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Leasehold Evictions??

Posted by Harry Pritikin on Sunday, 19 February 2017, at 7:59 p.m.
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In response to 140599: Housing is Expensive in Kona, posted by Mark T2 on Sunday, 19 February 2017, at 3:38 p.m.

Leasehold evictions? Here's the problem. Any person whose lease is terminated by Bishop is not going to tell someone he was at fault; they'll blame Bishop and tell you they didn't do anything wrong. But I've been in this business 30 years, and I've owned leasehold myself. Also, I've been both buyer's and seller's agent for numerous transfers. Bishop does not arbitrarily just terminate someone's lease without good cause. The two I have heard about (and I know many agents who deal with leasehold who would have told me about any) 1. The nephew was growing marijuana and got busted by the cops. 2. There were at least 50 junk cars on the property and the lessee was running a parts yard.

I have a blurb on my FAQs page; it's a little outdated, but still has a lot of info: http://www.konarealestateagent.com/leasehold.htm What has changed is the new 35 year lease. You don't want to get into leasehold these days unless you plan on living there the rest of your life and you love to farm. Worst case, Bishop will allow you to let a professional farm the property just so they pay the 3.5% percentage rent (on the gross income). Transferring the remaining years of the new lease by selling the leasehold interest is also expensive; 30% of the gross sales price if sold within the first 10 years, 20% the next 10 years and 10% the last 15 years. You can deduct the value of the buildings before you figure the percentage. Leasehold purchases have to be cash these days because the ag requirement of the new lease makes it a business. Farmer's Home Administration doesn't have a mortgage program for leasehold either.

Yes, you have to pay two, three or four hundred thousand (or more) to purchase a leasehold property. But you have to pay about as much most anywhere on the mainland to get a house on 5 or more productive acres (granted, without the restrictions). Here, a similar property in Fee Simple will cost you 30% to 50% more. It's hard to make a profit farming if you have a $500,000 mortgage on an $900,000 property. If you love to farm, leasehold is the way to go. Also, BTW, you have to buy your solar panels on the mainland too.

Mahalo, Harry

   Δ Thanks Harry You Helped Me Make My Point
    Mark T2 -- Monday, 20 February 2017, at 12:43 p.m.

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