Perhaps on the surface, the process is very similar to buying a home on the mainland. Like many metro areas on the mainland, the Honolulu Board of Realtors has an MLS and the public has access to and subscribes to the various rules and regulations of National Association of Realtors regarding standards of conduct.  The biggest differences are in the land tenure, unique terms and customs and practices as well as land use as it affects the environment.  This is where having a Berkshire Hathaway HomeServices Hawaii Realty agent familiar with our local customs and practices is essential.

The City and County of Honolulu is the entire island of Oahu. We also have a number of city designations, but these are not incorporated cities as they do not have a mayor or separate governing body. For example, the city of Kailua does not have a mayor or governing body and all the property taxes are paid to the City and County of Honolulu. To make it a little more confusing, we also mix and use the neighborhoods as well as city designations interchangeably. For example, Kailua has a number of neighborhoods such as Lanikai, Kalama and Beachside. Confused? This is why using Berkshire Hathaway HomeServices Hawaii Realty agent is important.

While many of the single-family properties have converted to fee simple, there are still a number (although declining) of single family homes that are leasehold. Many condominiums are still leasehold. Leasehold property was predominate in Hawaii in the early 1950s. The following information will give you an overview of what leasehold is. 

The basic terms of a leasehold property are the homeowner has a lease on the fee simple property, whereby a monthly or annual lease rent is paid for the right to use this property. The general terms were 55 years with the first 30 years at fixed lease rents. At the end of the first fixed term (usually 30 years), the lease rent was renegotiated based on the then-fair market value of the fee simple property, using a rent percentage calculator of, say, 4 percent. 

Thus, lease rent renegotiations became controversial as the original values of the properties were much lower compared to a value of, say, 30 years later. For example, it was not uncommon to have renegotiated lease rent in relationship to the original term be say 12-20 times greater. If the original lease rent was set at $20 per month and now the property is valued at $1,000,000, then the new lease rent would be, based on a 4 percent lease rent calculator, $4,000 a year or $330 per month.  Further, depending on who the lessor at the end of the lease will be, the property may revert back to the lessor, thus you as the leasee surrender the property back to the fee owner. 

If you are contemplating a purchase of a leasehold property, make sure you read the land lease document thoroughly and understand what the rent escalators are and end of lease provisions are. There could also be land use covenants that would restrict your use and what you could build. Financing could also be an issue.

Hawaii real estate is considered expensive when matched against other localities, especially in comparison to the U.S. Midwest, the Southeast and the Southwest. This higher valuation is driven by the availability of buildable land because it’s an island and secondly, restrictive zoning and building requirements. Thirdly, almost all construction materials in a home must be transported into the island from somewhere else. Lastly, the high cost of labor contributes to our higher costs for housing.

Value of Land in relationship to the physical improvements is generally the opposite of what most mainland buyers are familiar with as two thirds of the value of a property is in the land and one third in the physical improvements. Thus, even if the homes are about the same price as those sold, for example, in the Bay area, when most buyers see the physical improvements,  they are often disappointed as the physical improvements do not compare favorably with what they are accustomed. 

Further, because our climate is less inclement, the quality of construction is not as sturdy as it would be for a home built to withstand a brutal winter. We obviously do not experience the weather extremes, which is why you want to come to live here. Given more moderate temperatures, homes also do not have to be as large as more time is spent outdoors.

Our property taxes are a lot less when compared to most locales on the mainland based on our tax rates. Here, an owner-occupied home with a value less than $1,000,000 will have maximum property taxes in the $3,800-$4,000 range per year.  This is significantly less than in a number of major metro areas. The flip-side of this is, while real property tax rates are lower, the home valuations are higher.

Tax Map Key (TMK) is a unique identifier in addition to a street address and is used to identify the property for tax purposes. It is also a unique identifier for each property.  

If you are buying a vacation rental property, several things must be considered. First, many condominiums as well as neighborhoods have minimum rental periods that can be in conflict with the owner’s desire to move to short-term vacation rentals. Violation of these rental restrictions, depending on the condominium, can be costly. Violating zoning or land use ordinances can result in fines among other remedies. All vacation rents are subject to a Hawaii General Excise Tax of 4.72 percent and a TAT Rental tax of 9.25 percent.

Selecting a Berkshire Hathaway HomeServices Hawaii Realty agent is essential in understanding what purchasing a home in Hawaii is like as well as preparing you for your new Hawaiian lifestyle. 

Contact us today to begin your adventure.




Steve Chung Hausten
Steven Chung went above and beyond to answer our questions and help us find our property. We did some searches on our own before he took us on a tour, but we would have never thought to look at the building that we finally decided on. We were blessed to have him as an agent. We would most definitely refer him to friends and family who are looking for an agent. J.U.


Donna Maier Kailua Office
Donna Maier is the most knowledgeable, dedicated, patient and utterly professional Realtor. We are extremely satisfied with her efforts on our behalf, and we could not be any happier with the outcome of our home search. Donna really outdid herself in every way possible to make our home purchase possible.