Timeshare, Fractional, Fee Simple or Leasehold
In this third segment, we’ll look at some concepts that are more unique to Hawaii than most other places in the country.
With timeshares, you own 1-6 weeks per year in a particular unit, and have a right to use the property for that period of time. Many condominiums have a handful of timeshare units. Most timeshare management companies allow you to “exchange” these units for those in other vacation spots around the world.
I have owned a timeshare in Hawaii since 1983. In my opinion, it has been a great purchase that has allowed my family and me to enjoy many vacations here and other places without having to stay in expensive hotels. Maintenance costs in these units have gone up over the years, but not nearly as much as hotel rates. I like having a home away from home where I can store groceries and have my husband cook me a meal. (Ladies, cooking lessons as anniversary gifts can be the best investment you’ll ever make. Ask me how I know!)
I would not however, classify these as an “investments”. Yes, you can resell a timeshare, but don’t expect to make much money on it. In fact, if you buy one as the result of a typical high-pressure sales pitch, after signing on the bottom line, you may only be able to sell it for about half what you paid.
I would advise everyone to look into timeshare maintenance costs and resale values before buying, and weigh the costs against what you think you’ll be paying for vacations over several years. Keep in mind that if you do take vacations regularly, as I do, you may never want to sell it.
This concept is fairly new to Maui, but many feel it will take off because of the transient nature of many homeowners. In a fractional ownership, you own up to 1/6th (2 months use) of a condo or residential home. It is an official deed and gives you rights very similar to full ownership.
Statistics show that the majority of second-home owners use those homes a total of about 7 weeks a year. Due to Hawaii’s remote location, people don’t typically fly in for a weekend, as they might in other areas of the country. Instead, they typically stay for one to two months at a time. This is an excellent option to consider if you fall into that category.
Fee Simple or Leasehold
The majority of the properties on Maui are now sold as fee simple. This is the traditional mode of ownership, where you own the land as well as the structure on it.
There are still properties that are leasehold. This goes back to the days of old Hawaii, where all the property was owned by the ali’i, the ruling or noble class families. With leasehold, you own the property but you lease the land. Leases are often 50 or 100 years. If the land owner decides not to renew the lease, you lose rights to your property. Most leasehold properties on Maui are right on the beach which is very attractive to buyers and vacationers. This may be a risky investment, but it can be a great one if you’re aware of the time lines of the lease and plan for it with respect to financing and other relevant concerns.