Buying into Land Lease Coop (sale, real estate, apartment)

[kumo86]

Hi, I am considering buying a coop on a land lease. I've heard many people speaking to avoid land-lease properties, but my sense is that, as long as the lease term is long enough, i.e. 50 years and over, the only difference is the significant discount on the property. The con, though, is a high maintenance fee at well over $2000. This specific property is in a very desirable neighborhood, zoned for good schools. Are there any one who buy such a property? Are you happy or regret your decision? Any advice will be highly appreciated!

[barkomatic]

Will the monthly costs (maintenance plus mortgage) be less then a property in the same neighborhood that owns the land their building stands on?

Anyway, how much is the apartment? How many bedrooms? Are the co-op's financials strong?

If you've got a 99 year lease on the land then it might not matter too much since you'll be long gone. However, keep in mind you may want to pass your property down when you die -- and eventually that lease will matter to someone in your family.

I'd avoid it personally.

[kumo86]

Thank you for the reply. The apartment on a land lease is much cheaper than the regular coop: below $500K for a 2-bedroom in midtown east. The building's financials are strong and it is very likely that the lease will be extended once the current term ends in 50 years or so. If I compare the monthly payments for three properties we like, condo, regular coop, coop on a land lease, they are all the same. We have two small kids and want to sell the apt in the next 7 to 10 years (want to be in a good elementary school district). We may have a difficulty finding a buyer but hopefully we find one, someone like us, within a year or so.

[bluedog2]

Where are the tax advantages in a land lease co op ?

One of the biggest benefits of traditional home/co op/condo ownership is the deductibility of a large percentage of the monthly expense.Those deductible expenses are all derived from interest on building mortgages and real estate taxes paid to the city.Seems that with a land lease the co operators are just paying rent which is not deductible.

You can't really compare the monthly expenses of the different kinds of ownership unless the tax advantages are also the same.

[kumo86]

That is very true. I've heard that the tax deductibility is 37% for that particular apartment, which compares to 49% for another regular coop. I am asking for the detailed breakdown. I understand that the deductibility varies apartment from apartment even in each type of category.

[Kefir King]

kumo,

A figure that I would try to get is the percent of that "well over $2000" maintenence that goes to the landlord. If you are paying for marble lobbies trimmed in gold leaf, epauleted doormen, and a staff who honors your every wish then you are getting something. But if most just goes into the coffers of an absentee landowner, then think again.

Remember even an extra $500 a month buys more mortgage.

[kumo86]

Thanks for your note! I'll definitely get the breakdown of the maintenance fee for further consideration.

[mc33433]

What is the best way to look at the financials of a building? My husband and I are beginning a novice search to become owners vs. buyers and I've recently been doing more research on coops.

[Kefir King]

I have never "shopped" them but I assume anyone trying to sell a co-op will provide his realtor with the financials and that realtor would show them to any prospective buyer.

For a sale without a realtor, the seller should be able to provide the buyer with the last financial statement.

I would certainly not buy without seeing the paperwork...unless it was Mitchell Lama.