How to Buy A Condo in Hawaii &
What To Know Before You Buy.

Hawaii Condo Buyers Guide

When purchasing a condo in Hawaii, it’s crucial to be aware of the unique aspects of real estate ownership, such as leasehold vs. fee simple, HOA fees, special assessments, sea wall issues, and zoning. This guide will help you navigate these factors to make a well-informed decision.

1. Leasehold vs. Fee Simple Ownership

• Fee Simple: Full ownership of both the condo unit and the land it sits on.
• Leasehold: Ownership of the condo unit only, with the land leased from a landowner. Additional lease rent is paid periodically.

2. HOA (Homeowners Association) Fees

HOA fees are a regular part of condo ownership, covering shared expenses like building maintenance, amenities, and utilities. Fees can range from a few hundred to over a thousand dollars, depending on the condo’s features and location.

3. Residential vs. Short-Term Rental (STR) Condos

• Residential Condos: Primarily for long-term living, with restrictions on short-term rentals.
  
• Short-Term Rental (STR) Condos: Legally zoned and approved for short-term vacation rentals, often subject to strict local regulations.

When purchasing a condo in Hawaii, it’s important to understand the difference between residential condos and short-term rental (STR) condos. Residential condos are primarily intended for long-term living, often requiring rental terms of at least six months or more. These condos are typically located in areas zoned for permanent residents, and the condo association rules may strictly prohibit short-term or nightly rentals to maintain a quieter, more stable living environment.

On the other hand, STR condos are specifically zoned for nightly or weekly rentals, catering to vacationers and tourists. These properties are located in resort zones and can be rented out for shorter durations—often as little as a few nights. While STR condos offer a lucrative opportunity for income generation, especially in Hawaii’s tourist-heavy market, they are subject to strict county regulations and licensing requirements. Some counties have even placed caps on the number of new short-term rental permits issued, making it crucial to verify zoning and permits before buying.

4. Zoning Regulations

Zoning dictates how the property can be used:

• Residential: For long-term occupancy.
• Resort: Allows short-term rentals for vacation purposes.
• Mixed-use: May accommodate both residential and commercial activities, including short-term rentals.

5. Lease Fees (for Leasehold Properties)

Leasehold properties require lease rent payments in addition to your mortgage. Lease rent often increases over time, so it’s crucial to understand the lease terms and rent adjustment schedules when purchasing a leasehold condo.

6. Special Assessments

Special assessments are additional charges levied by the Homeowners Association to cover unexpected repairs or improvements that are not included in the regular HOA fees. Special assessments can arise due to:

• Major Repairs: Issues such as aging infrastructure, water damage, roof repairs, or plumbing and electrical updates.
  
• Capital Improvements: Upgrades to amenities such as pools, gyms, or elevators.
  
• Emergency Repairs: Situations like damage from storms, flooding, or other natural disasters.

Special assessments can be a significant cost to owners, especially in older buildings that require frequent maintenance or improvements. Depending on the scope of the repairs or improvements, special assessments can range from a few thousand to tens of thousands of dollars. When buying a condo, always ask if there are any upcoming or planned special assessments, as they can substantially impact your financial commitment.

7. Sea Wall Issues

For beachfront condos, sea walls play a crucial role in protecting properties from coastal erosion and storm surges. However, these protective structures often come with unique challenges:

• Erosion and Damage: Over time, sea walls can suffer damage due to powerful ocean waves, saltwater exposure, and storms. Repairing or replacing a sea wall is a costly endeavor, often requiring approval from multiple government agencies.
• Environmental Regulations: Sea walls are subject to strict environmental regulations in Hawaii, as they can disrupt natural coastal processes, contribute to beach erosion, and harm marine ecosystems. New construction of sea walls or major repairs may face delays or even denials due to environmental impact considerations.
• Shared Responsibility: Sea wall maintenance and repair costs are often shared among all condo owners within a complex. Special assessments may be issued to cover these expenses, which can be quite high, especially for properties with extensive sea wall damage.
• Future Risk: Rising sea levels and climate change have increased the long-term risks to properties near the shoreline. It’s essential to investigate the condition of existing sea walls and the history of coastal erosion in the area before purchasing a beachfront condo.

Final Considerations

• Due Diligence on Special Assessments: Before purchasing, request detailed financial records from the HOA, including any past or future special assessments. This will give you an understanding of potential future costs.
  
• Sea Wall Condition: If you’re considering a beachfront condo, have the sea wall inspected and inquire about any pending repairs, environmental permits, or government restrictions.
  
• Budgeting for Repairs: Whether it’s a special assessment for building improvements or sea wall repairs, it’s important to plan for unexpected costs when owning a condo in Hawaii, especially near the ocean.

By being aware of potential special assessments and sea wall issues, along with understanding the other key aspects of condo ownership, you’ll be better equipped to make a smart investment decision in Hawaii’s unique real estate market.