Ground rent - lease holder

[Ken Wang]

Dear All,

I am purchasing a Baltimore city property from an owner. We will close in next Friday, but today, we realized it's a leasehold property (subject to ground rent) instead of fee simple. However, the owner has no information about the leaseholder. The property is also not registered to the city as leasehold. It seems there is no knowledge of the leaseholder for many years. The property was built in 1941. From the website, https://livebaltimore.com/city-living-essentials/g... 

it looks like if I can't locate the leaseholder, I can redeem the lease through the city.  The leasehold property seems not a big deal but I would like to confirm with experienced investors that it is not a deal killer, such as potential legal issue ...etc. Appreciate your insight!

Sincerely,

Ken

[Joe Norman]

Originally posted by @Charlene Hammond:

I am purchasing a property using the BRRRR method. Will having ground rent affect my ARV for the refinance?

I agree with Ned that the ground rent won't significantly impact ARV (I wouldn't even bother to include its impact in my deal analysis), however keep in mind that some banks (particularly out of state banks) are skeptical of the Ground Rent system and will either give you a hard time about it, or refuse to lend on it entirely. Make sure you have this conversation up front with your bank. Good luck!