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Leased Land vs. Fee Simple

by Rob Zwemmer

Many ask what is the difference between Leased Land & Fee Simple land?

Leased land reduces the cost of a home by about 25 percent. Once a home is built on the parcel, the land can be of no other use to the homeowner. They benefit from the use of the land without the capital outlay, and purchase a home for a lot less than if it was situated on leased land.

Resales of Palm Springs Valley homes on leased land (such as properties located at Canyon Estates, Mission Hills, Seven Lakes and Cathedral Canyon) have maintained the value of other homes in the area. There is no need to feel that the value of a property on leased land will be hindered by that fact.

Here are frequently asked questions about Indian-leased land:

WHAT ABOUT MY CHILDREN AND GRANDCHILDREN AND WILL I BE ABLE TO PASS A LEASE HOLD ESTATE ON TO THEM?
You can give or sell your home on leased land just as easily as on fee land. However, if you are concerned about your heirs 65 years from now, there are four realistic questions you should think about:

1. Will they really want a 65 year-old home when the average life of most California residences is estimated at less than fifty years?
2. Considering that most residences change ownership about every five years (which would be more than 10 turns of ownership during the life of your lease) is this home really likely to stay in your family for 65 years?
3. If you have a savings of $206 per month ($2472.00 per year) by leasing land vs. purchasing, over the life of a 65-year lease, your savings would be a total of $160,680.00, even if it earned no interest. If you kept this monthly savings in an account paying 10% annual interest,your savings would exceed $1,250,000 over 65 years (and even more if interest were compounded monthly).
4. What happens at the end of the lease? Since there is no legal restriction prohibiting the tribe from selling its land, you or your heirs may have the option to purchase. You probably would be offered a new lease based on conditions existing at that time. There would be no financial advantage to taking the land back.

WHY DO SOME PEOPLE COMPARE A HOME ON LEASED LAND TO A VARIABLE ANNUITY LIFE INSURANCE POLICY?
Just as a variable annuity gives you the possibility of gaining from both fixed interest rates and asset appreciation, a home purchased on leased land gives you a monthly savings along with the possibility of home appreciation. It can be an investment hedge whether home prices are rising or falling. During an "up" period, your home will increase in price. In a "down" period, the dollars you did not spend on land, but invested in a fixed interest savings, will continue to increase. Today, building on leased land is no longer an advantage reserved for business and investment buyers.

View our latest Featured listings at desertonline.com and take a look at our snapshot of Rancho Mirage.

Rob Zwemmer
Zwemmer & Associates

First-time Buyer Tips

by Rob Zwemmer

 

New Desert Home buyers, here's a few helpful tips to take note as you transition from renter to owner. It’s one of the most exciting experiences you will ever have, and the most important purchase you will ever make—acquiring your first home. It's of paramount importance that when your deal is in escrow, to be extra careful about making all of your payments and keeping your credit score at a maximum. Maintain a paper trail and documentation so you may keep the lender apprised of any large deposits you may have recently made; they will want to know how the money was obtained. Keep a folder at hand with bank statements, pay stubs, tax forms in case anything needs updating during the process. Ask questions, questions and more questions. If you don't understand a term or procedure regarding the buying of your new desert home, don't be afraid to ask for explanation. Keep all of your bank statements, employee pay stubs and tax forms in case anything needs to be updated during the process. Refrain from major credit card purchases as you are the process of buying your new home, and do not apply for additional credit. Don't get carried away and buy new furnishings before the sale of your new desert home is conveyed... it can lower your credit rating and possibly jeopardize your deal. Document that your earnest money deposit has cleared your account and have a copy of your canceled check or statement as proof... you don’t want to do anything to delay or derail your closing!

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For more helpful first-time desert home buyer tips, contact Rob Zwemmer and Associates directly.
We will make your home buying experience as perfect as it can be.

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