Fee Simple vs. Leasehold: What’s the Difference?

Shopping for a home? You’ll probably come across two terms pretty quickly: fee simple and
leasehold.

They may sound like real estate jargon, but the basic difference is pretty straightforward: do you
own the land your home sits on, or are you leasing it from someone else?

Fee Simple: You Own the Land
With fee simple ownership, you own the home and the land it sits on. You can live in it, sell
it, rent it (subject to applicable rules), or pass it on to your family.
There’s no expiration date on your ownership, which is why fee simple is the type of ownership
most people picture when buying a home.

Leasehold: You Own the Home, Not the Land
With a leasehold property, you own the home or condo, but someone else owns the land.
Instead, you lease the land for a specific period and pay the landowner lease rent.

A simple way to think about it: fee simple is buying the whole pie. Leasehold is buying the
slice and leasing the plate.
So why would someone consider leasehold? Price. Since you aren’t purchasing the land,
leasehold properties can sometimes be priced lower than comparable fee simple properties. For
the right buyer and situation, that lower entry price can make homeownership more accessible.

But There’s More to the Story
Leasehold properties come with a few extra details that buyers need to understand:
● The lease has an expiration date. What happens when it ends depends on the lease terms. Some leases may be extended or renegotiated, while others may have different
requirements.
● Lease rent can change. Some leases include scheduled dates for rent adjustments,
which can affect your future housing costs.
● Financing may be different. Lenders pay close attention to how much time remains on the lease. A shorter lease can make financing more difficult and may also affect your options when it comes time to sell.

One of the biggest numbers to pay attention to is the amount of time remaining on the
lease. A property with decades left can be a very different financial decision from one with only a few years remaining.

Do Your Homework Before You Buy
If you’re considering a leasehold property, don’t just look at the price tag. Ask to review the lease and understand how much time is left, when the lease rent can change, and what happens
when the lease ends.

Neither ownership type is automatically better than the other. It comes down to what you’re buying, the terms attached to it, and whether it fits your long-term plans.

That’s where having a local real estate professional in your corner can make a difference. At Salt Water Real Estate, we believe buying a home should come with understanding—not confusion. We’ll help you dig into the details, ask the right questions, and understand what you’re actually purchasing.

Whether you’re looking for your first home, your next home, or a place to put down roots on Hawaiʻi Island, we’re here to help you navigate the process.

Buy. Sell. Stay.
Salt Water Real Estate — salt water heals everything!