Imagine that you have dreams of buying in one of the top neighborhoods in Manhattan. Think West Chelsea, the West Village, Park Avenue but your budget is more Murray Hill or midtown which are more budget-friendly neighborhoods. Then all of a sudden...
Imagine that you have dreams of buying in one of the top neighborhoods in Manhattan. Think West Chelsea, the West Village, Park Avenue but your budget is more Murray Hill or midtown which are more budget-friendly neighborhoods. Then all of a sudden you come across an apartment that is almost too good to be true. It’s beautiful, it’s big and it’s within your price point and it’s so much less expensive than all of the other properties in that neighborhood. What’s going on? That’s when the listing broker tells you it’s a land lease and you say...huh?
What is a land-lease?
A land-lease building is a building where the land is owned by an entity separate from the building. As an owner in a land-lease building, you will be paying rent to the person or entity that owns the land. This is usually incorporated into your monthly maintenance charges which usually results in higher monthly charges. Typically the land lease goes out many years with escalation clauses throughout the term of the lease. The benefit of buying in a land-lease building is that usually, the cost of the property is much less because of the uncertainties around a land lease.
Buyers that are more risk aversive or typically more willing to buy in land-lease buildings. They are a bit trickier than buying just a straight property where the land is owned by the building but if you are comfortable with the risk it could be an amazing opportunity to live in a neighborhood you couldn’t afford otherwise and or have an amazing apartment at a lower price. However, don’t forget about those monthlies being high.
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