Do You Know You Can Buy Land in Hawaii?

Hawaii

Not too long ago, land in Hawaii could not be owned privately by individuals, but rather it was controlled by the mōʻī (king) and his aliʻi (high chiefs) through an organized land division or ahupua‘a. However, King Kamehameha III’s Great Māhele of 1848 paved the way for individuals to take title to land and properties in Hawaii.

Today, land can be bought and sold in Hawaii – in certain areas and following Hawaii real estate laws and regulations. Let’s explore the stories of owning land in Hawaii, from gaining title to Hawaii land today to the ahupua‘a of the past.

Who can buy land in Hawaii today?

Anyone in the world can buy property in Hawaii. However, if you are not a resident of Hawaii, which is characterized as filing Hawaii state income taxes, then buying or selling land in Hawaii might have a few more complications.

If you are not a U.S. citizen, you cannot use the property as a permanent residence unless you have a green card or a visa. Non-U.S. citizens can use the property as an investment or a vacation home.

While anyone in the world can buy property in Hawaii, non-Hawaii residents will be subject to a tax of 7.25% on the sale price, when and if they sell the property, under the Hawaii Real Property Tax Law, or HARPTA. This 7.25% tax along with a 15% federal tax for non-U.S. citizens, known as FIRPTA, will be automatically withheld during escrow. There are various tax forms and regulations with HARPTA as well as with FIRPTA, so if you are a non-Hawaii resident wanting to sell your property in Hawaii, it is suggested that you consult an accountant.

Another difficulty of buying property in Hawaii if you are not a U.S. citizen is that financing can be difficult. An all-cash sale, of course, can easily be made, but financing through a local lender or even a foreign lender can have its difficulties, as documentation often differs between countries.

Today, where can you buy land in Hawaii?

Land is limited in Hawaii. Land with improvements, or homes, is limited, and undeveloped land is also limited.

Today, where and what type of land you can buy in Hawaii has a lot to do with what the land’s zoning or use designation is. Each of the Hawaiian Islands has different land available as well as different zoning laws under the county. Here is a GIS map of all the islands of Hawaii with more information about each of their zones.

The City and County of Honolulu, or island of Oahu, has the following zoning that includes land designated for the following uses: preservation, agriculture, country, residential, apartment, apartment mixed-use, resort, business, business mixed-used and industrial.

Where can you buy residential properties on Oahu? This will be in most of the coastal cities, such as Kailua, Kaneohe, Honolulu, Hawaii Kai, Kapolei, and Waianae, and the few developed cities inland on Oahu, such as Mililani or Wahiawa.

If you are looking for undeveloped land, there are only a few places where land remains for sale on Oahu:

  • Maunawili in Kailua has some large lots for expensive residential homes.
  • Waimanalo has mostly agricultural land for sale.
  • East Honolulu, including Hawaii Loa Ridge near Hawaii Kai, has a few lots for sale.
  • Near Kaneohe, including the neighborhoods of Ahuimanu and Kahaluu, some larger lots for either residential or agricultural use can be found.
  • The North Shore has many agricultural lots near Wailua as well as others around Kahuku.

Some of the other islands, such as Hawai‘i Island, also known as the Big Island, or Maui, have much more undeveloped land for sale – sometimes are relatively cheap prices by Hawaii standards.

How can you buy land in Hawaii?

Have you found an available piece of land for sale in Hawaii? If you don’t have the cash to outright purchase land in Hawaii, typically buyers will need to secure a vacant land loan. The good thing about most land loans is that buyers will typically only pay the interest for the first few years. Usually, you will also need to secure a construction loan. Once construction is complete, the land loan and construction loan can convert to a regular mortgage.

Cons of a land loan include needing to put more money down and more difficulties in qualifying for the loan than other home loans such as a conventional loan.

When you buy land in Hawaii, offers are made with the same Purchase Contract as other real estate transactions involving single-family homes or condos. Closing on land is also similar to closing on a home in Hawaii, except there will be no home inspections or termite reports.

Some real estate agents as well as mortgage brokers specialize in buying land in Hawaii, so we suggest consulting one if you are interested in learning more.

Why would you buy land in Hawaii?

Buying undeveloped land in Hawaii might be the right option for some people, as there are a variety of creative ways to utilize land.

Some people might dream of purchasing agricultural land to start a farming business. Note that in Hawaii, there typically can be a “farm dwelling” on agricultural land which is defined per Hawaii Revised Statutes 205-4.5(a) as “a single-family dwelling located and used in conjunction with a farm…where agricultural activity provides income to the family occupying the dwelling.”

Some people might buy a piece of residential land to build their dream home. Constructing a custom home in Hawaii has a variety of costs. However, you might opt to build a modular home, a tiny home, or even a home out of a storage container. If you purchase residential land, make sure you ask questions about utilities, including water and electrical, as well as access to public roads.

Some people have dreams of buying a piece of land in Hawaii to do vacation rentals and to make a lot of money. Can you do glamping in Hawaii? Glamorous camping or glamping might be your entrepreneurial idea and you may want to construct yurts or fancy tents to rent out to tourists on sites such as Airbnb. However, realize that Airbnb is controversial in Hawaii with many new laws passed on each of the islands. Most likely any undeveloped land for sale would not qualify to serve as a vacation rental destination.

Today in time, any individual can buy land in Hawaii – if they have the means and can find a suitable property for sale. However, the idea of owning land in Hawaii once was unheard of.

Buying Land in Hawaii Today

From the time of kings ruling each island to the Kingdom of Hawaii to the Republic of Hawaii to a U.S. territory to statehood, land ownership in Hawaii has changed. The Native Hawaiian people once did not even recognize land ownership as a necessity since they enjoyed sustainably using and sharing the lands in an organized and prosperous ahupua‘a system.

However, the controversial history of the Mahele, or land distribution, and later the overthrow of the Kingdom of Hawaii, has led to the ability for individuals from all over the world to purchase land fee-simple in Hawaii. Today, if you have the right resources and perhaps a little bit of luck, a piece of land in Hawaii paradise can be purchased.