Buying Land in Hawaii: Leasehold vs Fee Simple Guide 2025

Leasehold vs Fee Simple Ownership

Understanding Fee Simple

Fee simple ownership means you fully own the land and everything on it—forever. You can build, sell, lease, or pass it on no questions asked. It’s the gold standard of ownership, offering stability, equity-building potential, and access to conventional financing. You get the freedom to plan for long-term use, whether it’s for off-grid projects, a retirement build, or even real estate development.

A stunning view of the lush green countryside with buildings on the Hawaiian Island of Maui, Hawaii

Understanding Leasehold

Leasehold ownership, on the other hand, means you own the structures but lease the land beneath them for a set term—usually between 30 and 99 years. It may start with a lower purchase price and monthly ground rent, but that lease expiration remains a looming question. At the end of the term, ownership reverts to the landowner unless you negotiate an extension. In some cases, leaseholds can be converted to fee simple when developers or associations consolidate control.

Comparison: Fee Simple vs Leasehold

When comparing the two ownership structures, consider these factors:

• Financial Impact: Fee simple typically demands a higher purchase price, while leasehold can offer lower upfront costs. However, leasehold comes with ground rent, lease escalations, and restrictions.

• Long-Term Stability: Fee simple secures your ownership indefinitely. Leasehold delivers less certainty—and banks are often reluctant to finance leases with fewer than 30 years remaining.

• Resale and Financing: Loans for leasehold land can be harder to secure, particularly with shorter lease terms. Future resale may also be impacted by limited lease duration.

Understanding this core decision will guide the rest of your process—from how you finance to what you can build.

Financing Land in Hawaii

Challenges with Leasehold Financing

Many lenders shy away from leasehold land, especially when the lease term dips below 30 years. That’s because lenders need time to recoup a mortgage before lease expiration. This means you could face higher down payments, stricter credit requirements, or even find yourself having to pay cash.

For foreign buyers or those planning retirement here, financing terms may be less favorable—higher interest rates or more stringent eligibility may apply. Many off-grid or DIY buyers ultimately choose to purchase with cash to bypass these complexities altogether.

A beautiful view of farmland on Oahu, showcasing the island’s rich agricultural landscape and fertile fields.

Hidden and Additional Costs

Beyond the purchase price, leasehold properties often come with:

• Ground Rent: Ongoing monthly or annual fees that may increase over time based on lease escalation clauses.

• HOA or Association Fees: Some leaseholds are within managed communities, adding recurring dues.

• Infrastructure Assessments: Especially in off-grid or rural areas, costs for installing water collection systems, septic tanks, power hook-up, access roads, and easements can quickly add up.

• Surrender or Renewal Clauses: If the lease ends without a clear renewal plan, you could lose both land and structures—or face expensive renegotiations.

Understanding these ongoing obligations is key to budgeting realistically and avoiding surprises.

Zoning and Land Use Rules

Hawaii Zoning Basics

Hawaii has its own unique zoning system, and it’s essential to understand what kind of land you’re looking at before you buy. The most common zoning categories across the islands include:

Looking at south central Maui from Kula, at the base of Haleakala Volcano. A very laid-back place, don’t you think?
Scenes from the Kula Lavender Farm – Due West by John Morgan is licensed under CC BY 2.0. Image may have been resized or cropped from original

• Agricultural (AG): Typically large parcels with limited building rights. You’ll need to show active or planned farming in many cases.

• Conservation: Highly restricted; usually located in forested or coastal zones. Development requires state approval and environmental review.

• Rural and Residential: These allow for traditional housing with standard permitting, though some parcels might have infrastructure limitations.

Each county enforces its own regulations, and what’s allowed on Maui might not be allowed on the Big Island—even under the same zoning label.

Building on Agricultural Land

Buying land zoned AG is appealing for its size and price, but there are caveats. To build on AG land, you often need at least one acre and must meet county requirements for “farm dwelling” use. In some cases, you’ll need a farm plan approved before you can get permits.

