Land Lease vs. Real Estate: Differences in Lifestyle, Laws and Fees

Active Resort Properties Management Group, LLC (ARPLLC) and the azActiveResorts.com website specialize in fully furnished seasonal leases, marketing, sales and property management of park models and manufactured homes located in Arizona’s Premier Retirement Communities.

Kara Holt, the founder of ARPLLC is also a licensed Realtor for Arizona Prime Estates, lists and sells real estate as well. With over 20 years experience in selling and leasing homes located in these 55+ Communities, Ms. Holt is also a recognized expert in the land lease industry and has founded the Moms and Pops of America, an advocacy organization for seniors and small businesses which represents a lobby for property rights of retirement aged persons who own property in the 55+ retirement land lease communities in Arizona. Recently the Moms and Pops of America was successful in helping to pass legislation that will be enacted on July 31, 2010 that is a huge victory for park model owners (read full article here).

Having housed thousands since 1994, our comprehensive rental placement, facilitation and management services provide the benefit of allowing our clients “hands free home ownership” and peace of mind while experiencing their own retirement freedom. This very popular lifestyle offers many advantages but anyone who decides to buy a park model or manufactured home should know the differences between land lease and real estate laws, norms and lifestyle before entering into an agreement to purchase or lease a home. Many out of state visitors assume they are protected to real estate law and oversight in land lease communities and are not. The Moms and Pops of America will be sponsoring lectures, workshops and speakers to help educate winter visitors and others about the abc's of home buying/leasing in Arizona's land lease communities.

Seasonal Leases

Seasonal leases vary in duration of time but typically occur somewhere during the months from October through April (our cooler months). Most requests are for the months of Jan, Feb, and/or March. Our tenants are screened according to community criteria as well as the standards set by our clients. Home owner(s) are responsible for the expenses of preparation, repairs/cleaning, guaranteed inventory and maintenance during the rental term. Tenants are typically responsible for their use of the utilities including phone, cable and internet but such utilities may be included in the rental rate with a cap on use (i.e. Rental rate includes utilities up to $100 per/mo after which tenant is responsible). Tenants are advised to obtain a “renters insurance policy” to cover their personal items while residing in the home.

Expenses

Other costs (besides the monthly space rent and utilities) which are associated with owning a rental income property in a land lease community are as follows:

Homeowners insurance ($350-$900)
(Higher premiums if the property is being used exclusively for rental income)
Property taxes ($400-$700) (Depends on County location and assessed value)
Home warranty (Approx. $350 p/year, $45 service call, some exclusions)
Landscaping maintenance $300.00 per year depending on the amount of trees, bushes or other plants located on the property)
Pest Control $200 per year

Facilitation and Management Fees
Our fee for facilitating the placement of the tenant and management of the rental is twenty percent of the rental rate.

Facilitation and Management Services:

We provide:

Qualified tenants
Screening and residency approval
Negotiated rental rates and terms
Contract generation
Authorization to Lease and Management Agreement for Home Owners/Clients
Tenant Agreement for Tenants

Coordination of property preparation including inventory control, landscaping, cleaning, safety/quality inspections, check-in and check-outs, pest control, maintenance/service calls, rental statements (owner, tenant), collection and disbursement of rental proceeds, damage deposit refunds.


Space Rent and Leases:

Land Lease Fees “Space Rent” may be paid annually or monthly depending on each Communities Lease Agreement (Legal agreement between the homeowner and land owner), Statement of Policy, and/or Rules and Regulations of the various communities. These range from $200-$700 per month depending on area and community.


Utility Billings are either handled through the community or directly by the utility provider. Note: Some communities read their own meters and bill each resident for utilities (such as water/sewer/garbage electric/gas on one monthly bill) while in other communities, the utility services providers both read the meters and bill each resident.

Utility accounts are normally maintained in the homeowner’s name, billed directly to homeowner and then reimbursed by the tenant at the end of the rental term.

CC&R's vs. Rules and Regulations: Covenant Codes and Restrictions related to real estate are comparable to Rules and Regulations in the land lease world. Real Estate law requires that an escrow company provide a copy of these to a home buyer during their "10 day inspection period". A buyer has the right to reject these during this period and cancel the sale without penalty. This does not exist in land lease communities. There is no inspection period requirement when purchasing a previously owned manufactured home or park model and no requirement to disclose lease provisions or the "rules and regulations" of a community before consummation of a sale. Therefore, anyone who is considering a purchase of one of these "non-real estate" type of properties should consider this and ask the management of any community for a copy of any paperwork related to living in the community

Termite Inspections A termite inspection is standard and required for real estate transactions and not for manufactured homes or park models. Termites are commonly found in the ground around the area where a home is set up either above or "ground set". Certain factors such as storage of wood, wood pier supports, and moisture play a factor in the likelihood of termites. Inspections by certified termite inspectors can be free or done for a charge and if termites are found the treatment costs can range in cost from $300 to $1200 depending on the extent of infestation or damage. Once a termite inspection is completed, a yearly warranty is usually included and then maintained for a annual renewal cost to the buyer.

Leasing a Park Model or Manufactured Home that is "For Sale" Rental income may be generated, to cover expenses, while a home is being actively marketed for sale by our marketing and sales department. All sales are contingent upon the fulfillment of the lease. Special provisions should be made with tenants ahead of time to disclose the various scenarios should a home sell before a lease begins. In most cases, a seasonal renter will provide a deposit to hold a property for the next years "rental season". Renters should make sure that they get something in writing from the home owner assuring that the property will not be sold before the rental term expires. Simply returning a deposit does not make up for the loss of time is may take a renter to find a replacement property for the season as there are limited supply of rental properties compared to the demand.

Subletting: Some communities will allow a home owner to lease their property to others as long as they maintain the lease with the community. Some communities do not allow subletting. If a home buyer is planning to utilize the home for rental income, they should check with the community as to their policy for "subletting".

For more information on any of our services or those offered by our affiliated companies including Real Estate Sales/Property Management and Seller and Bank Financing/Refinancing, please feel free to contact our office at 1-800-478-3864.

Call today to request the Seller Questionnaire to receive a FREE MARKET VALUE ANALYSIS on an existing property or the Perfect Match Questionnaire to locate a home, community and area which best meets your criteria.

Thank you for this opportunity to serve you!

Posted by Kara Holt of Active Resort Properties Management Group, LLC (ARPLLC) at 12:04 PM 0 comments

Labels: Purchasing Home Only Properties for Investment Income