should I buy freehold on new build

gazpacho_uk

We are in the process of purchasing a new build property. The ground rent will be £300 per year, but the builder has said we can purchase the freehold for £6000.
We have funds to cover this, but is it something we should do ? would we benefit from purchasing the freehold ?
We aim to live in this property for 10 years before downsizing in retirement. We also plan to build a conservatory on the property ... which I believe would incur a charge if we were paying ground rent

chanz4

Lease hold is a pain, I would buy freehold.

Guest101

gazpacho_uk wrote: »

We are in the process of purchasing a new build property. The ground rent will be £300 per year, but the builder has said we can purchase the freehold for £6000.
We have funds to cover this, but is it something we should do ? would we benefit from purchasing the freehold ?
We aim to live in this property for 10 years before downsizing in retirement. We also plan to build a conservatory on the property ... which I believe would incur a charge if we were paying ground rent

Always, your future buyer will be grateful for it, and the price will be higher. If u live there 10 years the freehold only cost u 3000

pawlala

Why don't you ask the developer to buy the freehold for you or threaten to pull out of the deal. I saved £5000 doing exactly this. Worth asking the question?

teddysmum

Guest101 wrote: »

Always, your future buyer will be grateful for it, and the price will be higher. If u live there 10 years the freehold only cost u 3000

The ground rent will cost £3000 over 10 years, while adding no value to the property (assuming no price rise), but leaves you with a property to which the buyer will have to purchase the freehold or commit to a probably higher ground rent. A freehold property would be more attractive to a buyer.

Guest101

teddysmum wrote: »

The ground rent will cost £3000 over 10 years, while adding no value to the property (assuming no price rise), but leaves you with a property to which the buyer will have to purchase the freehold or commit to a probably higher ground rent. A freehold property would be more attractive to a buyer.

Ah that's what I said??

ging84

is this a flat in a block and they are offering to sell you a share of the freehold?
or is it a self contained property which is for some reason lease hold?

gazpacho_uk

ging84 wrote: »

is this a flat in a block and they are offering to sell you a share of the freehold?
or is it a self contained property which is for some reason lease hold?

I dont know the reason for lease hold, but it is a detached house on a development of around 100 plots of which a few are apartments/flats

gazpacho_uk

Thanks for all your replies .... it seem unanimous. Buying the freehold is the way to go

princeofpounds

I dont know the reason for lease hold

The reason is that they advertise the house for a price.

Gullible buyer compares it to other houses, most of which are of course freehold, despite it not being apples-to-apples.

Buyer rationalises this by saying 'well it's only £300 a year'. And it is. But capitalised at current interest rates that is actually an effective price of 5-6k.

So the builder gets a free option to legitimately raise the price to buy the house without looking like they are doing that, by offering the freehold to the buyer.

And if you don't buy it then they take them and sell them to a ground rent investor.

It's called 'squeezing every last bit of juice of the lemon'. And it works because buyers don't value that cashflow stream properly.

It has become particularly severe in large apartment developments, where builders will also use escalation clauses and clauses around appointing insurers and services to allow stealth profits for the freeholder. Most buyers are not sophisticated enough to value these instruments and don't demand the correct discount on the leasehold property price. But the builder then sells them to a big building management firm who then milks it.

gazpacho_uk

pawlala wrote: »

Why don't you ask the developer to buy the freehold for you or threaten to pull out of the deal. I saved £5000 doing exactly this. Worth asking the question?

I have not gone as far as threatening to pull out, but via my Solicitor this morning, I offered £4000 and they have come back with £5000 for the freehold which I have now accepted !