A Brief History of Palm Springs Land
In 1876 Pacific Railroad laid the tracks between Los Angeles and Yuma, Arizona. The U.S. government deeded the Agua Caliente Indians 52,000 acres throughout the Coachella Valley. The government gave the railroad a checkerboard of every other square mile of land for 10 miles on either side of the railroad right-of-way. The Agua Caliente tribe got the non-Pacific Railroad owned squares. Within the city limits of Palm Springs there are 6,700 acres of Indian leased land.
This is a unique arrangement. Most Native American reservations across the United States were located outside of areas that became city limits. The City of Palm Springs is built on a "checkerboard" consisting of alternating Indian and non-Indian land. It may sound a little unsettling from a real estate perspective, but these are long-term land leases that are commonly renewed well in advance of their expiration dates (it would be a public relations nightmare if they were not). Judging by the value of Palm Springs real estate, this unique situation has done nothing to slow the appreciation of property values.
Financial Benefits of Buying on Leased Land
The primary difference between buying or leasing land is obvious: leased land reduces the cost of a home, traditionally, by 20- to 30-percent. Once a structure is built, the land beneath it can be of no other use to the homeowner. So, by owning on leased land the homeowner gets the use of the land without the capital outlay—and can afford a far more luxurious home for less money. Furthermore, since no one actually owns a home until the loan is paid off, most so-called “land owners” don’t really own their fee simple property for 30 years.
Appreciation
While many factors determine resale value, available figures indicate that resales of homes on leased land have climbed in proportion as other homes in the area. The condition in which you keep your home has far more influence on its resale value than the fact it is or is not on leased land.
Leasehold Estates Rights of Survivorship
You can give or sell your home on leased land just as easily as on fee land. There are succinct processes to accommodate the transfer of lease land. However, if you are concerned about your heirs 65 years from now, here are four realistic questions you ought to weigh:
1. Will my heirs want a 65-year old home when the average life of most California residences is estimated at less than 50 years?
2. Considering that most residences change ownership about every five years (which would be more than 10 turns of ownership during the life of your lease), is this home really likely to stay in your family for 65 years?
3. If you have a savings of $206 per month ($2,472 per year) by leasing land versus purchasing it, over the life of a 65-year lease your savings would total $160,680 even if it earned no interest! If you kept this monthly savings in an account paying 1% annual interest, your savings would exceed $125,000 over 65 years and even more if the interest were compounded monthly.
4. Wouldn’t that be a better way to take care of your heirs?
An Easy Comparison
Some people compare a home on leased land to a variable annuity life insurance policy. Just as a variable annuity gives you the possibility of gaining from both fixed interest rates and asset appreciation, a home purchased on leased land gives you a monthly savings along with the possibility of home appreciation.
Your money in a variable annuity or applied toward leased land fees can be an investment hedge regardless of rising or falling home values. During an “up” period, your home will increase in value. In a “down” period, the dollars you did not spend on land, but invested in a fixed interest savings, will continue to increase.
Today, owning on leased land is no longer an advantage reserved for business and investment buyers. Now, in Palm Springs, it is something any home buyer can enjoy!
Example of a Purchase on Lease Land
What would make properties on Indian lease land more attractive?
- Prices are traditionally 15% to 20% less for comparable properties on fee simple land.
- Due to the purchase price the amount of the property taxes are also reduced.
Lease land fees vary greatly. For this example, let's apply a lease rate of $4,500 per year.
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Lease Land
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Fee Simple Land
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Home price
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$400,000.00
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$500,000.00
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Annual property taxes at 1.25%
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$5,000.00
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$6,250.00
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Annual lease amount
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$4,500.00
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$0.00
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Total annual expense
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$9,500.00
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$6,250.00
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Based on this example, the difference in cost for lease land compared to fee land is $3,250 per year. Yes it does cost you $3,250 a year but the initial difference in the price for the property was $100,000. You would need 30 years of land lease payments to reach the original price of the same property on fee la
If you find a property on lease land that you do like, consider and apply a similar calculation before you make a decision one way or another.
If you would like to learn more about the Indian lease land, please contact the Bureau of Indian Affairs, TESA Branch in Palm Springs at (760) 416-3289.
