Many areas and subdivisions in Scottsdale have houses on lease land. You'll recognize those areas in McCormick Ranch, Santo Tomas, the various Briarwood(s), Casa Del Monte, Hilton Village, among others, and various patio home developments by the Phoenician and Scottsdale Fashion Square.
So how does a house on lease land work? Well, the answer is like this: you own the house but not the land on which the property occupies -- you lease the land.
The typical land lease in Scottsdale is 99 years, and sometimes you find the 30 year leases. To keep it short as the formula can actually be more complex, the home owner on a land lease usually pays one share of the total number of houses in the development. So for a 200 home development, you would pay one two hundredth of the total lease cost, a sublease of the main lease. Or sometimes, a fraction of the sales price of the home.
So why buy a house on a land lease? Because you get more house for the dollar in the total purchase -- you don't buy the land. The land part of the property, you lease. So consider the purchase of a $500,000 residence built on a $150,000 lot. You may be able to buy an equivalent home for $350,000 on leased land. So the lease payment for the land, let's say about $350/month is $4,200/year.
But if you would have purchased the land at $150,000, mortgage it 30 years on a fixed conventional loan at 4%, your monthly payment is $716.12/month. It would have cost you over $300,000.
So let's take it to another level. The difference of $366.12 invested at 4% for 30 years is a nest egg of about a whopping $255,000.
See what I mean?
But let's take a look at a cash purchase rather than a mortgage loan. The amount tied up in land is $150,000. The same applies here. Rather than paying a mortgage loan on it, you would have it invested and deriving an investment income.
So perhaps this helps you understand why companies and individuals choose the land lease option. It may not be the vehicle option for you, but consider all the options before making a decision. It's a good way to get more home for your money.
The other way to look at a land lease is to compare it to the high priced HOAs in Gainey Ranch at $500/month, Sandpiper $525/month, 3rd Ave Lofts at $800/month, and The Waterfront at $1,000/month. HOA fees usually increase every year or so, whereas land lease fees are fixed for very long periods.
So if this is of interest to you, please let me know, land lease properties are on sale right now.