Why Lease Land in Waterford Wisconsin?
Thank you for the opportunity to share the advantages of leasing your land versus purchasing land. Your housing decision may be one of the largest investment decisions you will ever make. Thus the decision to lease versus owning your land directly impacts your financial health.
Although there are several advantages to leasing your land in a managed community, the primary advantage is the significant savings you realize by not having to purchase the land, and your freedom to invest those dollars or spend those dollars on other priorities. The dollars that you would have tied up in the purchase of the land are at your complete disposal, not in an illiquid investment in land.
The following is an illustration of the potential savings with leasing. Assume you would have to purchase a lot for $85,000 to build your home on, and you financed that cost with a loan at 6%, interest only.
| Purchase Price of Lot | $85,000 |
| Annual Interest Cost | x 6% |
| Annual Interest Expense | $5,100 |
| Annual RE Taxes | (per Village of Waterford 2007 mill rate)$2,044 |
| Total annual cost of owning land | $7,144 |
| Add’l cost of annual lawn service | $360 |
| Total annual cost | $7,504 or $625 per month |
The monthly lot fees (or rent) at Harbor Heights ranges from $270 to $300 per month. If you assume that your monthly cost of leasing is $300/month you would realize a savings of $325/month ($625 per month less the $300). If you invested this $325 difference at 6% over the next 20 years, you would have a net savings of $45,590 (assumes monthly compounding at 6% annual rate and a constant lot rent). If you assume that the lot rent increases at 5% per year over the next 20 years, your savings are approximately $30,000.
If your monthly cost of leasing is $270 month – a savings of $355 per month results in a savings of $49,800 over 20 years (again, assumes monthly compounding at 6% annual rate). If you assume that the lot rent increases at 5% per year over the next 20 years, your savings are approximately $35,000.
Plus, this financial savings does not include the added benefits of leasing – providing professional management and enforcement of neighborhood covenants, screening of residents, maintaining the roads and utilities to your home, snow removal on the roadways, providing parking for boats and RVs, and maintaining the community common areas.
You may argue that by leasing you will not be able to experience the increase in value of the land. Given the recent meltdown in the traditional real estate market, we have all been reminded that land does not always increase in value. Leasing the land allows you to invest your monthly savings dollars any way you see fit – bonds, stocks, CD’s.
Also, ask yourself – how would you like to be able to use the funds that you would otherwise tie up in owning land for other purposes? Through a land lease, you are able to have easy access to these funds without having to sell your real estate or take out an expensive home equity loan. The funds are available for emergency use or health care expenses, to supplement your monthly income, or for that boat or new car you’ve got your eye on!
The example of the monthly savings above is based on several assumptions. Changes in the assumed purchase price of a lot, the reinvestment rate and changes in the mill rate for real estates taxes will alter the monthly savings and the net savings. If you would like us to work through these numbers with different assumptions, please contact our office and we would be glad to walk through different scenarios with you and/or your financial adviser.
Email Harbor Heights Community or call 262.534.9005 today for more information on manufactured homes availability and land leasing.