Is Buying on a Land Lease a Deal Breaker?

[Melissa Wedell]

I am looking at a property in Phoenix area and I found out it is on a land lease. Everything I've researched online is a very mixed bag of everything from "it's fine" to "don't do it". From what I've read, it seems like the condo itself should be priced lower than something that's like a Townhome (since you'd own the land) and I have to pay the Mortgage, HOA, and Land Lease. For reference, the numbers are about $700 P&I, $180 HOA, $180 Land Lease monthly.

Am I being paranoid?  Aren't all condos non-land owning?  I'd love any insight anyone has!  thank you! 

[Tom Parris]

Hi @Melissa Wedell,

I would pass on the land lease. Entirely because it can impact your ability to exit the property. It's not very common in residential real estate, so therefore, realtors, lenders and obviously the buyers are going to be treading in unfamiliar territory, which is enough for everyone to just say no. I think the steepest hill to climb is finding a lender who knows enough about underwriting the property to approve a loan, and even then, they may want a much higher downpayment to make up the additional risk. There is one community where I am that's on a land lease, and it has everything going for it. Great location, on the water, lots of amenities, and newer construction. The tougher sell has caused a low appreciation rate, high inventory, and the time on market to be triple the area's average. 

Good luck! Hope that helps.