rent.
- Plan a shorter hold period or a second home strategy.
- Are an investor who can balance yield with lease risk.
- Can pay cash or have access to a lender comfortable with the lease terms.
When fee simple usually wins
Fee simple often fits best if you:
- Plan to own long term and want full land rights.
- Rely on conventional or government-backed financing with strict lease rules.
- Want the broadest resale market and strongest long-term value.
Buyer checklist for Honolulu
Use this list to move forward with clarity:
- Request the full ground lease, all amendments, and a lease abstract.
- Confirm remaining term and any renewal options or formulas.
- Verify current ground rent, payment frequency, and escalation method.
- Ask about historic rent reset outcomes.
- Check loan eligibility with your lender before you offer.
- Review condo declarations, HOA budgets, and special assessments.
- Order title and have a local attorney review priority, liens, and rights of first refusal.
- Match the lease timeline to your ownership horizon.
Seller tips for stronger results
If you plan to sell a leasehold unit:
- Provide complete lease documents up front.
- Disclose ground rent history and any pending resets.
- Explore a lease extension before listing if possible.
- Price for the remaining term and buyer financing realities.
- Consider credits if a major reset is near or the term is short.
How to compare two properties
Here is a simple, repeatable method:
Compare the purchase prices. Note the mortgage payments for each at your expected rate and down payment.
Add lease costs to the leasehold option:
- Current ground rent on an annual basis.
- Expected increases based on the lease schedule.
- Any one-time reset that might occur during your planned hold period.
Estimate an effective annual cost over your horizon, such as 10 to 20 years. Combine mortgage payment, ground rent, and a yearly allowance for expected resets.
Adjust for financing risk. Shorter leases can limit loans, which affects cash needed and interest rate.
Consider resale. Short remaining terms often narrow your future buyer pool and could lead to a larger discount when you sell.
This approach helps you compare apples to apples, not just sticker price to sticker price.
Your next step
If you’re weighing leasehold vs fee simple in Honolulu, you do not have to figure it out alone. Our team can help you model costs, align the lease timeline with your plans, and navigate lender and HOA requirements. With 300-plus closed transactions and island-wide expertise, we tailor guidance to your goals and timeline. Ready to talk strategy for your move or investment? Connect with Ashliey Wasson for clear next steps.
FAQs
What is the main difference between leasehold and fee simple?
- Fee simple includes land ownership, while leasehold gives you use of the home for the lease term and separates land ownership.
How do lenders view leasehold homes in Honolulu?
- Lenders check the remaining lease term, rent escalation rules, and lender protections in the lease. Short terms or uncertain renewals can limit loan options.
What costs are unique to a leasehold property?
- Ground rent, scheduled rent resets, and possible HOA pass-throughs of land costs. Always add these to your annual budget.
What happens when a ground lease expires?
- Outcomes depend on the lease. Options can include renewal, landowner reclaiming the land, or negotiations for purchase. Review your documents closely.
Can a leasehold be converted to fee simple in Honolulu?
- Sometimes, if the landowner is willing to sell or a specific process applies. It is case by case and can be costly.
Why are many Waikīkī condos leasehold?
- Historic landownership patterns, resort uses, and long-standing ground leases created a notable concentration of leasehold properties in resort and urban areas.
