Is Property On Leased Land Good Idea/Bad Idea For Purchase??

Question

I'm searching for properties and finding a few here and there that are on leased land. Obviously, most

prices are pretty appealing, but I am not sure if purchasing a property that sits on leased land is a good idea?

Good/Bad idea?

Thank you in advance!

Nathan Diones · Answer

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.

Nathan Diones · Answer

For those that may be interested, here's the online map showing all the allotted leased land within Palm Springs area.

http://acbci.maps.arcgis.com/apps/webappviewer/index.html?id=aa24e4476c0046aca649b58c273f613c

Jo-Ann Lapin · Answer

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

Shane Zuspan · Answer

Hi @Daniel F. Harb!

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.

Cheers!

Tom Parris · Answer

Hi @Daniel F. Harb,

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.

Good luck!

Dave Van Horn · Answer

@Daniel F. Harb

Do you have any details on the lease?

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).

Daniel F. Harb · Answer

Excellent, @Nathan Diones. Be nice to keep touch. Maybe we can do business in the future.

Thank you!

Daniel F. Harb · Answer

Wow, @Nathan Diones! Talk about killer research, thank you so much!

Best of profit to you!  :)  $$$

Daniel F. Harb · Answer

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! )

Much profit to the both of you!  $$$

Daniel F. Harb · Answer

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"?!

Thank you so much for your time, @Tom Parris!

Is Property On Leased Land Good Idea/Bad Idea For Purchase??

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