If you’re planning to live off the land, you’ll likely need to show intent to cultivate or use the property productively. That can work in your favor, too—AG land may qualify for reduced property taxes if you meet those active use criteria.

Environmental and Cultural Considerations

Hawaii’s land isn’t just a blank slate—it carries cultural, historical, and environmental significance. Depending on the parcel, you may encounter:

• Cultural site protections: Known as “kuleana” lands or areas tied to native practices, which may have public access rights or restrictions on alteration.

• Environmental restrictions: Especially near coastlines, wetlands, or forest reserves. These may require environmental assessments and public hearings before development.

• Access concerns: Some lots, particularly in rural or conservation zones, lack legal access roads. That can complicate permits, resale, or financing.

Consulting with a land-use planner or zoning consultant early in the process is wise, especially if you’re eyeing undeveloped property.

Restrictions and Buyer Eligibility

Buying as a Non-Resident or Foreigner

Hawaii doesn’t prohibit non-residents or foreign buyers from purchasing property. However, there are important considerations:

• Tax Withholding: If you sell the property later, you could face federal (FIRPTA) and state (HARPTA) withholding taxes. These are aimed at ensuring non-residents pay their due on capital gains.

• Loan Requirements: Buyers without a U.S. credit history may face higher down payments and limited financing options. Many foreign buyers opt for cash purchases or private lenders.

• Visa Status: You don’t need a green card or visa to buy land, but your residency status could affect how you use or develop it long-term.

Even if the law allows it, cultural sensitivity goes a long way. Understanding the historical and community context of where you’re buying is a must.

Hawaiian Home Lands

Hawaiian Home Lands are not available to the general public. This is a special land category reserved for Native Hawaiians with verified ancestry. These lands are managed under separate rules and cannot be purchased on the open market.

For the average buyer, this means some listings you see may not be eligible for purchase—even if they appear attractive or affordable. Make sure your real estate agent understands the distinction.

Rooster on Hawaii on the green lawn

Off-Grid and DIY Land Development

Utilities and Infrastructure Access

If your dream is to live off-grid in Hawaii, many areas—especially on the Big Island and parts of Maui—offer that possibility. But there are challenges:

• Water: You’ll likely need a rain catchment system, well, or water delivery service. Potable water access is a major concern and must be factored into land prep.

• Power: If you’re beyond the reach of HELCO or another utility, you’ll need solar, wind, or generator systems. Solar is the most popular and feasible for long-term living.

• Road Access: Some parcels may be landlocked or require you to maintain private access roads. Be sure to verify recorded easements and road maintenance agreements.

Zoning Support for Off-Grid Living

Not all areas welcome off-grid development. AG and rural zones tend to be more flexible, but you still need proper building permits. Permitting septic systems, solar setups, and rainwater catchment systems is essential for legal occupancy.

You’ll want to balance your desire for independence with local compliance—working with a builder or consultant familiar with off-grid permitting is highly recommended.

If you want to get the real deal on land in Hawaii, take a look at a recent video from a Hawaii land and real estate expert, Dylan Nonaka:

Hawaii Real Estate Market Conditions

Land Prices and Trends

Land prices in Hawaii vary dramatically by island and location. Coastal areas and lots near urban centers like Honolulu or Lahaina command premium prices, while remote inland parcels—especially on the Big Island—offer more affordability. However, lower cost often means trade-offs in infrastructure, road access, and zoning flexibility.

Recent years have seen heightened demand for land suited to off-grid living and self-sufficiency. The trend has been particularly strong among buyers seeking space and lifestyle changes post-pandemic. This increased competition, paired with limited inventory, is driving prices upward even in historically affordable regions.

Timing can also influence price. Some buyers watch for price drops during slow tourism seasons, while others act quickly to secure lots in limited subdivisions.

Community Impact and Local Dynamics

Land in Hawaii carries more than financial value—it’s deeply rooted in history and community. As interest in building and buying increases, so do local concerns about overdevelopment, environmental strain, and cultural disruption.

