Expert: Dick Dennis - 7/10/2006

Question
My husband and I are looking to buy a vacation/rental home as an investment near the beach. Our plan is to buy, rent out and use for several years and then sell later to buy something more permanent.
We found a great condo, for a great price, but the building is a land lease with 66 years left on the lease.
What can you tell me about the implications of this kind of arrangement? Should we move on and keep looking?

Thank you.
Kim

Answer
Thirty three years have been used up on that land lease already. You will find that property with land leases tend to sell for less because as the years move on, the value of the property depreciates as it appreciates instead of merely appreciating like regular properties.

It is up to you, Kim. You are the one who knows how long you're going to own that property. If you feel you'll resell that property with about, say, 50 years or more left on the land lease, then you might go ahead and buy it. But you will find that you are eliminating a small percentage of buyers because they are not knowledgeable.

Suggestion: I would be willing to bet you can get that condo for less than you think.

I do wish you well.

Dick Dennis              dixiedee13@aol.com