Buying a Condo on Leased Land

[Hannah Noble]

I found a 2bd 2ba condo in southern California (orange county area) in a very desirable area, minutes from the beach and a downtown area. It is definitely a fixer upper (mostly cosmetic), but has a lot of potential for add value. However, the down side is that it is on leased land (lease ends in 2057). It sounds like this lease keeps being renewed and most likely will in 2057. The downside is the lease will continue to go up as it is renewed.I am not very familiar with making investments on leased land, but doesn't sound like an ideal situation for a REI purchase. I know that it really affects the appreciation and re-sale value on it since you don't actually own the land.

What intrigues me about it....

This condo is goingg for half the price of similar condos in that neighborhood that have been somewhat updated and down the street from small homes and condos that almost triple in price.

Background on the condo complex that is on the leased land...

There was a 1bd 1ba in this condominium that was recently upgraded and sold in September for about $10,000 more than the one I am looking at. Another one that is somewhat upgraded and same layout (2bd 2ba) that is currently on the market for 140k more than the asking price on the one I'm looking at, but has been on the market for a while (most likely because it is priced too high with the land lease and isn't fully upgraded). A few years back an upgraded 2bd 2ba with the same layout sold for about 85k more than the price mine is currently listed at.

Because of the land lease it doesn't sound like something I would hold onto for too long because I am not going to appreciate like other properties in this area due to the land lease. However, may be one that could be a live in flip kind of idea. However, just unsure of how the land lease will effect buyers in 2-5 years, even if it is upgraded, in a good location, and listed well below average condos in that area.

Would love any thoughts or experiences anyone has had with land leases, especially in areas with high appreciation, desirable living conditions, and any thoughts about a purchase like that with everything that is going on in the world right now with our economy.