Buying The Building But Leasing The Land
Has anyone bought a building and just leased the land from the owner?
I remember reading this zero-down technique some time ago and was impressed by it. Unfortunately, at that time, I was focused on other methods and did not give it much thought. Now, I have a potential situation that may make this an ideal method to use but can't remember the exact mechanics of it. Neither can I remember the book.
Kindly share your experience or point me to a book that covers said method.
Thanks
Yes I have through not fault of my own. I kind of inherited the situation. Here how it goes. You buy or build a building on leased land. Banks do not like to loan money on buildings on leased land, so you have problem # 1. More importantly, when your lease runs out, you loose your building, as it becomes the land owners. And if that's not enough to turn your head, how about trying to sell your building on leased land. We had a 950, 000 building on leased land and the lease was about 7,000 per month. We were finally able to pay down the loan on the building so we could get some person to buy it and assume our lease. That only took 7 years. Good luck
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More importantly, when your lease runs out, you loose your building, as it becomes the land owners.
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Now that you brought this up, it is coming back to me a bit. I think (correct me if wrong) the zero-down can be structured as follows:
Purchase the building and lease the land with an option to buy. If the land represents at least 20% of the value of the entire property (land + building), then all I would need is to come up with an 80% loan from an institutional lender, right? Or would the lender base the loan on the value of the building alone?
[ Edited by aurera on Date 01/27/2004 ]
Ok, I think I got it now...
Buyer does not get a new mortgage but rather assumes the current mortgage (or maybe a subto would work also). Seller keeps the land and leases it to the buyer who has the option to buy. The land will serve as some kind of "downpayment". This way, both parties win: Buyer gets property with zero-down while the seller gets whatever equity he had in the property.
Is this feasible? Has anyone done this? If so, how is title recorded?
It is in your interest to make part of your land lease transaction a number of points:
1. as long a term as you can negotiate.
2. as low of rent increases as the owner will agree to.
3. you have the first right of refusal to purchase should the seller sell.
4. seller agrees to allow outside lender financing on building to the largest extent possible.
All the above need to be reviewed by an attorney who is skilled at that area of law.
5. the opposite applies when you own the land (obviously)
[addsig]