Would you ever buy a property where the house is owned but the two acres the property is on is rented?

[Avicenna]

This is a single-family home, not a mobile or manufactured home

Hell no

Yeah, sure

[hahahmm]

No, but only because it might make it difficult to sell the house in the future. If I planned to live in the house forever it's fine. And actually the owner of the land is putting themselves at risk because any tree I plant is actually their responsibility to pay for trimming or if it damages the house they have to pay. Not very smart on their part.

I'd be sure to get a contract that says they won't be building anything right up to the side of my home tho... I imagine they plan on building something which is why they want to keep the land.

[OlderAndWiser]

That is actually a common arrangement for commercial properties. The tenant leases the property for 99 years and then constructs an office building or other commercial space.

[Avicenna]

Yeah, given the amount of improvement when building such edifices, that makes sense. It would also make it easier to sell. But not for a residential property like the one I described.

[OlderAndWiser]

Most arrangements like this, in the commercial context, are driven by tax considerations. Doing something like this with residential property sounds weird!

[Avicenna]

I thought so too. Thanks for contributing that.

[Avicenna]

Yeah, writeoff of expenses.

[OlderAndWiser]

Avoids capital gains tax and the annual income is taxed in a lower bracket.

[Avicenna]

Ah, OK, interesting

[midnightmoon05]

Mr. Older and wiser, How do you avoid capital gains tax if the property value doubles?

[OlderAndWiser]

@midnightmoon05 Capital gains tax is only due upon the sale of the property.

[OlderAndWiser]

Thanks for MHO!

[midnightmoon05]

We did buy a town home with 3 units. We kept the leftover tenants from upstairs. They turned out to be amazing and helpful.
For whatever reason, the value went up and we sold it 2 years. ago. We did very well. For the 13 years we owned. We screened our own potential tenants. They all turned out well. We also created our own leases. Except one group of girls. But the court pretty much threw them out and told them to grow up.
We also rented out the lower unit because we couldn’t move jn after we purchased. I had just giving birth to our baby and my family was able to help. So we stayed closed to our families.

the main thing about having left over tenants is…you must have their financial info. have their IDs and SS info., tax doc. you create a new lease if you want to keep them.
(Or your lawyer must do these at closing) their income must be whatever % higher than the rent. (My math is bad)

call/text me if you need more info. I am an expert in this area.

[midnightmoon05]

I just read other peoples comments. I am a little confused by the type of property you described.

[Avicenna]

This was a house where the owner was selling and had been owner-occupied but was empty now. The owner of the house does not own the land.. The land it sits on (and it is the only property on a two acre lot) was however rented from a different person who owned the land but not the house. I have never seen this before in a residential situation.

[midnightmoon05]

Never heard. Talk to the realtor? They should know the laws.

[art84]

We have a half an acre in the backyard and can't imagine renting it. The value has definitely gone up since we added to the house and installed a fence in the yard and front. Looks nicer than it did before as the yard had a huge barn that was old and fallen apart.

[Smoke-n-Growls]

If you don't own the land, you can be evicted and your house destroyed at any point the landowners decide.

Sure, a contract might give you the legal minimum notice of rental eviction; but a landowner of a few acres is probably just gonna pay the fine and go forward anyways.

[Avicenna]

I obviously don’t know what the rental terms are, but if you own the house not the landowner, they’d better not destroy it. If you’re no longer renting the land, I’m pretty sure you have to move the house.

[Smoke-n-Growls]

"They'd better not destroy it."

I don't know about you, but I'm not about to hitch my living situation on a "they'd better not do x" statement.

Landlords break laws all the time, and for people with money, a fee is just an opportunity cost.

[Avicenna]

The landlord owns only the lot of land the house is on, not the house. If they illegally destroy the house on it that belongs to someone else, they will pay more than a mere "fee".

[Smoke-n-Growls]

Lol, sure.
And yet you don't know the rental agreement.

Hey, if you wanna take that chance, you go for it. But don't come whining on here when you're forced off the land. 🤷🏽

[Avicenna]

LOL, I'm not going to do it- I just wondered if anyone would! But I'm pretty sure when a rental agreement is terminated, your property doesn't get destroyed...

[Smoke-n-Growls]

Lol, again, "pretty sure".

[Avicenna]

Well if you want to argue that the owner of land underneath a house worth $100K that is owned by his tenant or so is simply going to destroy the house because they feel like it or because a rental contract is over, go right ahead. In the very unlikely event that someone would do that, they'd owe a lot of money in damages and perhaps also face criminal charges. I think few people would want to do that.

But I guess you think you know better.

[Smoke-n-Growls]

I'll take "landlords will do whatever they want for money" over "but suuuuurely no one would do that, it's mean".

You're giving off some real naive optimist vibes, bud. Good luck on whatever you decide.

[Avicenna]

You do realize that this is not the typical landlord/tenant arrangement of someone renting an apartment or a house, right? Destroying someone's relatively expensive property is not the same thing as refusing to make repairs, evicting someone, or whatever else landlords, do right? You do realize that if the lease of the land runs out and isn't renewed, the house simply has to be moved, right? You do realize it would cost the landlord a lot of money if they maliciously destroyed someone's property, right? You do realize that a judgement against a landlord could mean that the landlord loses the land or has to sell it, right?

But, sure, I am so naive...

[Avicenna]

And if a landlord is that desperate to break a lease, what do you think they're going to do- illegally destroy someone else's house or offer to pay for moving it somewhere else?

[Smoke-n-Growls]

You're making assumptions on the rental agreement again.

[Avicenna]

No one would sign such an agreement, so it seems like you're making strange assumptions. Now, if you evidence of leases for this exact situation being standard or can cite court cases, go right ahead. Until then, your wild claims are unproven and cannot be viewed as credible.

[ArrowheadSW]

I have never heard of this arrangement before, but of course I don't work in real estate. I would not get involved with that at all. Seems like a problem waiting to happen.

[KrakenAttackin]

Are you talking about a home sitting on land owned by the Army Corp of Engineers?

Getting a mortgage can be very challenging.

[Avicenna]

Nah, I think the one that inspired this question is under private ownership

[KrakenAttackin]

@Avicenna. I have seen arrangements like this in Mexico where foreign nationals can't own land, so a 99 year land lease is rolled into the mortgage.
The real question is, do you absolutely love the home? If so, add up the total costs of ownership, reduced resale, and makes an informed decision.

[Avicenna]

I would never buy such a property. I just have never seen something like that.

[GoodGuyBreakingBad]

Hell no, not too sure about buying a property that is owned

[belle_kai]

No I like freehold

[Avicenna]

Exactly

[Filthy_Immigrant]

nah, that's a little weird. let's not forget that we never know what the people who are renting those acres might be up to

[exitseven]

No, that would be a bad investment.

[DiegoO]

That calls for problem

[pizzalovershouse]

Probably not

[Cj_Shway]

depends on the rent