Converting Oahu Leasehold to Fee Simple

6 Replies

I have a family member who owns a leasehold SFH in Waipahu. Mortgage is paid off but the lease has just exited the fixed rate portion of the term so the monthly rate has greatly increased. There are still approximately 20 years left on the lease. We were interested in purchasing the leased land. The current owner is CJ Robinson, Limited Partnership. My family member has gotten a price of a little under $200k for the land. He told us this is non negotiable and is planning on a 15 year loan.

Is it possible to successfully negotiate the price of the land? If so, please let me know what potential means can be used. Also,  with some time left in the lease I didn't know if it could be beneficial to wait until a dip in the real estate market to see if that brings a drop in the cost of the land. Would be interested in knowing if people more familiar with Honolulu and Hawaii leasehold think this is a possibility or if it would be better to purchase now with low interest rates.


Thanks in advance!

Jordan

Hi Jordan,

First, ask owner (your family member) if s/he has a booklet for LH disclosure when purchased (this is mandatory form). Each LH situation is unique, and you don’t want a generic answer from a forum with partial information.

I will not expect the fee price to go down ever, in relation to real estate market.  As time goes by, it is a depreciation to the improvement (house) and appreciation to the land.

If you are interested to purchase, and lessor offer a fee price like this case, it’s generally “take or leave it” by the lessor. 

When condo AOAO involves for a group of purchasers, it is worth negotiating terms by having another appraisal represent interested group to negotiate a counter price.

Cost to hire fee negotiation and appraisal for your SFH only may wash your saving.

It also depend on how long you plan to hold this property against the “step-up” or “renegotiation” schedule.

Is the fee price fair? I do not know. I have seen LH in Waikiki, Hawaii Kai and high land-value areas, but not in Waipahu.  So I am not qualified to know much further... Best of luck!

Under 200k for fee simple land sounds very low for a price point.  Pretty sure you can't buy fee simple land on oahu at that price right now.  (There's only 1 lot on Maui under 200,000 now and Oahu is way more expensive).  If you consider that comparison as a replacement cost, then your relative should purchase now since its under market.  Collect your gains instead of chasing a possibility that might not happen.

There is a possibility that the lease owner might not offer the fee buyout in the future as well.

Keep in mind too that typically lease rent also increases over time too.

It just seems there is more benefits of buying out the lease now compared to later in this case.

There should also be information on the leasehold disclosure, agreement.  Each leasehold is unique so do your due diligence on that part thoroughly.

Thank you for the help! Seems like we are headed in the right direction by planning on buying the land. I appreciate the information.

Hi @Jordan Lane , I would also have to agree with @Mitch Tempo , I grew up in Waipahu for many years and my family sold their SFR back in 2013 for $655,000 fee simple. The property was a 5 bed, 4 bath at 3,033 sf living space built in 1980. I just checked the tax assessor website and the land is assessed at $447,500, building is assessed at $289,300. Of course the tax assessor and market appraisers reports will not match, but in this market they wont be far off. You can also reference the Honolulu tax assessor's website to check your own specific property "http://qpublic9.qpublic.net/hi_honolulu_search.php..."

Do you know what neighborhood in Waipahu the house is in?  The neighborhoods have big swings in the market value, for instance, Waipio Gentry, Waikele, and Kunia all fall under the city of Waipahu but I would say they all have better sales than the true Waipahu town.  So if the land is in any of these neighborhoods, you'll be able to sell for more.  Either way it sounds like a winning deal to me, go get em!  

Thank you for all the help! It is in Kunia so will definetly be helping to make this happen.

@Jordan Lane I'm a realtor and investor here on Oahu.  I would agree with the others that it is highly unlikely to go down in the future.  The majority of the value of most real estate on Oahu is in the land, so that sounds like a decent deal.  Let me know if I can help in any way!

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