Home Improvement – Real Estate

1.Why are there so many properties on leased land?

There are several situations here. Business and commercial land is often leased all over the world. In New York City, Tokyo, and other larger, older cities; land owners often lease the land that is underneath those skyscrapers and in some cases even the park land is leased to the city by the land owners.

In Lewes, all of the land east of the Lewes and Rehoboth Canal, what is known as Lewes Beach; is leased land. The land leases there are usually owned by the Town of Lewes and are usually for 99 years and renewable. Some of the properties on Lewes Beach, however, are leased for shorter terms by the town, but as a rule all of these are automatically renewable. When you buy a property on Lewes Beach you pay a fee to get the leased land re-assigned to you. That fee for a Bay Front Property, on the Delaware Bay; can be well over a half million dollars, depending on the size of the lot; and the value of the home and improvements is added to the lease assignment value. In other words, even though it is leased land on Lewes Beach; the price is commensurate with purchasing the land. This land has always been leased land as prescribed by England, during our American Colonial Period and that ownership style remains.

In Rehoboth and Dewey Beach areas, is the Rehoboth By The Sea area, a large number of the lots are owned by the family owned Rehoboth By The Sea Realty Company. The current treasurer of Rehoboth By The Sea Realty Company is Jack Redefer; 302-227-4277. Land is leased to the tenant-owners for shorter periods of years; some leases have as little as 20 years left on the lease. These leases may or may not be renewed and the land value if the resident is allowed to purchase it later, could be significant. As a result these properties on leased land go for much less money that the lots that are owned. Some of the lots have been purchased from the Rehoboth By The Sea Realty Company in the past and are owned by the residents – most have not been purchased. Rehoboth By The Sea Realty Company will not likely renew some of the leases, some they may, it is up to them. On the lots that they do not renew the leases for – the residents are required to remove the improvements and leave the land in it’s original level and unimproved condition at the end of the lease. The good news is that you can save as much as half a million dollars when you purchase a home on some of these lots. The bad news of course is that you may have to remove the home and vacate the lot in a couple of decades or so.

Long Neck and other areas where there are trailers, manufactured homes, single wides, or double wides also are comprised of mostly leased land. There is some leased land along Rt. One, where trailer parks now, at times, contain larger and more conventional homes as well. These land-lease communities are far less expensive to purchase. The appreciation in value is small or nonexistent – or in some cases the value of a property purchased on these leased-land communities can depreciate to far less than the purchase price. There is also a monthly or annual lease fee to pay for the use of the land.

2.Why would anyone purchase a mobile home or manufactured home on leased land?

There are many, Realtors included, who wonder why in the world anyone would ever purchase a so called mobile home on leased land. Actually many of the folks who live in the leased land communities are well to do, even wealthy in some cases, many are Realtors themselves.

Safety and security is one reason. Many of the folks in land lease communities, which some might call trailer parks, are retired or part time residents. There are many who prefer the security services which are only available in the manufactured home communities. Most of these communities have community centers, neighborhood watches, security patrols, and alert neighbors who keep a far better eye on the community than the police force can in a town or city.

Low maintenance is another reason people, in fact most people, live in land lease communities. The lots are usually quite small and often the park owner maintains each of the lots. When the individual does need to maintain their individual lot the grass cutting expense is minimal. The fee for cutting the grass, edging and trimming can be as little as $8 each time, as the grass cutter can often take care of a lot in less than ten minutes and if he has several lots in the same community he can do 5 or 6 lots per hour with a push mower and a weed whacker. Some folks do fabulous landscaping jobs on their land-lease community lots. In fact some communities have annual or seasonal competitions for the best kept, most beautiful, or most improved yard. Many of these lots are only 50 feet by 100 feet, sometimes less – so a lot of beautification can be done with limited expense compared to the far larger lots that one must have in a non leased community.

3.Are homes on leased land a good investment?

Very seldom are homes on leased land a good financial investment. There are exceptions. The homes on the leased land on Lewes Beach are just as good as financial investments as the homes on what is called in-fee or deeded land in Lewes town proper. In fact, since the Lewes Beach is more desirable to more people – the prices are higher and the percentage of appreciation on Lewes Beach is, over the long term, better than those in Lewes proper. The town of Lewes, other than the beach, is more of a Williamsburg flavor in architecture, ambiance and character. Lewes Beach on the other hand is less traditional in it’s architectural character. The town of Lewes is very much a walking and shopping town with shops, boutiques, and little stores along Market Street, Second Street and Pilottown Road, especially. The beach has very little commercial activity and is far more a beachy bedroom community where the focus is of course the beach, the canal and the bay.

