Lake Forest is a particularly beautiful part of California’s Orange County. According to the 2010 U.S. Census, it had a population of 77,264. The city was quite late to incorporate, which took place on December 20, 1991, when it became known as Lake Forest rather than El Toro. It now also includes the two master planned developments of Portola Hills and Foothill Ranch. This increased the number of homes in the city, and also the number of commercial cities. Interestingly, Lake Forest is considered to be one of this country’s safest cities.
Lake Forest gets its name from the two man-made lakes, which also serve as community gathering places. Both lakes are maintained by community associations. The forest it gets is name from is also man-made, being a eucalyptus grove that was built to increase development at the start of the 20th century.
Lake Forest Land for Sale & Lease – Should You Buy or Lease?
If you are interested in land space, be that as an investment or for construction or other purposes, you have two alternatives: buying or leasing. There are pros and cons to both of these options.
Looking first at buying land, the pros include:
- You can lease out your land without having any income tax consequences, so long as you pay your income tax on the rent that you receive on the land.
- You become the owner of a property, which means 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, which you will have known about before you purchased the land, 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.
The cons of buying land have to be considered as well:
- It is possible that you, as the property owner, will lease your land to a tenant and then allow the land to act as security for the financing of the tenant. If the tenant defaults, the land could be at risk of foreclosure.
- You will pay income tax at ordinary rates on any rent you receive. This can be a disadvantage, depending on your personal tax situation.
- You must ensure that the lease document has ground control included in it, or the tenant could potentially completely redevelop the plot.
- You usually cannot borrow against the equity on the land while it is leased to a third party.
Your other option is to lease your land, which also has a number benefits:
- You will have much lower initial development costs, because you do not have to acquire any land.
- You can deduct all your rent payments from your state and federal income taxes.
On the other hand, there are some disadvantages:
- Usually, the amount in the long term that you will pay for your lease will be much higher than had you purchased the property. This is not always a disadvantage, however, as it depends on whether you intend to be at the same location 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 probably not be able to take any equity out of your business or refinance anything due to ground lease limitations.
- A lease is classed as a “diminishing asset”, which means that, towards the end of your lease agreement, your business value will also be diminish.
Lake Forest Land for Sale – Trends and Statistics
There is currently no land for sale at all in Lake Forest. Whenever land does become available, it is usually for the construction of new residential properties. However, the city has put a halt on expansions of the city’s borders, not in the least because it is already getting very close to its neighbors, including Mission Viejo.
Lake Forest Land for Lease – Trends and Statistics
Similarly, there is currently no land for lease in Lake Forest. If people do purchase land, they do so to construct homes, and it is very rare for plots to remain empty for long enough to be interesting for lease contracts.
It should be noted also that there is a big caveat attached to buying or leasing land, which is that of zoning. In many cases, due to zoning, it is only possible to use a piece of land for a very specific goal. While rezoning applications can be considered, these have to be paid by you and are rarely successful.