Differences between land lease communities and leasehold real estate
Leasehold real estate vs land lease communities
What's the difference between leasehold real estate and a land lease? The length of the lease is very different. Leasehold titles generally last for much longer—anywhere from 25 to 99 years—whereas leases are for six months, a year, or even month by month.
Relying on Google searches for clarity can cause a great deal of confusion. Leasehold properties are not common on the east coast, with the exception of some condos in New York as explained in the article below;
- What is leasehold interest property - Realtor.com
In Hawaii, where I started my real estate career, leasehold condos are common in areas like Waikiki and Hilo. Large amounts of land in Hawaii are privately owned in trusts, some with specific restrictions on how the land can be used.
When you buy a leasehold condo, you are only purchasing the unit with no rights to ownership once the lease expires. Values depreciate accordingly based on the remaining years on the land lease.
Ultimately, when the lease ends you no longer have any rights of ownership - it reverts to the lease holder.
A "land lease community" refers to a residential area where homeowners own their houses but lease the land they are built on.
Manufactured Home Communities
Once considered "trailer parks" or "mobile home parks" - the current term is "land lease community." This is where confusion occurs.
There are a variety of land lease communities and some search results refer to communities based on a leasehold type of offering vs month-to-month lot leases typical in privately owned manufactured home communities.
With leasehold properties, the terms of the lease are tied to the deed for your property. When the lease ends, you lose your home.
The video below is a good example of the confusion. Her explanation applies to leasehold properties, not typical manufactured home communities which are usually privately owned with month-to-month lot leases;
Home Equity Differences
When you own a manufactured home in a land lease community, your own your home!
Manufactured homes have increased in value 60% in the past 5 years. Current market values and equity gains or losses tend to follow stick-built market trends - not a depreciating asset like a car.
In some cases, equity growth for manufactured homes has outpaced equity gains in stick-built homes.
Leasehold ownership only depreciates, ultimately ending in losing your ownership when the lease ends.
As a home owner with a lot lease, you have rights to sell your home or move it to another location if it meets township requirements for a permit. Your lot rent has to be current as the community land owner must approve the permit application.
If that isn't possible, you can sell your home at today's market value and benefit from recent equity gains for manufactured housing.
What's the best home ownership for you?
Everyone's situation is different. Sorting out what's best for you and your family to fit your financial and lifestyle goals is what's important. Comparing the pro's and con's of renting vs buying is a very personal decision.
For market insights and a private consultation, please contact me. Let's talk!
