We’re often asked about the differences between freehold and leasehold properties, buying a leasehold property and which makes the better financial investment.
Both options have positive factors, but both have characteristics that you need to be aware of before deciding. In Week 1 of our Buy To Let investor workshop (out now) we get down to business with HCR partner, Martin McQueen to uncover the truth behind leases , service charges and ground rents – why we need them and how to work with them to make the very best of your investment property or portfolio. The important thing is finding a leasehold investment property that offers good value…
A payment made by the property owner towards the cost of services and repairs beyond those specifically for their house or flat – such as repairs, maintenance and improvements to communal areas and building insurance. This kind of investment is ideal for investors that require a more ‘hands off’ approach to their investment. Service charge – what’s the industry standard? Is there a statutory framework on the horizon? Listen to Prosperity CEO Joe Billingham and HCR lawyer Martin McQueen discussing this topic in detail and revealing what they think is a good barometer on service charge levels.
Protect you and your tenant. Most leasehold properties are apartments and flats, these kinds of properties have multiple dwellings on each floor meaning tenants need to be considerate of other tenants living in the same building. Having a lease with tenants ensures that landlords can keep control over the tenant’s behaviour, meaning loud or disruptive tenants can be dealt with. Ultimately this means that the buildings tenants can be kept happy and satisfied with where they live.
Happy tenants means more capital appreciation and long term asset value – you want to create and maintain a desirable place to live.
The same goes for service charges, no one likes paying high service chargers, but if you want to create a desirable home for people to live in, service charges will be higher for that maintenance. As a property owner you want these conditions, they’re protecting your investment.
Landlords are of course, very yield focused so will always look to maintain the balance – a realistic service charge yet an effectively managed property, thus retaining the asset value by producing the right services, with the right regulations.
What do I need to ask before buying a leasehold property? Number of years, restrictive covenants – access all the information you need in our Buy To Let Investor course – Week 1, The legal purchase process.