Land leases in Orange County CA? should I steer clear?

[Dennis Guzman]

AsThanks in advancerch to find my perfect first deal I've come across some townhomes in orange county. The mortgage and the hoa can be covered by a renter, and it would cash flow. It's the first time I've ever seen or heard of land leases and this one is 2000 per year. I was wondering if I should steer clear or what questions should I ask that can help determine if it's a good deal? Thanks in advance for all your help.

[Kimberly T.]

I personally will never buy anything on leased land. The value of the building drops precipitously as the end of the land lease nears, then the land lease has to get renegotiated and you have to pay more for the lease once that's negotiated. I hate not having complete control over my property, which is why I won't even buy anything with HOA.

I remember when we were looking for multifamily rentals here in OC a few years back and came across a fourplex in Anaheim that looked like a good deal (as far as GRM, etc.), then I found out it was on leased land, so we passed on it. As I recall, it sat on the market quite a while.