Leasehold Condos in Kailua-Kona and the Financing Catch

A two-bedroom unit at Kona Makai, oceanfront and steps from Ali'i Drive, can list for a fraction of what a comparable fee-simple condo commands a few blocks away. The gap looks like an opportunity. For a lot of buyers who call their lender the next morning, it turns into a wall.

The reason has nothing to do with the unit's condition, its view, or its rental history. It has to do with a lease clock that started ticking decades before the buyer ever saw the listing. Kona Makai's land lease runs to 2039. That leaves roughly thirteen years on it as of this year, and most conventional lenders stop financing leasehold property once the remaining term drops under thirty years. The math isn't close.

Several of Kailua-Kona's most visible, most photographed condo buildings have lease terms below the threshold many lenders use for standard financing, a factor worth weighing alongside the price.

What "Leasehold" Actually Buys You Here

Hawaii is one of the few places in the country where a buyer can own a condo unit while a separate entity owns the land underneath it. The arrangement traces back to plantation-era land holding patterns that never fully unwound. A 1984 U.S. Supreme Court decision let the state force large landowners to sell the fee interest under single-family homes to their long-term tenants, and over the following decades many homeowners on the outer islands and Oahu bought their land outright. Condominiums were left out of that process, which is a large part of why leasehold condo buildings still exist today, Kailua-Kona included.

Buying leasehold in Kona means you own the unit and its interior, but you're leasing the ground it sits on from a separate landowner for a fixed term. You pay ground rent on top of your HOA fee. When the lease ends, ownership of the building reverts to the landowner unless the lease is extended, renegotiated, or the fee interest is offered for sale to the lessees, something that happens at some buildings and never happens at others. None of this makes the arrangement unusual by Hawaii standards. It does mean the calendar is doing more work in the price than most buyers assume.

Three Kona Buildings, Three Different Clocks

Three of the more commonly listed leasehold buildings in and around Kailua-Kona illustrate how differently that clock can read depending on which one you're looking at.

Three buildings, three different positions relative to the same invisible line. A buyer scrolling listings sees three units described the same way: "This is a leasehold property." What that sentence means for financing changes completely depending on which of these three you're standing in front of.

The 30-Year Line and Leasehold Financing

Lenders that will finance leasehold property in Hawaii generally require at least thirty years remaining on the lease before they'll write a standard loan. Terms between thirty and fifty years remaining typically still qualify, but often carry a rate premium in the range of a quarter to half a percentage point over what the same buyer would pay on fee-simple property. Under thirty years, most conventional financing disappears, though shorter-term loans may still be available; the Hale Kona Kai and Kona Kai listings state cash only.

Kona Makai, at thirteen years remaining, sits well under that threshold. Buyers can calculate the remaining term by subtracting the current year from the lease expiration year.

Mauna Loa Village is the more interesting case, because twenty-four years is close enough to thirty that the building doesn't fall neatly into "cash only" or "fully financeable." Some lenders will still originate a loan there, but only if the loan term itself stays safely inside the remaining lease, often with a margin of several years built in. A buyer expecting a standard thirty-year fixed mortgage may instead be offered a fifteen or twenty-year term, which raises the monthly payment even though the purchase price looked like a bargain on paper. The discount on the sticker price and the discount on the monthly payment are not the same number, and at Mauna Loa Village they can pull in opposite directions.

What Resets When the Ground Rent Resets

Financing is only the first surprise. Ground rent in Hawaii leasehold condos isn't fixed for the life of the lease. Most leases include a renegotiation clause that resets the monthly rent every ten to twenty years, and statewide, ground rent on condos currently runs somewhere between two hundred and eight hundred dollars a month depending on the building and lease terms. That's on top of the regular HOA fee, and it can move at the next reset regardless of what the buyer agreed to at closing.

This matters most for anyone planning to hold a Kona leasehold unit for longer than a decade. A rent reset can land in the middle of an ownership period, and the new number is often tied to a formula in the original lease rather than a fixed schedule the buyer can simply plan around years in advance. Before writing an offer, a buyer should ask when the next reset happens and how the new rent gets calculated, not just what the current rent is.

Why the Headline Median Doesn't Separate the Two

A recent look at the Keauhou condo market, just south of central Kailua-Kona, found a year-to-date median sale price of roughly $758,000 through July 2026, compared with about $531,000 for the rest of the Kona condo market over the same window. The guide behind those numbers notes something worth sitting with: Keauhou's own reported figures blend oceanfront units, golf-front condos, older walk-up buildings, and leasehold interests into a single median. A buyer shopping by that number alone has no way of knowing how much of the lower end is leasehold inventory sitting at a discount for reasons that have nothing to do with condition or location.

The same blending happens across the wider Kailua-Kona condo market. A unit priced well below its fee-simple neighbors isn't necessarily a better deal. It may simply be leasehold, on a shorter clock, and priced accordingly by a market that already knows what the loan officer is about to tell you.

Before You Write the Offer

A handful of questions, asked before an offer goes in rather than during escrow, separate a leasehold purchase that works from one that stalls at underwriting.

• What year does the land lease expire, and how many years does that leave as of today
• Has your specific lender confirmed, in writing, that they'll finance this specific remaining term
• If the loan term has to be shortened to fit inside the lease, what does that do to the monthly payment
• When is the next ground rent renegotiation, and how is the new rent calculated under the lease
• Has the landowner ever offered to sell the fee interest to unit owners in this building, and is that door currently open or closed

None of these questions show up on a standard property disclosure. They live in the lease documents themselves, which is exactly where a buyer's agent who works Kailua-Kona regularly should already be looking before the first showing, not after the offer is accepted.

A Short FAQ

Can a Kona leasehold condo ever become fee simple? Occasionally a landowner decides to sell the underlying fee interest to existing unit owners, converting those units to fee simple. It isn't guaranteed and isn't offered on any fixed schedule. Some buildings have gone through this process. Many never do.

If I already own a leasehold unit and the lease is getting close to expiring, what happens? Unless the lease is extended, renegotiated, or the fee is purchased beforehand, ownership of the unit reverts to the landowner when the lease ends. The equity a leasehold owner has built over the years does not transfer with them.

Is a leasehold condo ever the right move? For a buyer who understands the remaining term, has the cash to close without financing if needed, and plans a hold period that comfortably fits inside what's left on the lease, a leasehold unit can make sense at the right price. The mistake isn't buying leasehold. It's buying it without doing the subtraction first.

Kailua-Kona's condo market rewards buyers who read past the price per square foot. If you're weighing a leasehold unit against a fee-simple comp and want a clear read on what the lease terms actually mean for your financing and your timeline, Marc Shackman can walk through the specific building, the specific lease, and what it means for your offer before you're standing in front of a lender who's already done the math.

This article is general information, not legal, tax or financial advice. Consult a qualified professional about your situation.