Rethinking land lease

Given (1) the poor financial performance of one-bedroom co-ops on the Upper East Side, (2) the one-way direction of maintenance, even though quality seems to be declining (3) a possibly long period of high interest rates, I am rethinking the pros and cons of buying in a land-lease building. E.g.: https://streeteasy.com/building/175-east-62-street-new_york/14b My husband and I are in our early 40s... [more]

Given (1) the poor financial performance of one-bedroom co-ops on the Upper East Side, (2) the one-way direction of maintenance, even though quality seems to be declining (3) a possibly long period of high interest rates, I am rethinking the pros and cons of buying in a land-lease building. E.g.: https://streeteasy.com/building/175-east-62-street-new_york/14b My husband and I are in our early 40s with no children. You can't take it with you, and a lease expiring in 2099 is no problem for us. In this case, lease increases are pegged to the CPI through 2030, though after that who knows. Even assuming a doomsday outcome where the resale value is -50%, a net outlay of $300k + around $5000/mo maintenance puts you at $1.5m after 20 years. Yet if you invest the cash that would have gone into a traditional co-op (a 20-year treasury is 4.56% right now) you would basically break even. In my head an apartment like this should cost $1.2m or so? The $600k you don't spend, invested at 5%, would be worth $1.6m after 20 years. Compared to a traditional co-op - where our life savings would be locked in a single piece of property, and which might resell for not much more than we bought it after a decade or two of $3000/mo maintenance - there is an appeal alongside the danger. And there is the matter of prestige: we could never afford to buy a place like this outright, and $7k/mo rentals at this price are still cookie-cutter condos. There are a lot of variables, I know. I may have a stronger stomach for this sort of thing from living in London, where most flats are leaseholds. Sometimes the terms run for 999 years... What sort of discount would you need to see, relative to a comp, before you took the plunge? Have learned a lot from these forums already. [less]