We receive a lot of inquiries on the Hale Ono Loa condominiums in West Maui. It is easy to see why. They are the lowest priced oceanfront vacation rental friendly condos on island, and many of the units have fantastic ocean and neighbor island views. That being said, the low price is a bit of a too good to be true scenario. These are leasehold condos. That means the owner is responsible for a monthly lease payment in addition to the maintenance fees. Until this week, that meant a monthly expense of roughly $1077. When you consider that the condo complex was only eligible for 15 year mortgage payments, the total monthly payments for the property added up to a significant sum. It is a classic case of the pros and cons of a leasehold property. Your purchase price is significantly lower than comparable fee simple condos, but your monthly payments are considerably higher than comparable fee simple condos.
Last year, there was a new state law passed that encouraged lessors to sell the fee on leasehold condominiums to condominium associations. This in turn would allow individual condo owners to convert their condo from leasehold to the more conventional fee simple form of ownership. Leasehold condos that have the option of being converted to fee simple are known as fee available. The Hale Ono Loa association and the Lessor agreed to a sale and it closed in the last month. The purchase was for $16,500,000. Individual owners may now purchase the fees of their condos for a price of approximately $234,960. The association is offering a two year interest only payment plan with a balloon payment. This plan comes out to approximately $1200 a month. It is worth noting that all of the condo owners including those that do not intend to convert the property to fee simple have to pay this interest only payment to offset the cost of the overall property fee purchase. Of course those that opt not to convert will not have the balloon payment.
The Hale Ono Loa Association’s fee purchase changes the dynamics for potential buyers interested in the complex. At one end, if you are interested in a low cost entry into the ocean front market, the monthly payments may give you pause. If you intend to keep the condo as leasehold ,monthly payments for the condo will exceed $2500 a month over the next couple of years when you include taxes. For creative buyers with cash, this may present something of an opportunity. A buyer may be able to come in and convert the unit to fee simple. They would likely find that the sum of the purchase price and the fee are below the price of comparable oceanfront ocean view condos in West Maui. For many mainland buyers, the concept of leasehold, fee simple, and fee available can be confusing. Please feel free to contact us with questions or for additional assistance.