Homes, manufactured homes or stick-built homes on the other land lease communities are not often a good financial investment. However they may be the best investment in lifestyle. Many folks have other real estate, other investments, and do not need to have the home they own in a land-lease community appreciate in value. And, the homes in the land lease communities are a small fraction of the purchase price that they would be if the land were deeded, in-fee.

For instance, a waterfront home on the Rehoboth Bay in Rehoboth Bay Mobile Home Community; now known simply as Rehoboth Bay Community; may cost as little as $115,000, for a beautiful, double wide, full time, modern home. The land rent would then be from $400 a month on a lagoon to $500, up to $750 a month or more on the largest and best bay front lots. Compared to a home on deeded land the same size that is a savings of over a million dollars!!! So, as an investment in lifestyle it is phenomenal and astute buyers seldom allow these homes to sit on the market.

Other areas, for instance the Angola Area are, have resale homes from $10,000 for a small fixer-upper on a small lot leased at $270 a month to brand new homes on much larger lots, large homes, for $70,000 to $90,000 on lots that rent for usually less than $300 per month. One double size corner lot rents for $400 a month and could have a many bedroom home with decks, porches, garage and still room left over. Angola Beach Estates and Angola Beach and Angola Estates are well established communities with pools, security, substantial community management and lots more. They have community centers, boat docks, launching ramps, boat storage areas, and a list of amenities not available in many other communities.

What a range of values: resales from $10,000 to $80,000 and new homes from $40,000 to $80,000 or $90,000 for a real show stopping extravaganza. Now you know why people are so willing to buy and live in land lease communities!!! You get a wonderful lifestyle for far less than you can purchase anything even remotely similar where you don’t lease or rent the land.

Do you charge to advertise your home quickly? If so, don’t be tempted by the ads you see that say “We Buy Houses” or “Sell Your Ugly House in 9 canicule for Cash.” Those types of ads are placed by absolute acreage investors who are attractive for sellers beneath duress, and they’ll alone pay up to 70% of the low end bazaar amount for your home.

But you don’t accept to be at the benevolence of those scavengers. Selling your home is demanding abundant after annoying about accepting a fair price, so alike if you accept no money for repairs, actuality are a few tips for accepting fair bazaar amount for your home in the beeline aeon of time:

Outside:

- Clean up all the weeds on your property

- Abolish asleep plants and trim awkward limbs

- Plant amber spots with cuttings of arena awning from friends

- Either abolish abandoned pots and containers or ample them with cuttings

- Wash all the windows

Inside:

- Take boondocks any decrepit window coverings

- Open all curtains and let the sunshine in

- Air our your home

- Pack up your claimed effects, such as ancestors photos, memorabilia, bags of magazines, and added clutter

- Get rid of balance furniture, abnormally pieces that are annoyed and worn

You don’t accept to accord your home abroad to absolute acreage vultures. A little bend grease, sweat, soap, and baptize can advice your home put on its best face for abeyant buyers, alike if you accept no money for repairs.

Recently I closed on the sale of two homes. They were located about a mile apart and had comparable market values. However, beyond these two similarities, the two deals were very different from each other. Let me discuss in more detail the similarities and differences of the two deals.

My business partner and I purchased both properties from families who were in preforeclosure. The leads for each property came from letters that I had mailed to families who had recently received Notices of Default. The one family responded to me within 24 hours of receiving my first letter. I met with them within two hours of receiving their phone call and signed a contract with them on the spot to purchase their home. The other family responded to me after receiving the fourth letter from me. After a couple of broken appointments and two meetings we signed a contract to buy their home. With each home we did a “kitchen table” type closing within a couple of days of signing the contract. Both homes were purchased “subject to” the existing financing remaining in place. The earnest money given for each home was one dollar.

First Deal

We began marketing the first house by advertising it in the newspaper at market value and putting signs in the neighborhood and nearby intersections. We had a verbal agreement with the seller that they would clear all of their belonging out of the house within two weeks. The house was very messy and dirty. When the sellers failed to make any progress clearing the house we went ahead with the marketing and reduced the asking price. Within two weeks we had only received a few phone calls from mostly non-interested prospects.

