Genre: Instruction

It is important for investors who purchase lots for resale to carefully evaluate their personal financial positions before actually selling . It may be more advantageous to lease , rather than sell , the property . A lease develops certain advantages for both the landowner and the tenant . The owner benefits by securing an income stream into the future . In addition , at the expiration of the lease , the reversionary rights to the Plot Sales are retained , as well as any improvements made thereon by the tenant . Long-term land leases also provide the landowner with an asset-the lease-that can be capitalized on . By pledging the lease as collateral , the landlord can secure cash from a lender - tax-free cash that can be used to purchase additional investments . Thus , the landlord continues to own the leased land and can expand the investment portfo - lio accordingly . The primary benefit to a land-leasing tenant is leverage : the leasehold interest acquired under a long-term land lease can be pledged as collateral for a mortgage to construct a new building . With a loan sufficient to pay for the costs of construction , the developer may be able to leverage 100 percent and avoid investing personal funds in a project . In addition , the rent paid by the tenant for the use of the land is considered an operating expense in the year that it is incurred . Thus , by paying rent on land rather than owning it , a tenant is effectively gaining the benefits of " depreciating " the land over the life of the lease . Remember that Plot Sales is not specifically depreciable .