Apts in Land Lease Building

This has been discussed many times. Use the search feature.

In a nutshell here you go: If a land lease expires in less than 30 years, no bank will give a mortgage and the apartments will be unsellable. In renegotiating the lease, the landlord holds most of the cards and can set the terms which could result in tripling or quadrupling or worse of the rent the coop pays the landlord. That results in astronomical maintenance quite possibly.

Here, if you bought and the lease truly is up in 2044, then you have only 5 years to renegotiate with the LL or you'll be in that stuck position of no one being able to unload a unit in the building by 2014. The risk of negotiations failing could be devastating to your investment in the coop.

In addition, I believe not one cent of the maintenance is tax deductible since it is rent and not a mortgage that the coop is paying.

If a land lease expires in 75 or 100 years, then the risks are for the next generation. But if it expires in the remotely near term as you say it does for 101 west 23rd, then I wouldn't touch a unit there no matter how good the value seems since the risks are unacceptably high.

All deeds are pretty much created equal (for Coop apartment buildings). Land leases are not. Even if you've got a 99 year lease, if the ground rent doubles every 10 years, it's a lot different than if it goes up by 1% a year, or goes up by the amount of the RE Taxes.

Don't forget the tax deductiblity of the mtc is always lower in a land lease building because the Coop doesn't pay the RE Taxes, the land owner does, so you lose that tax deduction.

In other words, you'd have to be an idiot to buy in a land lease building unless it's ridiculously dirt cheap.

what 30yrs says is wrong. In just about all landlease situations the building owner (ie, the coop) under the ground lease has the obligation to pay re taxes. All re taxes on the improvements that are part of the maintenance ARE deductible. The re taxes attributable to the land are not. Bottom line: most re taxes are deductible.

Whther the rewards outweigh the risk is a function of the apartment price and the terms of the land lease. If you are financially savvy, you can figure this out. If you are not, you should stay away.

The greatest downside is that they take the land away. So your building needs to find new land.

For a worst case scenario story check this link http://www.urbandigs.com/2008/12/landleases_when_worse_than_the.html
and look at the SE listings for 301 East 63rd.

"MACRO ECONOMIC DISCUSSIONS & INVESTMENT STRATEGY FOR MANHATTAN REAL ESTATE"

No thanks, I've seen enough after reading that pomposity!

Yesverage - funny. Where's the best place where you can find cheap new land for your building?

Yesver.... Don't embarrass yourself. Urbandigs is universally acknowledged as a highly reputable blog. Read it and you will be wiser for it. While you're at it, add calculatedrisk, rgemonitor, and some of the other sites linked there to your favorites list.

As for your other comment, I did see a land lease building wandering around the far west side last weekend and the people in it looked really desperate.

> No thanks, I've seen enough after reading that pomposity!

In this RE market, anybody THAT correct has to be considered pompous... because what ended up happening was so extraordinary. Nobody with meek predictions was right.