Buying a short lease property can be an appealing option for many buyers due to the potential for lower purchase prices and unique investment opportunities. However, it also comes with its own set of challenges and considerations. This guide will provide you with essential information on what short lease properties are, the benefits and risks, key considerations when buying, and how Fraser Bond can assist you in navigating this market.
A short lease property is a property with a leasehold tenure that has a relatively short remaining term. Typically, a lease is considered short if it has less than 80 years remaining. As the lease term decreases, the property’s value can decrease, and the cost of extending the lease can increase.
Short lease properties often have lower purchase prices compared to properties with longer leases. This can make them more affordable and attractive to buyers looking for a lower entry point into the property market.
Extending the lease can significantly increase the property's value. If you purchase a short lease property and then extend the lease, you can potentially realize a substantial increase in value.
Short lease properties can offer unique investment opportunities, especially in high-demand areas where long lease properties are scarce and expensive.
The cost of extending a lease increases as the remaining term decreases. Extending a lease on a short lease property can be expensive and may require significant financial planning.
Lenders may be reluctant to provide mortgages for short lease properties, making it more challenging to secure financing. Buyers may need to explore alternative financing options or be prepared to purchase with cash.
Properties with short leases can be harder to sell, as potential buyers may be deterred by the high cost of extending the lease and the complexities involved.
Changes in leasehold law and reform efforts can impact the lease extension process and costs. Staying informed about potential legal changes is important when considering a short lease property.
Determine the exact number of years remaining on the lease and understand the implications for value, cost, and financing. Lease terms of less than 80 years can significantly impact the property’s marketability and financing options.
Familiarize yourself with the process and costs involved in extending the lease. The Leasehold Reform, Housing, and Urban Development Act 1993 gives leaseholders the right to extend their lease by 90 years, but the cost and procedure can be complex.
Obtain a professional valuation to understand the current market value of the property and the potential value after extending the lease. This will help you make an informed decision about the investment.
Consult with a solicitor who specializes in leasehold properties to understand the legal implications, your rights, and the costs associated with extending the lease.
Explore different financing options, including cash purchases, bridging loans, or specialized mortgage products that cater to short lease properties. Be prepared for potentially higher interest rates and stricter lending criteria.
Consider the total investment required, including the purchase price, cost of lease extension, legal fees, and any renovation costs. Ensure that the potential increase in property value justifies the investment.
Fraser Bond’s expert agents have extensive experience in the leasehold property market and can provide valuable assistance in navigating the complexities of buying a short lease property. Our services include:
Helping you find short lease properties that meet your criteria and investment goals.
Providing professional valuations and market analysis to help you understand the value and potential of short lease properties.
Offering guidance on the lease extension process, including cost estimates and legal considerations.
Connecting you with experienced solicitors and financial advisors who specialize in leasehold properties and short lease financing.
Assisting with negotiations and ensuring a smooth purchase process from start to finish.
Contact Fraser Bond to learn more about how we can help you with buying a short lease property.
Buying a short lease property can offer unique opportunities and potential value increases, but it also comes with challenges such as high lease extension costs and financing difficulties. By understanding the key considerations and seeking professional assistance, you can navigate the short lease property market with confidence. Fraser Bond is committed to helping you make informed decisions and achieve your property investment goals. Contact us today to start your search for the ideal short lease property.
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