With the cost of properties skyrocketing, many turn to land lease ownership instead of buying a property outright. But, of course, with the lower prices and fewer legal obligations, many flaws can make this the wrong choice for some people. If you’re considering leasing a property, these are the most important highs and lows to keep in mind during your decision-making process.
What Is A Land Lease?
When considering the pros and cons of land lease property, it’s a good idea to know what a lease is. Most leased property is land that the renter is allowed to use and do with as they want, with the underlying knowledge that this land isn’t theirs. Many landowners go for lease-to-own options that will enable the renter to use their rent as part of the payment for a property while also having the chance at the end of the lease to back out, although, at that point, they would forfeit the money they put into the land.
The Best Parts to Consider
Leasing land allows you to use a property without having to buy it outright. This saves you from having to put the down payment on the property and ensures that you don’t have to pay the property taxes or deal with many of the financial restraints that come with owning the property.
Another great thing is that you can eventually own the property if you want to. Leasing gives you the time to build up your credit score for a loan or figure out what the next step you want to take is.
Where Does A Lease Fail?
Although leasing can be helpful, it can also cause issues in its way. A leasehold property island where the renter is allowed to build on it, farm, or use the land in other ways and have ownership over the personal property they add: but the land still belongs to the landlord. This can be frustrating for some people, especially if the lease comes to an end and the landlord wants them to relocate the things they’ve built or added on.
A lease can also be frustrating if you want the complete freedom of personal property. A land lease community can feel like a neighborhood, but this is more of a sprawling apartment complex when it comes down to it. This can be frustrating for those who want complete freedom and usage of the space that they live in.
Does This Work for Industry Buildings
Leasing is fantastic for businesses, especially when they’re first starting. Having a lease-to-own set-up ensures that as companies grow, they may eventually buy the land flat out. Otherwise, they didn’t put too much of an investment into the property, and if they decide to move or the company goes under, they’re not taking as much of a loss.
Buying the land for a business is better for established companies and could pay off the building within two to three years maximum. The need for real estate and possibly selling it down the road is also why this may be important to some business owners.
How Long Does A Lease Last For?
A lease lasts as long as a contract is set for. There’s some leased land with contracts that last or ninety-nine years before it’s signed off to continue on. All of this depends on the situation of the landlord and the renter. Any lease is generally longer than six months, and can automatically renew after that. After that, the renter can move, and the landlord could seek out another renter or sell the property. The length of the lease depends entirely on the two parties entering the agreement.
Selling a Home, But Not the Land
Many consider buying a house on leased land but aren’t sure what that means for them. Generally, when you buy the home, the private property belongs to you, but you’ll have to pay rent for the land you’re staying on. This can be most obviously seen in properties like mobile home parks, where the renters pay for the physical land to keep their belongings on. However, you can join a land lease community and be one of the other renters in your area, but own the home that you use.
Leasing Isn’t One-Size-Fits-All.
There’s no perfect fit for everyone, and nowhere is that more true than leased and renting. Leasing allows the renter to rent to own, or possibly just rent indefinitely depending on the contract: but these aren’t the best fits for everyone. Thoroughly research leasing before you sign a contract and ensure that buying isn’t a better option for your situation. Either is fantastic, but they both have their negative sides as well.