Leaseholds and Freeholds

[Duncan]

This is probably better suited for the this or that forum, but since the real estate/mortgage thread is here, i figured it'd be ok here too...

anyways, I already know what the difference between the two are, but my question to you is, would you consider buying a leasehold? the price is cheaper than a freehold for obvious reasons, which means you get more bang for your buck when it comes to the physical property (not the land). I'm asking because we saw a pretty good leasehold condo yesterday. It had 3bedrooms and 2 baths and over 1200sqft for $359k. It was on marine between elliot and victoria i believe. Normally, if a condo like this was sitting on freehold land, it'd probably go for 50k+ more. I believe there's roughly 75 yrs left on the the prepaid 99yr lease, but still, would you buy a place like that and try to overcome the stigmas that accompany a leasehold property? i'm not sure i can. And we're thinking we'll be living in the place we buy for 5-10 yrs max and upgrade when our family income increases (fingers crossed).

anyways, what say you? would you take the dive into a leasehold? or suffer the fact that you'd get less buying freehold, but it's worth it since it's freehold?

[jeSteR]

If there's 75 years left on the lease and you're not staying there longer than 20 years, it's a non issue really. The only thing that would hold you back from the purchase is precisely what you said, a stigma. Consider Manhattan or London, or any REAL major metropolitan centre, the majority of condos there are Leasehold as opposed to Freehold. If you're not looking at it as a long term investment, then it shouldn't hold you back from the purchase. I can't see the restrictions on a leasehold condo to be any more stringent than what a normal freehold strata would impose on you. And really, if it's not a long term stay, then you probably wouldn't be looking to make any major changes to the property anyways. The biggest issue you'll find though is that most banks would require at minimum a 30% downpayment on a leasehold.

[nature boy]

What is the difference between the two?

[Duncan]

[nature boy]

haha, i actually never heard of a leasehold. i know of the concept, but i guess i never knew it was called a leasehold.

anyway, wouldn't 30% be more attainable seeing as how i assume a leasehold would be much cheaper anyway?

[se7entse7en]

Sounds to me that the biggest issue (other than the 30% down) would be resale. How difficult would it be to sell 10-15 years from now when you're looking to upgrade?

[nature boy]

is resale up to you though? or is that up to the title holder?

[Duncan]

resale is up to the person who took over the lease. So if i bought the property, i could "resell" it whenever i wanted.

Reselling leaseholds are hard to do unless they're relatively new (i.e. only 5-10 years max gone on the lease). As stated before, there's a stigma about leaseholds, and not to mention that leasehold properties actually don't appreciate much. You're just hoping the location becomes more desirable. So reselling this place 10-15 years down the road would prove difficult. I we looked at a few leaseholds in the champlain area yesterday, and those were about 10-15 years older than the place we're considering so there's only like 60-65 years left on those leaseholds. Those places have been on the market for months. I think one's actually been on the market for almost a year.

if the lease is up and the owner of the property doesn't want to offer another lease, i believe they have to pay out the people who were living there market value for their home. I believe that's just the physical building though.

Anyways, we've kinda decided against buying a leasehold for now. I don't think it'd benefit us. We want a 3 bedroom property, but i don't think it's worth the risk of buying a leasehold.

[nature boy]

hm, describing it that way i don't see any benefit in getting a leasehold whatsoever.

[Duncan]

benefit is that it's probably 20-30% cheaper than freeholds when you buy it... for example, a 3bed 2 bath leasehold place we saw was on the market for $359k. The equivalent in a freehold title would probably run you $450k+

[nature boy]

but the downside is that you have to fork over 30% of that prior.
i think you already knew your answer before you even asked the question.

[Duncan]

well, i knew what i knew but i was trying to see if anyone else had other opinions or other facts that i might not have considered.

but like i said, i don't think we're gonna consider leaseholds anyways. I was seriously considering it when i posted the original post, but after thinking about it for a few more days, i don't think it's a road i want to travel down

[nature boy]

doesn't sound like it, no. even though it's cheaper, i still don't see the incentive to get into one.
a regular lease (like my car), i can see, because if something goes wrong it's not your problem. and after your lease is up, you return the product and the deal is done. but if it's on you to sell the place after you're through, then what's the point?