Wednesday, March 14, 2012

Disadvantages of Leasehold Property

Property can be divided into two sections. A freehold or leasehold property. A freehold property is a property where you will have the rights on the property with any time frame or duration. For leasehold property, one will have a lease duration usually 30, 60 or 99 years.

Below are the disadvantages of purchasing a leasehold property :-

1. Less chance in appreciation in value.

2. Harder to sell. Even harder to sell if the lease is nearing the end.

3. Need to pay premium. To extend the period of the lease one needs to pay premium. The longer the extension of the lease, the more premium one needs to pay.

4. Harder to get loan. To purchase leasehold property, banks are more strict in giving out loans. Property which has shorter lease period might not even get a bank loan.

5. Limitations. The leasehold agreement places limitations on what can be done with the property. Eg. to knock down an old development and build a new one would require a new leasehold agreement. There are associated costs with each of those arrangements.

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