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JT

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Reply with quote  #1 
looking at potentially purchasing a lake property.

Looking at several listing,  Trying to get the pros and cons of GA Power Land Leases, 

anyone have any info - pros or cons on buying ?

thanks for the help...
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pnalley

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Reply with quote  #2 
depends on the lease terms. The ones I have seen were 15 yrs. Not sure I would want to pay premium prices and not own the land.
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Mack

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Most of the land around Lake Burton, Lake Seed, and Lake Rabun, in Rabun County is owned by Georgia Power. The lots are leased, I forget the term...long term. The lease is simply transferred when the home is sold. There are some fee simple lots. The market value for a lake home with a fee simple lot compared to a lake home with a leased lot is similar. Those homes sell for millions of dollars, and most are on leased lots.
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RubberStamp

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Reply with quote  #4 
Quote:
Originally Posted by Mack
Most of the land around Lake Burton, Lake Seed, and Lake Rabun, in Rabun County is owned by Georgia Power. The lots are leased, I forget the term...long term. The lease is simply transferred when the home is sold. There are some fee simple lots. The market value for a lake home with a fee simple lot compared to a lake home with a leased lot is similar. Those homes sell for millions of dollars, and most are on leased lots.


So if just for 15 years...  what keeps GA power from confiscating all of the homes and reselling them or releasing them for their own profit?  I'm guessing the terms of the mortgage must be less than the lease term in regards to time? 

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We argue this: Meanwhile the agent's assistant just did 5 unofficial appraisal inspections they paired with a Zestimate and granted 90% LTV - all guaranteed no buy back.
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pnalley

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Reply with quote  #5 
I quit  doing appraisal on Jackson Lake due to the complexity. Leased lot, fee simple, deep water, cove that dries up. GA Power own many of them too
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Mack

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Reply with quote  #6 
https://lake-burton-rabun.com/qa/

http://burton-rabun.com/realtors/LEASE.pdf
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Nomad

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Resell will be horribly lower but that’s why they’re cheaper when you buy them. Largely, all of the leases are under 30 years. The reason they do this, in my opinion, is to make it harder to get a mortgage. They know that a bank won’t lend on it for longer than he lease terms so it hurts the marketability of the property because it requires buyers to bring cash or obtain shorter term mortgages. This reduces the amount of buyers. They like that because if for some reason they had to come along and buy people out to reclaim the land for some reason, it would be cheaper for them.
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Meatloaf

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Quote:
Originally Posted by Nomad
Resell will be horribly lower but that’s why they’re cheaper when you buy them. Largely, all of the leases are under 30 years. The reason they do this, in my opinion, is to make it harder to get a mortgage. They know that a bank won’t lend on it for longer than he lease terms so it hurts the marketability of the property because it requires buyers to bring cash or obtain shorter term mortgages. This reduces the amount of buyers. They like that because if for some reason they had to come along and buy people out to reclaim the land for some reason, it would be cheaper for them.


Yeah.. Yeah... Thats the ticket!!

Seriously?

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Nomad

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You can buy an absolute mansion on Lake Sinclair on a leased lot for 500k.  I showed one that was on its own peninsula w/ a boat house on one side, a swim dock on the other, and a 4 slip double decker boat dock near the boat house.  Alternatively, you can buy one that is not leasehold that is very nice but nothing special for 500k on sinclair.  The leases on sinclair are 25 years renewable every time it sells. No bank will lend for 30 years on them and Ga power knows it....
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Nomad

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Forgot to mention, one of the upsides is cheaper property taxes.
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Meatloaf

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They make 10 year notes, 15 year notes, 20 year notes, and I imagine you can get a 25 year note.  The term doesn't always have to be 30 years.

Why on earth would anyone ever get a 30 year loan? 

They will make a 30 year loan to a 90 year old man.... 

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Nomad

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Yes it just limits the pool of buyers due to the higher monthly expenditure.
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Meatloaf

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Reply with quote  #13 
True, but do you think that if they wanted to limit the pool of buyers they would have just put covenants on the land to do that?
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RubberStamp

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Reply with quote  #14 
Quote:
Originally Posted by Meatloaf
True, but do you think that if they wanted to limit the pool of buyers they would have just put covenants on the land to do that?


What is your theory then on why they lease the land instead of sell it other than to have the option to recapture it someday?

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We argue this: Meanwhile the agent's assistant just did 5 unofficial appraisal inspections they paired with a Zestimate and granted 90% LTV - all guaranteed no buy back.
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Meatloaf

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It probably has something to do with their ownership rights.  Just guessing.  I don't really know but I doubt they specifically picked a 25 year lease just to fugg up someone's financing.

Its probably so that they can control the use of the land.  Imagine if you owned the land... you could do whatever the fugg you wanted and no one could say or do anything about it.  Maybe you could open your own damn power plant and use the lake for cooling.... But by leasing the land, they have more control over how the land is used.

Why a 25 year lease?  Well its long enough to be useful but not long enough to justify spending a billion dollars on something.

