We've been talking about sub-surface rights. Next comes surface rights. In Florida, a house is usually built on a cement slab on the surface of the land described as a lot. Sometimes it extends below the surface and into the air above the surface, but the land had to support it, or support what was supporting it. Thus, surface rights are often sold without conveying any other rights. Neither the builders nor the occupants mind much if they do not need other rights.

As a practical matter, a lot of building is constructed on land that is not owned by either builder or occupant; it's leased. The great Astor fortune was created because of land leased in New York City where many of those tall skyscrapers were built on leased land.

Speaking of leases; Harding's diagram included a number of leases on a building: In the lease hierarchy, first comes the land upon which a building is situated. A net lease on free and clear land benefit a major building leased by a financially strong tenant is one of the safest long term investments in real estate. The tenant on a net lease pays for everything including taxes, insurance, maintenance, and improvements.

Quite often the lender who is financing construction on leased land will pay the land owner to "subordinate his lease" to the new loan. Thus, if the loan is foreclosed, he could lose his land. He normally only agreements to this if he is paid for his risk. So he makes more money without investing any more.

The way that risk is rewarded in the house business is when someone lends money at a high rate of interest to a fixer who may or may not complete the project. Another way is when a wealthy individual guarantees a loan at the bank so the entrepreneur can get the money needed for a project. Without spending a dime, the wealthy guarantor earns money by taking on risk that might be ruinous to the entrepreneur, but certainly a nuisance to a wealthy person.

Back to our building: Once the land is leased at one rate, the land owner may sell the lease to a long term investor such as a pension plan or insurance company and recover much of the cost of the land in the process. Aristotle Onassis freed and cleared all his ships and made $ billions in the process by leasing them to solvent tenants, then pledging his leases for enough money to build the ships. If an investor pays for all an entrepreneur's costs for a share of the profit, is not this about the same thing?

Once the building has been built, the overall building can then be leased by a building management such as Trammel Crowe or Marriot. Then each floor, room, apartment, office, etc. can be leased and subleased, with a profit being created with each transaction.

At the age of 22 I was in the mail order business. My company was operated out of a footlocker at the end of my bunk in a barracks in New Jersey, but my mailing address was in the Empire Estate Building. I paid $ 20 per month for a mail box to a guy who rented the office from the guy who rented the floor from the guy who rented the building from a guy who leased the land. Everybody made money; even me.

Are we done yet? No. Do you remember when King Kong was hanging onto the radio tower atop the Empire State Building? The tower was erected on the leased roof of the building.

That brings us to Air Rights: Once we've left the surly bonds of earth and soared skyward, we enter the reality of air rights. The old PAN AM building that shows up in all those old 1950 New York movies was not built on leased land. It was not built on land at all. It was built solely in lair rights leased from the owner of the land beneath Grand Central Station.

So is Chicago's Merchandise Mart; a monster building recorded in leased air rights along Lake Michigan. It sits on monster steel and cement supports that sit on forwarded easements. The owners of the Merchandize Mart even have to lease about 6 inches of air rights on all sides of the supports because the building sways a little into that space, which is rented.

I've only scratched the surface of the profit centers that can be exploited by those who understand all the attributes of real estate that can be converted from dead equity to income without disturbing the fundamental utility of it.

A farmer who leases an easement for a gas line across his property is oblivious to it, but not to the check he gets every month for the lease on his easement.

The person living in a rented house does not care either or not the house or the lease has been pledged for more money to invest in other rentals.

The oysters that grow on the ground benefit the water rights that are leased for a marina boat slip do not taste any worse for it.

The remote parcel of desert land which water rights were bought in order to build a casino in Reno does not look any worse for wear.

From this point onward, look at every property as if you were Zeckendorf: What would an obsoleste ugly old trailer camp worth if it was converted into a modern manufactured housing land lease community?

How much more would the land benefit a condemned gas station be worth if it could be cleaned up to meet EPA standards?

Could you buy a small plot of ugly land in an industrial district and sell it for what it cost, and make a tax free profit by keeping all the sub-surface, water, mineral, and air rights? One guy did this hundreds of times in Philadelphia. Now these rights are being leased for municipal improvements.

Could you buy tax liens across a strip of land on which construction would block the view of adjacent tenants, then sell it to them at a higher price as insurance that their view would never be blocked. Would their own land be improved? Could you trade them this land for a long term Option that would divide any increase in value?

If you let your mind run free, there are so many ways to capitalized on the possibilities that nobody else is thinking of. Is not that a better way to make money?



Source by J. Jack Miller