Ground Rent Arrangement

AAA

DEFINITION of 'Ground Rent Arrangement'

A situation in which someone owns a structure but not the land the structure is located on. Because she does not own the land, she has to pay rent on it. It is common for hotels and office buildings to be subject to ground rent arrangements; sometimes houses are, too. Ground rent arrangements are more common in some states than others.



INVESTOPEDIA EXPLAINS 'Ground Rent Arrangement'

For individuals, purchasing a home on leased land can be a more affordable option than purchasing both a home and the land it sits on. Also, the Internal Revenue Service allows ground rent payments to be deducted as mortgage interest under certain conditions. However, a ground rent arrangement can be a less stable form of home ownership because the homeowner has little control over what happens to the land.

RELATED TERMS
  1. Economic Rent

    An excess payment made to or for a factor of production over ...
  2. Rent Expense

    The cost incurred by a business to utilize property. Business ...
  3. Sublease

    A real property rental agreement between an original tenant and ...
  4. Zero-Lot-Line House

    A piece of residential real estate in which the structure comes ...
  5. Land Value Tax - LVT

    A tax on the value of a piece of land. Land value tax inherently ...
  6. Land Lease Option

    An option within a lease contract that grants the lessee the ...
RELATED FAQS
  1. What role did securitization play in the U.S. subprime mortgage crisis?

    The securitization of subprime mortgages into mortgage-backed securities (MBS) and collateralized debt obligations (CDOs) ... Read Full Answer >>
  2. How often is interest compounded?

    Interest can be compounded on any given frequency schedule. Common interest compounding time frames are daily, monthly, semi-annually ... Read Full Answer >>
  3. How does the loan-to-value ratio affect my mortgage payments?

    Several factors affect the mortgage rate you can obtain when you purchase a home. Lenders analyze credit histories and scores ... Read Full Answer >>
  4. What's the difference between a collateralized debt obligation (CDO) and a collateralized ...

    A collateralized mortgage obligation, or CMO, is a type of mortgage-backed security (MBS) issued by an lender that handles ... Read Full Answer >>
  5. What is the difference between a savings & loan company and a bank?

    Savings and loan (S&L) companies provide many of the same services to customers as banks, including deposits, loans, ... Read Full Answer >>
  6. Why does the loan-to-value ratio matter?

    For mortgage lenders and borrowers, the loan-to-value ratio is an important factor in determining the repayment terms of ... Read Full Answer >>
Related Articles
  1. Retirement

    Should You Buy Property On Leased Land?

    Find out what to consider before investing in a leased-land property.
  2. Home & Auto

    Rental Properties: Cash Cow Or Money Pit?

    Create a valuation system to forecast the profitability of an income-producing property.
  3. Home & Auto

    Rent-To-Own Real Estate Full Of Pitfalls

    Before you consider this type of arrangement, you should be aware of how it works, who benefits and the many things that can go wrong.
  4. Taxes

    Tax Deductions For Rental Property Owners

    Besides creating ongoing income and capital appreciation, real estate provides deductions that can reduce the income tax on your profits.
  5. Home & Auto

    Simple Ways To Invest In Real Estate

    Owning property isn't always easy, but there are plenty of perks. Find out how to buy in.
  6. Credit & Loans

    Is It Worth Buying A Second Home To Rent?

    Mortgage interest rates are low, but consider these dos and don'ts before making the leap into rental property ownership.
  7. Credit & Loans

    How To Combine Two Mortgages Into One?

    If you have a second mortgage as well as a primary, does it make sense to consolidate into a single loan? Here's how to figure it out.
  8. Credit & Loans

    Should I Consolidate My Two Mortgages?

    Consolidating your loans or mortgage may make sense for you, especially when interest rates are low. Here's what you should know.
  9. Credit & Loans

    Top 10 Common Mortgage Scams To Avoid

    How do you know which companies to avoid? Look for these telltale signs.
  10. Credit & Loans

    Can You Get A Mortgage On A Mobile Home?

    You can get a loan for a mobile home, but it may not be a mortgage. These are the choices for funding manufactured housing.

You May Also Like

Hot Definitions
  1. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  2. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  3. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  4. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  5. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  6. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
Trading Center