I want to share a real-life closing story that perfectly shows just how unique and sometimes tricky our island's property market can be.

We're going to dive into the world of leasehold properties and what happens when they get a rare chance to become fee simple—and how I helped a client navigate all the twists and turns.

Leasehold vs. Fee Simple: What's the Deal?

First off, let's clear up some terms. When you own a property in Hawaii, it's usually one of two types: fee simple or leasehold.

Fee Simple is pretty straightforward: you own the building and the land it sits on, free and clear, forever.

Leasehold, however, is a bit different. With these properties, you own your unit, but you essentially lease the land underneath from a landowner for a set period. Think of it like renting the ground your condo is on.

Leasehold properties often have a lower initial price tag than their fee simple counterparts, making them a more accessible way to get into the Oahu market.

But here's where it gets interesting—and sometimes challenging.

Because you don't own the land, getting a loan for a leasehold property can be tough. Many banks are hesitant to offer long-term mortgages, especially if the lease is running out soon. They often require the lease to extend at least 5 to 10 years beyond your loan term, and there are usually rules about how long the rent is fixed.

This means the pool of potential buyers for a leasehold property is much smaller, usually limited to cash buyers or those willing to accept shorter, less common loan terms.

A Client's Dilemma at Discovery Bay

Now, let's talk about my client at Discovery Bay.

He owned an investment condo there with incredible, unobstructed ocean views. Here was his situation:

• The building's association had a chance to buy 96% of the land under the building from Bank of Hawaii for $78,000, turning it into fee simple.
• The remaining 3% wouldn't be available until 2039, with no set price yet.
• There was a strict deadline: if he didn't act before May, that $78,000 price would jump by 30%.

So, he had a tough decision:

• Should he buy the land interest now and then sell?
• Should he sell the unit as-is, still leasehold?
• Or should he buy the land interest and hold onto the unit?

While the unit was paid off, these new developments made him realize he no longer wanted to keep the property, especially since he had no plans to move back in the future.

More Than Just the Land: Unit Challenges & Market Competition

His decision wasn't just about the land. The unit itself had its own set of hurdles:

• It still had all of its original cabinets, making it look dated compared to other renovated units in the building.
• A tenant was currently on a fixed lease for at least another six months, which can be a turn-off for buyers who want to move in right away.
• Due to the financing challenges associated with leasehold properties, the buyer pool was already significantly limited.
• More listings had recently come onto the market within the building, creating additional competition.

All of these factors meant fewer potential offers and potentially a longer selling process if the property were listed on the open market.

My client's primary goals were clear:

• Sell quickly
• Maximize his return
• Minimize complications
• Stay mindful of capital gains and depreciation recapture taxes associated with an investment property

Finding the Right Path: My Approach

To help him make the best decision, I didn't just present one option.

Instead, I broke down every possible scenario and analyzed:

• Estimated closing costs
• Potential sales prices
• Tax implications
• Net proceeds under each strategy

After thoroughly discussing the options and giving him time to think things over, we decided to try a strategic approach first.

We would test the waters with my network of cash investors to see whether we could secure a quick off-market sale.

And it worked.

Within days, we received a strong offer from a cash buyer in my network.

While he briefly considered listing the property on the MLS for broader exposure, the attractive offer and the promise of a fast, clean closing aligned perfectly with his goals. In the end, he chose to move forward with the cash buyer.

How I Help My Clients

This story highlights the approach I strive to bring to every client relationship.

I don't just list properties.

I take the time to understand your goals, analyze the numbers, and present clear options without pressure.

Whether the best path involves listing on the MLS or connecting directly with an investor—and there is no additional fee for the introduction—my job is to help you make the most informed and confident decision possible.

Let's Talk

Thinking about selling on Oahu, or simply curious about your leasehold and fee simple options?

Let's chat.

Book a quick consultation with me, and I'll help you navigate the market with clarity, confidence, and a strategy tailored to your unique situation.