Leasehold properties?

5 Replies

Hello all, 

I am an investor in Californiaa  who has been working on what looked like a good deal on a piece of vacant lake-front land in a residential area of Fort Worth, TX. for awhile now.

The opportunity is that I can get this for a very good price and re-sell myself at a very good profit. However, a major hurdle was recently uncovered in that this property has back payments owed on a leasehold agreement ($7200). The deal is seemingly good enough that I am almost willing to just pay it and move-on. In looking at this agreement and looking-up just what a leasehold agreement is, I am now very weary of moving forward as the way I read this is that I do not own the property at all. 

My ultimate question is, this property was valued in a BPO and corroborated by two other brokers at $80k. Now knowing that this property is under a leasehold agreement how does this effect the value of the property? I frankly would not want to pay $80k to pay small lease payments on a property that I don't fully own, so why would anyone else want to?

Thank you Boyd,

Presently I have things covered, but not understanding how this effects my re-sell value is what is scaring me off right now.

I do market in the area though, so when I need local assistance in the future I will definitely let you know.

I'd recommend purchasing a title insurance policy w/ the land.    If they won't make a title commitment, walk away or hold off until the current owner can get it cleared.    If they issue title insurance, it's not your problem.    Issues like this are usually cleared at closing out of sale proceeds.     At any rate, the seller should pay any amounts owed, not you.

Thank you Chris, 

Title insurance is pending, so technically speaking the deal is still alive.

I agree with your statement as a whole, but still wonder if the property has the value that I am hoping for. This new wrinkle is adds a layer of complexity that I  am not comfortable with. To me it makes as little sense as leasing a car, but I do concede naivety to land deals and lease laws in Texas.