Did you know you could buy a house or condo in Orange County, but not own the land on which the condo sits? This is most common in Huntington Beach and other coastal real estate areas. You may come across this if you see a luxury home listed for a steal. It looks like a great deal but in fact you will be paying more in the long run because you will have to pay a lease every month for the land. Benefits of buying a home on leased land include a cheaper home price in an amazing location and lower property taxes.
If you encounter a house that involves a land lease, you can still secure bank financing, but you need to make sure the lease lasts longer than the mortgage; a thirty year mortgage and a 35 year lease or a 15 year mortgage and a 25 year land lease. If the length of the lease remaining is shorter than the time you plan to stay, then you need to find out what happens to your interest in the property when the lease ends.
It can get expensive if you don’t. Over a year ago the Orange County Register reported that for nearly five decades, Monarch Bay residents have owned the homes in their gated, beachfront community in north Dana Point. But they had to pay rent to the Moulton family for the land their houses sit on. Forty-eight homeowners in a 214 home development now own both their houses and their land, due to a new agreement allowing Monarch Bay residents to buy out the property’s original developer, leaders of the Monarch Bay Land Association said.
The negotiation resulted in the forty-eight homeowners agreeing to buy the land for $85 million. That amounts to an average of $1.8 million per lot, with prices ranging from $1 million to $5 million, said Bruce Tester, land association president. The rest of the homeowners have staged negotiations out until 2020.
Quite a price to pay!