Buying a Waikīkī condo and seeing both “fee simple” and “leasehold” in listings? You are not alone. Understanding the difference can change your budget, your financing, and your long-term plan. In this guide, you will learn how each form of ownership works in Honolulu, how it affects price and resale, what lenders look for, and the due diligence steps that protect you. Let’s dive in.
Fee simple vs leasehold basics
Fee simple means you own the unit and an undivided interest in the land beneath the condominium. You control your unit subject to condo rules and you pay property taxes and HOA dues.
Leasehold means you own the condo improvements, but the land is leased from a landowner under a ground lease. You own the right to use the land for a fixed term rather than perpetual title. When the lease ends, the landowner generally has reversionary rights unless the lease provides for renewal or a conversion.
How Waikīkī leaseholds work
Many older Waikīkī condos sit on land owned by large landowners, trusts, public entities, or charities that favor long ground leases. Lease terms often span multiple decades, such as 50, 55, 75, or 99 years, with very different rent formulas and renewal language from building to building.
Typical leases spell out the initial term, any renewal options, how ground rent is calculated and adjusted, whether the landowner must consent to a sale or mortgage of the unit, and what happens at expiration. Some projects have rights to negotiate buyouts or conversions, but these are complex and depend on the lessor’s willingness and the specific lease.
Costs and value in practice
Leasehold units often sell at a discount compared with similar fee simple units. The discount depends on how many years remain on the lease, how rent will escalate, and what buyers and lenders are willing to accept in the current market.
Key costs to model for leasehold:
- Ground rent paid to the landowner in addition to HOA dues and property taxes
- Scheduled rent escalations or resets that can increase future costs
- Possible special assessments if the association funds a lease buyout or higher lease obligations
Value tends to decline as the remaining lease term shortens. The effect can accelerate as you near time frames when buyers and lenders step back.
Financing realities
Lenders treat leasehold differently from fee simple. Many lenders and government loan programs limit or restrict financing for leasehold condos. Underwriting often requires that the remaining lease term extend beyond the loan maturity with an added cushion. Appraisers adjust for ground rent and lease term when valuing a unit.
Project details also matter. Lenders look at whether the lease allows mortgage liens, if the lease can be assigned, and whether subordination, non-disturbance, and attornment protections exist. Not all condo projects with leasehold status meet FHA or VA requirements, since those programs have their own project and lease criteria.
Resale and timing
As the remaining lease term drops, the buyer pool can shrink and financing can become harder. That can pressure resale value and slow your exit timeline. Market practice often watches for periods around a few decades remaining, but each lender and cycle is different. Always verify current lending standards for the specific building you are considering.
Investors and rentals
Waikīkī draws investors, but rental use is controlled by a mix of condo CC&Rs, city rules, and state law. Leasehold status does not automatically restrict short-term rentals, yet many associations prohibit them and local zoning can limit them. Confirm allowed rental terms in both the condo documents and the ground lease before you underwrite income.
For cash flow, include ground rent, HOA dues, property taxes, vacancy, management, and any potential special assessments. Model how rent escalations could affect returns over time. Plan exit scenarios based on lease term and probable buyer financing.
Due diligence checklist
Obtain these items before you shortlist a building or make an offer:
- Recorded ground lease with amendments, not just a summary
- Condominium declaration, public offering statement, CC&Rs, bylaws, and house rules
- HOA financials, current budget, recent financial statements, and reserve study
- HOA meeting minutes for the last 12 to 24 months
- Preliminary title report or commitment
- Any available appraisal reports or a recent comparable sales analysis
- Evidence of litigation, liens, or code issues
- Seller disclosures about lease terms, future rent adjustments, or pending assessments
Questions to ask the seller, HOA, or management:
- How many years remain on the ground lease, and are there renewal options?
- Who pays ground rent today and after closing, unit owners or the association?
- When is the next rent adjustment, and what formula applies?
- Has the landowner discussed redevelopment, conversion, or a sale of the land?
- What are the rules for renting, both short-term and long-term?
- Has the HOA pursued a buyout or conversion in the past, and what were the outcomes and costs?
- Are there lender or insurer limitations tied to the leasehold status?
- Does the lease require extra insurance or special conditions for owners or the HOA?
Red flags to watch
- Short remaining lease term with no clear renewal mechanism
- Renewal terms that are unfavorable or at the lessor’s sole discretion
- Ground rent formulas that can trigger large future increases or are undefined
- Lessor consent required for sale or mortgage without clear timelines or criteria
- Weak HOA reserves or recent special assessments linked to the lease
- Title exceptions showing broad termination rights for the landowner
- Active litigation between the association and the lessor or developer
- Limited lender appetite to finance units in the project
Smart offer strategy
- Reflect lease term and financing limits in your price and terms
- Use contingencies for lease review, preliminary title, and lender pre-approval
- Confirm ground rent math, next reset timing, and who pays what after closing
- Review HOA minutes for lease talks, buyout efforts, or looming assessments
Who to involve early
- A real estate agent with Waikīkī leasehold experience
- A Hawaii real estate attorney to review the lease and condo documents
- A local mortgage lender or broker who knows leasehold underwriting
- A title officer who understands leasehold title insurance
- A CPA or tax advisor if you are investing
Local resources to consult
- Hawaii Bureau of Conveyances for recorded leases and deeds
- Honolulu County Real Property Assessment Division for tax and classification questions
- Hawaii Revised Statutes, including condominium property regime chapters
- Hawaii Association of REALTORS for local guidance and market context
- Local title companies and closing attorneys for title and recording details
- Local mortgage lenders familiar with leasehold projects in Honolulu
Choosing between leasehold and fee simple in Waikīkī is not one size fits all. If you want a lower entry price and plan a defined hold period, a well-understood leasehold can work. If you want long-term control and simpler financing, fee simple may fit better. The right call depends on your timeline, budget, and risk tolerance.
If you would like building-specific guidance, ground lease summaries, or a clear plan for financing and resale, connect with the boutique team at Fortune Hawaii Realty. Our owner-led approach, development sales expertise, and bilingual service in English and Mandarin help you move from research to the right purchase with confidence.
FAQs
What is the difference between fee simple and leasehold in Waikīkī condos?
- Fee simple gives you ownership of the unit and land interest, while leasehold gives you ownership of the unit improvements with a time-limited right to use the land under a ground lease.
How does a leasehold term affect condo pricing and resale?
- As the remaining lease term shortens, buyer demand and financing options can tighten, which often reduces value and can slow resale.
Can I get a mortgage on a leasehold condo in Honolulu?
- It depends on the project and the lease, since many lenders require a remaining lease term that extends beyond the loan maturity and may have other conditions.
Do leasehold condos always allow short-term rentals in Waikīkī?
- No, rental use depends on condo CC&Rs, city rules, and the ground lease, so you must confirm what is allowed for each building.
What documents should I review before making an offer on a leasehold unit?
- Obtain the full ground lease and amendments, condo documents, HOA financials and minutes, a preliminary title report, and evidence of any litigation or assessments.
Are lease-to-fee conversions common for Waikīkī condominiums?
- Some associations negotiate buyouts or conversions, but these are complex, depend on the landowner’s willingness, and often require significant funding and legal work.
