Many waterfront properties are on 99 year leases on the east coast, where the price could be fixed for that term. So lease land isn't always a bad thing.
With that being said, I also think to determine whether it's a good deal or bad deal will depend on your strategy for the property (buy and hold, fix and flip, etc).
Many waterfront properties are on 99 year leases on the east coast, where the price could be fixed for that term. So lease land isn't always a bad thing.
With that being said, I also think to determine whether it's a good deal or bad deal will depend on your strategy for the property (buy and hold, fix and flip, etc).
You definitely want to do what @Dave Van Horn says. Find out the details about the lease. Most land leases are long term, so it's not risky in that sense that the owner can make you move the property off the land.
This is the bad. Financing on that property is going to require a large downpayment to make up for the risk. Since land value isn't being included in the value, and they're going to be financing something that could be on land that eventually doesn't belong to you, they're going to need the details on the land lease also.
Your exit strategy is going to take longer. That above rule is going to be for whomever buys your property in the future. Usually, they take much longer to sell, because you have to wait for the right buyer to take that risk and have the funds to do so.
ARRT, RT(R) / Rental Property Investor · Newport Beach, CA · Member since 2017 · 360 posts · 242 votes
8y
Thank you, @Dave Van Horn! I don't have a specific lease in mind, but I do see pockets of leased land in some parts of Huntington Beach, Palm Springs, California, and a few other areas where I see a potential property to purchase.
Based on your expertise, it would seem I need to know and understand the details of the leasehold, correct?
ARRT, RT(R) / Rental Property Investor · Newport Beach, CA · Member since 2017 · 360 posts · 242 votes
8y
Oh, I understand now, @Tom Parris. The land value is not included in the total value (i.e., list or sell price.)
That would explain why I am seeing these beautiful condos in Bolsa Chica (HB), for amazing prices of the $250~$300K range, and I am thinking "Why aren't these $350~$400 Grand"?!
Also be wary that some of the "smokin' deals" could be in the middle of a lease renewal or a possible buyout. Don't want to get saddled with a hefty extension payment shortly after closing. Good idea to chat with your agent as we'll typically put those kinds of notes in the private remarks on a listing, as well as when the lease ends. In the Greater Palm Springs Area we typically see leases renegotiated with about 40 years left to accommodate lenders 30 (+5) year terms.
Loan Officer · Tustin, CA · Member since 2015 · 3k+ posts · 713 votes
8y
I looked at deal on leased land near back bay this summer. The land lease could be bought out as the values in the area had gone up so much but when they have the numbers for the land as land is so expensive now it just killed the flip transaction. so in a nut shell it depends
ARRT, RT(R) / Rental Property Investor · Newport Beach, CA · Member since 2017 · 360 posts · 242 votes
8y
Thank you @Shane Zuspan! I have much to learn about leases. I am really interested in the Palm Springs area, and I'll need to do my research. I appreciate the input. Best to you!
Hello @Jo-Ann Lapin! Thank you for your expertise. I love the Back Bay area, sometimes I ride my carbon fiber road bike through there. It's so beautiful! (And expensive! )
Real Estate Broker · Redlands, CA · Member since 2011 · 127 posts · 43 votes
8y
Thank you @Daniel F. Harb. I own and broker many multifamily apartments within Coachella Valley. I have not done a land lease yet (leased not preferred but I would consider for the right deal) but I have looked at several and that map has helped me tremendously.