Hello everyone – how are you all doing? It’s been an unusually long time since I made a blog post, but looking for mortgages (loan shopping), looking for properties, taking cars into shops and looking for a new car, etc., surely takes one time up! Since I’ve been in this mode and have learned some new things, I thought I’d pass a little of my new-found knowledge along.
So we are low-income (and recently lost some monthly income) and our rent went up. But we have some funds to use for a down-payment, so it’s time to buy a condo if we can find one. Why? Where we live, it costs less per month to pay a low-end mortgage and homeowner’s association fees (HOA), than it is to rent. Seems silly, huh?
Leaving the vagaries of renting vs paying a mortgage aside, there’s this thing that exists in our country called a land-lease (not all states allow this for condos/houses, apparently, and for good reason). I have read a number of realtor’s comments and articles on this and this is what I have to say: don’t buy into the idea that there are good reasons to buy a condo or house on leased land. Buying a manufactured home in a mobile home park MAY be worth it, but I’m not talking about mobile homes.
Ok, so this came as a shock to me that you could BUY a condo on land you don’t own. The lease tends to be a lot, and they also have high HOAs. So how, possibly, could this help anyone but the leaseholder? But wait, you might say. What if you buy the home and the lease is finally paid up – don’t you own it all then? That would make sense, right? And it would make up, maybe, for paying the lease for all that time (up to 99 years, I’ve seen). But NO, you BUY a condo, but when the lease is up it’s NOT YOURS. This is what I’ve read; this is my understanding. If you buy a condo or home on leased land and you want to sell and get your money back from the investment you made in the property, you might be dreaming. If the lease is almost up, no one in his/her right mind is going to spend their good money on a home that will be “theirs” for only few years!
I saw a condo here recently that was very attractive, very cute, in a nice area (it only had one parking spot, however). They were asking a fairly low price for the condo itself ($139K), but the lease was around $3,300 annually right now (this is actually a low lease), with scheduled increases to $6,814 annually by 2031. The HOA was a very high $584 per month. Another listing didn’t provide either the lease cost or the HOA. Ok, another is one of those deals where the listing agent sucks in unwary people: a nice condo listed for a ridiculously low price (about 25% of comparable ones in the area), with a bit higher than average HOA, and NO mention of it being a land-lease.
Finally, one in the city where I live. An OK looking condo for not all that cheap of a price (in a perhaps an OK area, but not a great area), with $412 HOA and no lease price provided. Let’s say you were able to put down 20% on a mortgage for this place (but good luck with even finding a bank to give you a mortgage for this type of property). The monthly payments would be about $780 per month. Property tax would be minimal. There’s the $412 HOA, and the lease is . . . what? Just for the heck of it, let’s provide a lease that is kind-of average for a mobile home lease in the region: $1,000 per month. That would leave you paying $2192 per month for you basic housing needs.
We’re looking to buy a small regular condo and our monthly costs will be between about $1,025 and $1,420, and that includes property tax. So how does the land-lease option help lower income people, or help to save on monthly costs? It doesn’t; it only helps the landowner. And you will not gain equity in that home. You will be lucky if you get the same amount back for it as you paid. This is what I’ve read from real estate agents and others. One good side to owning, some people try to suggest, is that the place will be better maintained and generally nicer than a cheaper condo or apartment, so it’s better for families. Well. I say don’t throw away your hard-earned cash and be patient, do some more searching, etc. (Build good credit; it’s kind-of astonishing how much of a difference one-half of one percent makes on your monthly payment.) Save that money for your kids’ college education and don’t just throw it at some land-owner who’s sitting back making all kinds of cash off you for simply roosting on his land.