Should I Purchase A Home With A Land Lease Agreement?

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[melaniereynders]

Land lease deals are super tricky! As my fathers executor, I had to sell his house with a land lease a couple years ago and it was a huge hassle. My dads property was on Songhees land so the lease had to go through their office and transferring the lease to the new owner took 8-9 months. Thankfully we worked it out with our lawyers for the new owner to be able to take possession of the house until the land lease transfer went through (as a “renter”), but that meant that it was several months before the estate saw the money from the sale. Also, I would check what the monthly lease fee includes. My dads was a small house in an area for seniors so they had a common space they could use and they got snow and garbage removal which was included in the monthly fee. It was a great place to live and he absolutely loved it! But if you are wanting to live there until you can afford a larger home, I do not recommend it. It will be too difficult to sell. For retirees with no mortgage, it is perfect, but for everyone else it is not ideal.

[tmurrayis]

Do not do it. There was a experience in Vancouver BC years ago where a whole neighbourhood was on leased land. When the lease term matured the owner quintupled the lease payments and told the residents if they didn't like it they could take their house and leave! It was an awful situation for some folks whom had more recently purchased the home and taken over the lease. They ended up walking away as the new lease terms made their homes worthless.
George is forgetting that as a town home owner and part of a strata you also own a part of the common land along with your unit. A completely different set up than a leased land with an owned building.

[kim.in.nature.]

This is super common in Florida for mobile homes. The home is usually much less than a MH on owned land, but...the lot rent can (and usually does) increase yearly.

[Sizukun]

I think Dave nailed it: if I'm buying a house to live in and I have to pay $800 (or whatever) on top of the mortgage for the building, I'm walking away from that deal. The only buyers for that house would be similar to timeshare buyers.

[AllynHin]

I know darn well that you can get a home for significantly less than $400k in South Jersey. If he has $100k to put down, he can get a mortgage for that $800 a month and eliminate all that BS with the land-lease. How is it that a person can call a finance show to ask for advice about a lease without actually knowing the terms of said lease?

[luketarplin]

So this guy has nearly 100k to buy this house and is prepared to pay $800 per month in perpetuity? That’s a mortgage payment, why not use the 100k and put a decent downpayment on one of those 400k houses? This doesn’t seem Like a good deal.

[abarbar]

Appreciation of real estate is basically 100% in the land value, the building depreciates. If you don't own the land, you're not better off in the long run

[mikeb.]

These are common in Baltimore where the city owns the land your house is on and you get a 100 year land lease. Anything to keep you from actually owning anything ever.

[wisestein]

$400k sounds awesome! Take that for sure.
I’m looking at Toronto where the average is $1.2Million CAD right now, which is about $900k USD.

[oldfordman]

Just reading the tag line to this video I say absolutely not, land lease is the same as living in a trailer Park you park your trailer some place and lease the land under it.

[rometimed]

Not sure about this one in New Jersey but over here in BC this is becoming very common on indigenous owned land.

We got our brand new home for roughly half the cost if what similar freehold homes cost about a 5 minute drive from us.

Our lease hold term is 99 years and every 20 years we have an option to pay the holder 1% of the then appraised value to extend the terms another 20 years. The contract allows for up to 50 of these, or up to 1000 years extended.

We do have a lease fee that can increase at certain intervals but it and the local tax here, combined, is about 20% less than municipal taxes in the freehold area 5 mins away.

We get the benefit of a very good location at about half the price. The land itself doesnt have the appreciation but the area is desirable and will be into the future.

[wickedbird]

I would not be interested any Weird concept for a single family home. I agree with Dave. Selling it would be a nightmare.

[alllle]

I live in London and all flats are leasehold..

[nephetula]

Bad move to buy a cheap house on leased land, especially with a lease that costs $10k/yr. There are PLENTY of nice homes (3br, 2ba) for sale in south Jersey for $250k...or less. He probably doesn't really need a $400k home.

[austintomkewitz]

Worst of both worlds rent the Land that doesn't depreciate but buy the depreciating house that way you got maintenance costs and a mortgage on the land good plan bud

[marytargonsky]

I live in a 55+ community in Ocean County that is a land-lease community. I own my own home and pay a month lot rent. The downside is that the landlord can increase your rent every year. Our township recently signed an ordinance for rent control and cannot go above 3.5% based on the CPI index in the year Oct to Oct. There are rules you need to follow....our lot rent includes lawn maintenance, pool, clubhouse and we can claim 18% real estate tax. But we have to pay our own water as it is city and we have to run the sprinklers during the summer. We are responsible for upkeep of our home. You will probably have rent increases every year...our home has appreciated in the six years we purchased though. Many of the homes in the area are increasing in value and that goes for our homes here too. But there are rules and regulations similar to condo assns. So you have to weigh all things. Good luck.

[jimroscovius]

Why not just move and buy a house elsewhere?? New Jersey stinks!!

[grayandgray]

This is more like any trailer park set up. A mobile home isn't worth anything to the banks after a few years, so it's all cash buyers. The pad rental is like the land lease fee. It never goes away. In my area people are buying 30 year old mobiles for $250000 and they get a little house. That same square footage on a freehold lot is Basically paying for the right to be on the pad, but that right isn't that secure. Good luck moving the mobile anywhere if the land gets redeveloped and watch it go from $250000 to $10000 when it hits the road...

[YuggyAdventures]

Well we never own the land either way, if its a long term lease for 800 dls that could be a lot less than the taxes he would have to pay per year to uncle sam

[aulzhoefer]

How can this guy even value the deal without understanding the term? And ultimately the deal isn’t far from just paying a mortgage the $100K upfront plus annual on a $400K pays it 10 years out in which time there is a potential capital gain.. the more complex the deal the less true advantage