Ground leases offer superior ownership dynamics .
IMPROVED CASH FLOWS
One big advantage to buying a leased fee property is that you can purchase your home for 10% to 16% less (on a $500,000 home you can save between $50,000 to $80,000). At the same time, leased-land properties may offer better surroundings than apartment living for children and pets, and you can invest the money that leasing saves you.
Buyers can live in a high-priced location they could not otherwise afford in addition as noted above they can invest the money they save .
IMPROVED DEBT SERVICE COVERAGE / REDUCED REFI RISK
Ground leases improve debt service coverage creating cushion to cover unforeseen interest rate or income shocks.
REDUCED EQUITY REQUIREMENTS
Ground leases reduce the down payment in buying a home thus allowing the homeowner to reap more of the upside.
For investors Ground leases increase cash on cash returns as well as IRRs for owners by passing off the lowest yield portion of the capital stack.
FINANCEABLE – AGENCY AND LENDER APPROVED LEASE FORM
Today’s ground leases offer a lease form that is modern, comprehensive, standardized and capital markets compatible with lenders and government agencies.