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Sometimes things aren't always as good as they seem on the surface. For example, a few things that listing does not tell you is the unit is a Leasehold Property, not a Fee Simple property.
This means in addition to the purchase price, and in addition to the $215 monthly HOA Fee, you pay a "lease Fee". In this case, the Lease Fee is $485/month. The Lease has an expiration date. The lease on this unit expires 2021 ... in just 8 years. At the end of the Lease, the leasor can take the unit back if they so choose. They are not under obligation to renegotiate or extend the lease.
Leasehold values drop the closer you get to the end of the lease.
So basically you are paying $48,000 (you'll need cash because a bank won't loan on a leasehold property that close to the end of the lease. And then on top of the $48,000, you'll need to pay $700/month in HOA's and Leae Fee's. Then at the end of 8 years you'll likely lose your condo to the leaseholder.
Where are you getting this information? I checked the link *and* the original listing here : 369 Hobron Ln 32, Honolulu, HI 96815, US and neither page makes reference to this being a leasehold.
I am not disputing what you say as being true, but apparently the real estate companies in Hawaii expect potential buyers to be mind-readers since they do not offer up this information in their listings. Please tell me where you found out this information.
Where are you getting this information? I checked the link *and* the original listing here : 369 Hobron Ln 32, Honolulu, HI 96815, US and neither page makes reference to this being a leasehold.
I am not disputing what you say as being true, but apparently the real estate companies in Hawaii expect potential buyers to be mind-readers since they do not offer up this information in their listings. Please tell me where you found out this information.
20yrisnBranson
Those links and "advertisements" for the property are not the full listing details from the multiple listing service. So there is a lot of information about the property not mentioned in the links/ad's you're seeing.
But the price of the unit alone is enough to know it is a leasehold toward the end of it's lease term once you become familiar with pricing in Honolulu.
Right near the particular unit you referenced is another little complex that is very similar. Those units are all smaller than the unit you referenced (they're all about 445 sq ft) ... but they are Fee Simple properties and the least expensive one currently available is $245,000. The price difference is leasehold -vs fee Simple and how close to the end of lease the property is at.
I've walked past those building many times. Nice location. But I personally would not be interested in buying a leasehold property.
I walk by there all the time - when that leasehold is up that property is going to be sold and something else put in its place - that is a prime real estate location and the clock is ticking.
It's not my kinda thing at all, but since this is a type of dealio that is common in Hawai'i, I ran the numbers and was surprised that on a monthly basis it's not out of reason. The trick is to remember that you are not buying "forever," with an expected residual value, but you're buying 8 years, with zero residue.
$48,000 over 8 years = $500/mo. $500 + $485/mo Lease fee + $215/mo HOA fee = $1,200 month. I can see how that could be attractive to some people.
I have no idea what the tax implications would be... do you get to take a deduction for a $48,000 loss at the end of 8 years? If so, that would make it even less expensive than paying rent.
It's not my kinda thing at all, but since this is a type of dealio that is common in Hawai'i, I ran the numbers and was surprised that on a monthly basis it's not out of reason. The trick is to remember that you are not buying "forever," with an expected residual value, but you're buying 8 years, with zero residue.
$48,000 over 8 years = $500/mo. $500 + $485/mo Lease fee + $215/mo HOA fee = $1,200 month. I can see how that could be attractive to some people.
I have no idea what the tax implications would be... do you get to take a deduction for a $48,000 loss at the end of 8 years? If so, that would make it even less expensive than paying rent.
You can take a capital loss on the leasehold subject to the $3,000/year deduction on your taxes.
What your model doesn't take into account is that $48,000 should generate $15,000+ in income over the next 8 years. So, at the end of 8 years you potentially have $63,000+ versus $0. Since you can't get a mortgage for it - you also lose the interest deduction.
You can take a capital loss on the leasehold subject to the $3,000/year deduction on your taxes.
What your model doesn't take into account is that $48,000 should generate $15,000+ in income over the next 8 years. So, at the end of 8 years you potentially have $63,000+ versus $0. Since you can't get a mortgage for it - you also lose the interest deduction.
Good points all... though it seems to me the $24,000 capital loss over 8 years would offset the $15,000 lost income... but nevertheless, whatever the exact details, it's not an insane offer. When you look at it as a purchase of 8 years residency, it could be workable for some people.
Obviously I would not love to be in the seller's position, though.
At this point in time of the lease it will probably be an investor rather than an individual who intends to live in the property. A person who has $50,000 in cash sitting around usually wouldn't want to live in a property so rough around the edges. Also, the capital loss deductions wouldn't kick in until the property is disposed.
Personally, I'd prefer to use the 48,000 as a downpayment on a small fee simple place.
At least that way, at the end of 8 years you'd still own your house and maybe even some appreciation. And you could more easily sell it during the 8 yrs if your plans or needs change.
With this specific leasehold, at the end of 8 years you'll have nothing and be looking for a new apartment.
But I'm not a fan of leaseholds.
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