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Getting a mortgage for a home on leased land can be challenging.
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Buying a home on leased land can be more affordable than traditional homeownership.
With a land lease property, you’ll own the home but not the land it sits on.
There are additional costs associated with land leases, including rent and HOA fees.
With a typical home purchase, you own both the house as well as the land it sits on. But if traditional homeownership isn’t right for your budget, you do have other options beyond renting.
If you’re considering buying a home with a land lease agreement attached to it, there are some things you should be aware of first.
Land lease definition
Similar to how an apartment lease enables you to live in an apartment owned by someone else, a land lease is a contract that allows a tenant to use a piece of land owned by a landlord.
With these types of agreements, you’ll own anything you put on the land, but not the land itself. Land leases are common in manufactured home communities, where residents own their manufactured home but pay rent for the land that it sits on.
Land lease pros and cons
Pros
Cost of homeownership is lower
Pay less in property taxes
Requires less maintenance from the homeowner
May have homeowners association (HOA) amenities
The main benefit of owning a home on a land lease is that you’ll pay a lot less to become a homeowner, since the land accounts for a significant chunk of the overall price in traditional home sales.
“The house is probably priced significantly lower than other properties on the market, giving you more bang for your buck when it comes to home size,” says Dallas Waldon, a real estate investor and managing partner at Land Boss.
This will help keep your upfront and ongoing costs lower, since you won’t need as large of a down payment and your monthly mortgage payment will reflect your smaller loan amount. You’ll likely pay less in property taxes, too.
Additionally, because you don’t own the land, you typically won’t be responsible for its upkeep. You may also get access to community benefits, like a shared pool.
“If it’s part of a homeowners association (which many …read more
Source:: Business Insider