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RubberStamp

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Reply with quote  #16 
Down in Destin the paper companies turned into builders over night when the land they owned for decades suddenly become the hot spot.  Companies are interesting entities:  They can take a long term approach beyond a typical lifespan to ensure future profits. 


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We argue this: Meanwhile the agent's assistant just did 5 unofficial appraisal inspections they paired with a Zestimate and granted 90% LTV - all guaranteed no buy back.
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Mack

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Reply with quote  #17 
Quote:
Originally Posted by RubberStamp


What is your theory then on why they lease the land instead of sell it other than to have the option to recapture it someday?


In Rabun County the lakes make electricity. Georgia Power isn’t going to sell the land around the lakes they use to power their company. But, they will lease it to make money.

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RubberStamp

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Reply with quote  #18 
Quote:
Originally Posted by Mack
In Rabun County the lakes make electricity. Georgia Power isn’t going to sell the land around the lakes they use to power their company. But, they will lease it to make money.


Great explanation.  Give up ownership and you give up control..  so this way they still get to make the rules.

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We argue this: Meanwhile the agent's assistant just did 5 unofficial appraisal inspections they paired with a Zestimate and granted 90% LTV - all guaranteed no buy back.
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EasyE

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Reply with quote  #19 
I have 14 acres on Seed Lake and the cabin is built on our property just above the GA power land (50 feet straight up from water level and straight across til it hits land) . Our lease where the boat house is situated is $100 per year.... Not sure what the lease is when your cabin is situated on GA power property. FYI I love Seed Lake!!! Affordable and not as busy as the other lakes in the area.... Good luck!!
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HighRoad

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Reply with quote  #20 
I am an appraiser and agent in Rabun County and specialize in lake properties. To clear up a couple of things.....banks do make 30-year loans on the lease lots with 15-year leases. It is ALWAYS best to shop a loan with banks or lenders who have experience with leases. Also, there has never been a case where GA Power just "pulled" or failed to renew a lease where there was no violation of the lease. It is just like any other lease in that regard. If GA Power were to arbitrarily yank a lease there would be a firestorm of
bad publicity. It would get so ugly for them so quick I cannot see it happening. 

Leasehold versus fee simple is something we have to deal with quite a bit as it is a foreign concept to some. Most of the better lots are lease so if you want to run with the big dogs.......you have to come to terms with leasing the land. GA Power does not allow subdividing of a leased lot so any fee simple lots have been split up and tend to be smaller. This can vary but generally the case. Keep in mind that even if you have a fee simple lot you must have a license from GA Power for use of the shoreline. Lease fees for lease lots are generally around $1,100 annually (increases slightly over the 15-year lease). 

Mack posted links to our site so if you need any information regarding the lakes in Rabun County just give us a call. We are the market leaders! EasyE- You are right about Seed. Smaller and more affordable but still awesome! Last year was a record year for sales on that lake so the secret is out.

Finally....We have clients who are looking at several lakes and they come back to our lakes. Why? They are the most scenic, they do not have widely fluctuating lake levels, and they have the cleanest water. You would be hard-pressed to find nicer lakes.

Good luck with your search!


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warrendj2

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Reply with quote  #21 
Highroad, 

That is my experience as well, I've done probably 15 Georgia power leases, the last one the improvements were in excess of 1.5 million, they are incredibly stable leases, which Georgia power absolutely want to preserve and renew.I believe all of Lake Seed, Lake Rabun, and Burton are GA Power leases, Jackson has a combination of GA Power, Strickland, and deeded lots. Georgia Power are a good solid alternative to purchasing in conventional terms.  

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HighRoad

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Reply with quote  #22 
An overwhelming majority of lots on Seed are leased but Rabun and Burton have fee simple mixed in. Some on Seed have fee simple lots that the house is on but the lakefront area is leased. All lakefront fee simple lots have a license from GA Power for use of the shoreline and beyond.

One thing that I have been thinking about is the Ga Power transfer fee. Most lease lots have a $20,000 GA Power transfer fee when they sell. It is a negotiable item in the negotiations where the buyer may pay, the seller may pay, or it might be split. Do you think this warrants an adjustment? If the buyer pays the transfer they are effectively paying $20K more than the purchase price and that does not show up on MLS. If the seller pays they are getting $20K less. What do you think?
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RubberStamp

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Reply with quote  #23 
It depends on if you have strong enough data to know who paid what and compare appropriately.  You can't make assumptions that could effectively be the complete opposite - such as assuming who paid what fees. Otherwise I'd just consider it a factor of negotiation that a buyer would have to consider across several lake properties.  I believe substitution still holds true if there is competition in the market.  But if you had strong enough data I wouldn't fault you if you could determine an adjustment were necessary.  But without studying the market I would believe the transfer fees are already baked into the home prices.
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We argue this: Meanwhile the agent's assistant just did 5 unofficial appraisal inspections they paired with a Zestimate and granted 90% LTV - all guaranteed no buy back.
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