Why you shouldn't buy a home on leased land

Photo: haven't the slightest

Did you know you could buy property without owning the land it sits on?

You're familiar with mobile homes, right? They're the most well-known example of a home you can own while paying a monthly fee to rent the ground it sits on.

But you can do the same thing with an actual house, or even a condo. You’ll find different types of leased land properties in different parts of the country. Some leased land communities are retirement or vacation home communities.

How can you identify these properties, which are often disguised in real estate listings?

-The property might have a regular street address but also have a lot number.
-The home might be priced far below similar homes in the area, or be far nicer but priced like an average home.
-The price might be a dream come true given the location, like waterfront property for the price of an inland property.
-The listing might describe the home as being in a planned development or master planned community (though traditional homes can also fit this description). 

Sometimes, it may simply appear that the property is governed by a homeowners association (HOA) because the listing might mention the association features you’ll have access to, like a community pool and playground. However, the HOA fees will be sky-high, double or triple the standard HOA rate for your area. That's because part of the HOA fee will go toward community amenities; the rest will cover your land lease fee.

I don't think these arrangements really work out in favor of homeowners, as I discuss in my Mortgage-Calc.com article, Why you shouldn't buy a home on leased land.

There are also lifestyle issues to consider. Land lease communities, like other HOA properties, can have restrictive rules such as how long guests may stay with you or what types and sizes of pets you can own.

Indeed, leased land properties often belong to HOAs. That means you not only need to understand the details of the leased land arrangement, but you should also understand what you’re getting into when you buy a home in an HOA. Learn how they work in my articles, 9 Things You Need to Know About Homeowners Associations and What Living in a Homeowners Association Means.