Property on Leased Land

[Jason Khoury]

Hi there,

I am wondering if anyone has any experience with owning property on leased land? 

I understand the concept of it and know that the home will not appreciate as much & lease amount can increase etc.  Just looking for some advice or any thoughts/warnings you guys may have on leased land properties.  The land is on a 20-year lease.

Being in WA state, options are limited in my area and homes prices are somewhat out of reach. If I were to go this route it would be a midterm primary (3-5 years) and then be converted to STR or normal rental property after that. The properties I am looking at are more than affordable for my income and would still allow me to save between 30-40% of my monthly income.

The property would allow for some value add, making it a potential long term BRRRR. I am not sure if renovations for a home on leased land is worth it.

Thanks in advance for any replies!

[Max Ferguson]

It all depends on the contract of the leased land. If you are able to make cash flow on the investment and have it pay for itself in the time of owning it, then it may make sense. But this really isn't ideal, as after that lease is over you may be stuck with nothing. The most similar scenario I encounter is folks who buy trailers for dirt cheap to rent out here. 60k entry (or whatever they are going for) then 600 a month to lease the pad/land. A good way to crush the 1% rule in a market that doesn't offer too much of that, but you are basically writing the property off after however long you plan to implement the strategy for. 

A different/maybe possible way to go about it, is to find a plot with utilities on the outskirts of your town (may not be possible, I have no bearing on your local market), then buy a mini home. That way you at least have full control of the operation and *may* be able to resell the mini home whenever you decide to exit. 

Good luck and let us know what you figure out!