At this point we reduced the asking price further and changed our signs to notify the public that owner financing was available. At that point we started to get a larger number of phone calls from truly interested prospects. Our owner financed terms and the lower than market value asking price separated us from the hundreds of realtor represented homes that needed bank financing.

With the second home, purchased a month later than the first, we immediately marketed it with owner financing. When we purchased the home we stipulated in the contract that the seller had to vacate the property in two weeks or be charged a fee for failure to do so. The seller was agreeable and cooperative and moved quickly to remove their belongings from the house. The seller of the first house was still dragging their feet and the house was still a mess.

Shortly after changing the marketing of the first house, we received an offer from a highly interested buyer. This house was truly ideal for this family and we wanted to help them get into it. They offered to buy it with bank financing and we agreed to sell it to them. There was still enough time before the foreclosure auction to close the sale with bank financing.

I cautioned the buyer that he should seek a loan other than an FHA loan since we had not held title to the property long enough for FHA to approve a new loan. In case you didn’t know, FHA recently changed a rule that now requires a property to be on title at least 90 days before they will approve a new loan. So guess what the buyer did?

Right. His mortgage broker and his real estate agent steered him toward an FHA loan program. Luckily, the buyer qualified for a good FNMA program as well. So I stipulated in the contract that the buyer had to gain approval for the FHA program within 5 days or else drop the FHA program and proceed with the FNMA program. Both the broker and the agent needed education on this point, which I provided in writing, and four days later the broker notified me that the buyer would not be approved by FHA and that they were proceeding with the FNMA program.

The next obstacle we faced was the home inspection. The inspection resulted in asking for several hundred dollars worth of repairs that we agreed to do. The repairs took two weeks to complete. While repairs were ongoing we ordered a property appraisal. The appraisers in our area are backlogged eight weeks but we knew an appraiser who would perform an appraisal within a week for 150% of his normal fee. Of course we didn’t have the luxury of being able to wait eight weeks so we bought the expensive appraisal.

The next obstacle was to order a preliminary title search, which showed a clear title luckily. The previous owner did not have an as-built survey so we had to order an expensive set of survey documents from the county.

Now that the obstacles to closing were nearly erased and we were close to a hard closing date, we still had a problem with the previous seller. They had only moved a few things out of the house and the house was still well cluttered. They were getting around to moving out eventually but not fast enough to be out of the house before closing the sale. Their lack of cooperation and their inability to follow through with their verbal promises made it clear why they had neglected their home and let it go into foreclosure.

Since the utilities were turned off and the seller was no longer living in the home I had the legal right to declare their belongings as abandoned property and I notified them that I would move the items out for them. My partner and I spent a day boxing and bagging up the seller’s personal items, and grudgingly they picked the boxes and bags up the day before closing. Whew!

Second Deal

Now, on the other hand, events with the second property proceeded much more smoothly. We bought the home, found a buyer for it within eight days, and closed on the sale eight days later.

We decided to sell the second home on a land contract or wrap mortgage with the existing financing remaining in place. We also decided to stipulate that the home had to be refinanced within two years or it would be foreclosed back to us. We did this to protect the previous seller’s interest in the underlying financing. They didn’t want it hanging out there for a long period of time.

Our “owner finance” signage attracted several buyers quickly. We required a large enough down payment to “cure” the loan, that is, to pay off the existing arrearage and attorney fees. We found an eager buyer who had sufficient cash on hand and a good income, but without enough time in the area to have a high credit rating. He understood the concept of the wrap mortgage and the underlying financing and we negotiated a contract with him at Starbucks. He negotiated a lower sale price by offering a larger down payment. Basically we were able to immediately receive all of the “back end” profit that would have been paid to us in two year’s time when he refinanced. We received this up front in exchange for a lower sales price. It was a fair exchange for both parties.

He agreed to buy the home “as is” and to do some repairs himself. No home inspection was needed; no appraisal was needed; no repairs had to be made; no real estate agent needed to be paid; and no survey had to be ordered. The buyer paid all of the closing costs which were far less than he would have paid if he had used a real estate agent and a mortgage broker.We used a closing agent who is very familiar with transactions of this type, which she calls “unacknowledged wrap sales.” Our closing agent has become a friend and has spoken at our local Real Estate Investment Club.

In summary, each of the two deals netted about the same profit, but it is obvious which deal one would prefer to do if given a choice. If I were Robert Kiyosaki I might call one deal my rich dad’s deal and the other my poor dad’s deal. We learned enough to make deals of the first type go more smoothly in the future but I’ll take deals of the second type every day of the week.