Whether you’re buying on the North Shore of Oahu or in upcountry Maui, expect strong community involvement in land-use discussions. Engaging with local perspectives, respecting community priorities, and avoiding overly commercial intentions will earn more trust—and likely smoother approvals down the line.

The most successful landowners are those who integrate their plans with the land, not just on it.

Hawaii by David Wipf is licensed under CC BY 2.0. Image may have been resized or cropped from original and has been 64268289@N03.

Land Buying Due Diligence Checklist

Before making an offer, walk through a clear checklist to protect your investment and stay within legal bounds:

• Review Lease Terms: Understand length, renewal options, escalation clauses, and end-of-term outcomes.

• Confirm Zoning and Use: Double-check what you’re allowed to build or operate under current zoning. Ask about upcoming changes or variances.

• Investigate Environmental and Cultural Restrictions: Look for archaeological or historical designations and public access routes.

• Verify Infrastructure Feasibility: Will you need to install power, water, or a septic system? Are easements recorded? What will access cost?

• Examine Title and Boundaries: Get a professional survey and review title for easements, encroachments, or liens.

• Choose the Right Team: Your real estate agent, land-use attorney, and contractors should all be experienced in Hawaii’s unique real estate processes.

Buying land without this due diligence is a gamble—and in Hawaii, the stakes are too high for guesswork.

Conclusion

Buying land in Hawaii isn’t just a real estate move—it’s a lifestyle decision rooted in values, purpose, and preparation. Whether you’re eyeing an off-grid retreat, a future retirement build, or simply a slice of paradise to call your own, understanding the difference between leasehold and fee simple, researching zoning and utility access, and respecting the land’s cultural context are essential steps.

Patience is key. The more time you invest in planning and learning, the smoother your experience will be—and the more rewarding your life on the islands can become.

FAQs About Buying Land in Hawaii

What is the difference between leasehold and fee simple ownership?
Leasehold means you own the structures and lease the land for a set term (usually 30–99 years), which includes monthly ground rent and uncertainty at lease end. Fee simple means you own both land and structures outright, offering long-term security and easier financing.

Can a non-resident or foreign national buy land in Hawaii?
Yes. Foreign buyers and non-residents can purchase land, though they may need an ITIN, face FIRPTA/HARPTA tax withholdings upon sale, and get limited financing options. Many opt for cash purchases or private loans.

Are there restrictions on building on agricultural land?
Yes. Agricultural—or AG—zoning typically requires at least one acre, an approved farm plan, and active or planned cultivation. These parcels may offer property tax benefits but come with usage restrictions.

How does zoning affect off-grid living?
Off-grid living is mostly allowed in AG or rural zones, but every build (solar, septic, rainwater, etc.) needs permit approval. You’ll need to follow regulations for catchment systems, wastewater, and utility installations.

What hidden costs should I expect when buying leasehold land?
Common additional expenses include ground rent (with possible escalation), HOA or association fees, infrastructure upgrades (roads, water, power), and legal or renewal fees when your lease term ends.

How do I know if a parcel has legal access?
Check the title and survey for recorded easements. If access is unclear—or if the road is private—you’ll need legal documentation allowing entry and potential maintenance responsibilities.

Do Hawaiian Home Lands show up in general listings?
Occasionally, but these parcels are reserved exclusively for Native Hawaiians. Ordinary buyers should verify eligibility and avoid relying on these listings for acquisition.

What financing challenges should I expect for leasehold land?
Lenders often require longer lease terms—usually over 30 years—stronger credit, and larger down payments. If the lease is shorter or you’re a non-resident, cash might be your best or only option.

How much should I budget for infrastructure development?
Costs vary based on location, terrain, and needs—water catchment or well ($10k–$30k+), septic ($10k–$20k), solar plus batteries ($15k–$40k), plus road or easement work. These often exceed the initial purchase price.

What is the most important step before making an offer?
Due diligence—confirm lease terms, zoning, water access, easements, title, environmental or cultural restrictions and involve experienced local professionals (agent, land-use attorney, surveyor) before closing.

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