What Is A Land Lease Or Ground Lease?
With a land lease or ground lease, all improvements (a house or apartment building, for example) on the property revert back to the land owner at the end of the lease period, usually without additional compensation or payment of any type.
Thus, as the end of the lease term gets nearer and nearer, there is less and less remaining value for everyone except the ground owner because any lessee would only have a limited span of usage. In turn, there is less and less reason to fix the place as the lease ends.
But, if you like the location and can accept the idea that what you pay is more like rent than equity (you give back the improvement at the end of the lease), then it can work.
Also, in theory, the price of the property should be lower than like-properties because you’re not buying the land.
Have an attorney review the land lease for rental increases, the right to continue the lease, etc.
See a tax pro regarding write-offs.
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