Costa Mesa is a city in California’s Orange County, with some 109,960 residents in 2010, according to the U.S. Census. The city was incorporated in 1953 when it was just a small, semi-rural farming community. It has now become a suburban edge city with its economy boosted by the light manufacturing, commerce, and retail industries. An important feature of the city is South Coast Plaza, which serves as the commercial hub of the city. This is beautiful shopping center that houses some 322 stores, making it one of the biggest in terms of sales volume in the country. In fact, the revenue generated at this shopping center has been estimated to be $1 billion per year. The southwestern portion of the city contains a number of manufacturing plants, including those that focus on plastics, pharmaceuticals, and electronics. It also serves as home to the headquarters of several companies, particularly those in media and communications.
Costa Mesa Land for Sale & Lease – Should You Buy or Lease?
If you have an interest in land in Costa Mesa, there are two alternatives: buy or lease the land. In making your choice, you will need to examine the advantages and disadvantages of both of them.
Let’s take a look at the benefits of buying land:
- You can lease out your land without having any income tax disadvantages, so long as you pay your income tax on the rent that you get on the land.
- You become the owner of a property and this implies that you have the opportunity to have a truly productive economic use out of the land for a long period of time.
- You may retain a degree of control over how the land can be used and developed. There are usually zoning restrictions in place, and this means that those who lease from you will not be able to redevelop your property in a way that you do not want them to.
There are also a number of disadvantages when buying land:
- It is possible that you, as the property owner, will lease out the land and the tenant will use the land as security for a loan. If the tenant defaults, the land may be foreclosed.
- Your income tax will be at ordinary rates on any rent you receive.
- You must make sure that the lease contract has ground control included in it, or the tenant could potentially completely redevelop it against your purposes.
- You usually cannot borrow against the equity on the land while it is leased to a third party.
Your other option is to lease the land, which also has a number of benefits:
- You will have far lower initial development costs, because you do not need to pay a down payment.
- You can deduct all your rent payments from your state and federal income taxes.
Leasing the land also has some disadvantages:
- Usually, the amount that you will pay for your lease in the long term will be much higher than the amount you would have paid if you purchased the property. This is only a disadvantage if you intend to use the land for a long period of time.
- You won’t have as much flexibility when it comes to how you would like to develop the land that you are leasing, and this may make it more difficult to run your operations in the way you want to.
- You will not be able to take any equity out of your business or refinance anything due to ground lease limitations.
- A lease is considered as a “diminishing asset”. This implies that towards the end of your lease agreement, your business value will also decrease.
Costa Mesa Land for Sale – Trends and Statistics
There are currently three plots of land available for sale in Costa Mesa:
- A 0.23 acre lot of multi-farm land at 2068 Maple Avenue that is available for $1,300,000.
- A 0.31 to 1.45 acre lot of other land at 1959 Newport Boulevard which is priced at $6,500,000.
- A 0.30 to 1.46 acre lot of other land at 390 North Ford Road with an undisclosed price
Costa Mesa Land for Lease – Trends and Statistics
There is currently just one plot of land for lease in Costa Mesa, which is 1,200 square feet of office building at 155 Rochester Street for a negotiable rate.
What these statistics consistently show is that investing in land, be that for purchase or for lease, has a big caveat attached to it. This is due to the zoning laws. In many cases, because of these laws, it is only possible to use a piece of land for a particular purpose. While rezoning applications may be submitted, this will entail some expenses and furthermore, they are rarely approved.