Leasehold till 2050, worth it? (2B2B) (300ishk$)

Honolulu, Hawaii
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Leasehold till 2050, worth it? (2B2B) (300ishk$)

Ian Bruesehoff
Member since 2021 · 5 posts · 3 votes

Hi everyone, 

AirDNA is projecting $113k projected revenue, 84% occupancy, and a daily rate of $370. HOA $1120 a mo.

OPEX $31k, NOI $82k, CAP rate 25%.

I currently own & operate two STR‘S in SoCal USA, both fee-simple, no leasehold, so I'm new to this concept.

Any advice on if this is a good idea? I know that LH’s get a bad reputation, but with the leasehold till 2050, that’s 25 years of possible excellent cash flow, It’s attractive to me to invest in from that perspective alone. 

Any advice or horror stories welcome, thanks. 


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  • AJ WongBusiness Member
    Real Estate Broker · Oregon & California Coast · Member since 2022 · 822 posts · 695 votes
    2y

    There's nothing wrong with a leasehold..with the exception of financing limitations. Assuming it is a cash transaction but if you did ever want to leverage, limited lenders that will lend on leasehold. 

    Check in with @Joseph Chiofalo though..they have a few investors that provide lending on lease holds and/or work with foreign investors nationwide for conventional title. Sounds like a healthy deal.  Good luck! 

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  • Andrew SyriosPro Member
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    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    2y

    Biggest issue would be financing and, of course, you wouldn't get to take advantage of appreciation. So it's really important the cash flow is good. I think the thing that might dissuade me from such a deal is if you needed to put a substantial amount of money down as again, financing is tough with leaseholds from my understanding. 

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  • Joseph Chiofalo
    Banker · Henderson, NV · Member since 2023 · 316 posts · 73 votes
    2y

    Hi Ian, 

    What is the purchase price for this property? 

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  • Joel BongcoBusiness Member
    Investor · Honolulu HI & Los Angeles, CA · Member since 2018 · 370 posts · 177 votes
    2y
    Quote from @Ian Bruesehoff:

    Hi everyone, 

    AirDNA is projecting $113k projected revenue, 84% occupancy, and a daily rate of $370. HOA $1120 a mo.

    OPEX $31k, NOI $82k, CAP rate 25%.

    I currently own & operate two STR‘S in SoCal USA, both fee-simple, no leasehold, so I'm new to this concept.

    Any advice on if this is a good idea? I know that LH’s get a bad reputation, but with the leasehold till 2050, that’s 25 years of possible excellent cash flow, It’s attractive to me to invest in from that perspective alone. 

    Any advice or horror stories welcome, thanks. 


    Aloha Ian, is this unit in Waikiki?  I bought a LH 1B/1B in Waikiki at 70k.  Even with the high lease rent, I was still able to cash flow it. 
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  • Sayed Jaffar
    Real Estate Agent · Honolulu, HI · Member since 2018 · 37 posts · 11 votes
    2y
    Quote from @Ian Bruesehoff:

    Hi everyone, 

    AirDNA is projecting $113k projected revenue, 84% occupancy, and a daily rate of $370. HOA $1120 a mo.

    OPEX $31k, NOI $82k, CAP rate 25%.

    I currently own & operate two STR‘S in SoCal USA, both fee-simple, no leasehold, so I'm new to this concept.

    Any advice on if this is a good idea? I know that LH’s get a bad reputation, but with the leasehold till 2050, that’s 25 years of possible excellent cash flow, It’s attractive to me to invest in from that perspective alone. 

    Any advice or horror stories welcome, thanks. 



     Hi Ian,

    Buying a LH property in itself is not an issue, it all depends on buyer's due diligence and analyzing the situation for his/her advantage. For example, if you are in your 70s and you want to live in Waikiki, then buying a 1-bed LH unit around $100K makes sense. If you are a investor, then I am sure you are running numbers different, and it all comes down to cash flow and a likelihood of a negative appreciation. I think as long your HOA and Lease Rent is not eating all your expected profit, then it may not be a bad deal, especially if you can turn it into a STR, you can definitely maximize the returns. Now if this is a LH property that comes with a FA option, that may not be a bad buy.

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  • Nathan GesnerBusiness Member
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    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    2y

    I'm going to rain on your parade.

    Mortgage and HOA fees will be around $31,000 but you haven't accounted for furnishings, utilities, WiFi, maintenance, taxes, and other expenses. And if you live in SoCal, you probably need a PM who will take 25% of all income.

    Post all the expenses, and then we can determine whether it's a wise investment.

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  • Chris SeveneyBusiness Member
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    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y

    @Ian Bruesehoff

    If it’s in an hoa what is going to happen as it gets closer to expiring. People will want to go cheap and avoid any costly repairs or maintenance.

    So I would factor that in

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  • Kumar R.
    Property Manager · Destin, FL · Member since 2023 · 83 posts · 27 votes
    2y

    @Ian Bruesehoff 25% CAP rate?? Did I read that correct? That's incredible ROI!

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