Is Freehold Terraced House > Leasehold Flat?

jumperabv3

If you had a development with 2 options:
Freehold Terraced 1 Bed House for £220,000
Leasehold 1 Bed Flat for £190,000
Same location.
Would you invest the extra £30,000 in the Freehold house?
I'm asking for investing purposes but feel free to answer even if you were not doing it for investment purposes (i.e. for yourself to live - yet, it's still a sort of investment - as one option carries service charges etc. - the other doesn't).
What do you think? Thanks in advance for sharing your opinions!

Socajam

Freehold all the way, unless the lease is 900+ years.

greatcrested

No brainer.

Whether as a home or as an investment, buy the house - assuming you can afford it.

Though if you can squeeze the finances to 2 bed you'll have a more marketable property either to let or when you sell.

jumperabv3

greatcrested said:

No brainer.

Whether as a home or as an investment, buy the house - assuming you can afford it.

Though if you can squeeze the finances to 2 bed you'll have a more marketable property either to let or when you sell.

Thanks for the tips!
For us, a 1 bed house/flat can be suitable for short lettings (e.g. Airbnb), especially once this Coronavirus becomes history ... in the meantime it can be rented out normally like all other properties until it happens. And the main concern for short lettings is evictions - what if the person stays and doesn't leave the place - still looking into that. (What do hotels do really if a guest is not leaving the room?)
I remember 10 years ago when I looked in Zoopa I haven't seen so many "Rooms to rent" - now there are lots, so it looks like if people are willing to pay (and it's not cheap) to rent a single room despite sharing the place itself with someone else - then in comparison renting your own complete place is more valuable. It also depends on the location itself.

Yes, it does seem like doing short lettings and things like that would be easier without having to get a consent from a 3rd party. But does it mean you won't have to spend your own personal "service charge" to upkeep the house? What do you think? Thanks again.

davidmcn

If I were investing I wouldn't buy a 1 bed anything, and I wouldn't buy newbuild (assuming that's what you're implying by "development").

AdrianC

jumperabv3 said:

If you had a development with 2 options:
Freehold Terraced 1 Bed House for £220,000
Leasehold 1 Bed Flat for £190,000
Same location.
Would you invest the extra £30,000 in the Freehold house?
I'm asking for investing purposes but feel free to answer even if you were not doing it for investment purposes (i.e. for yourself to live - yet, it's still a sort of investment - as one option carries service charges etc. - the other doesn't).
What do you think? Thanks in advance for sharing your opinions!

It's simply impossible to generalise. There may be factors in the flat's favour - such as it being bigger, or better located in the development. The house may have other charges for estate management. Sure, the flat carries service charges... but you don't need to maintain the fabric of the structure at your expense and hassle.

One thing's for sure - they aren't the only two properties for sale in the wider area, so you need to view them each individually in that wider context.

eddddy

If you want to do AirBnB, most leases won't allow that. (Also mortgage lenders won't allow it, if you're buying with a BTL mortgage.)

Also, I'd have thought a critical factor is the potential rental yield for the house, versus the flat. Maybe discuss potential rents that with a few local letting agents.


As you suggest, a leasehold service charge is your share of the buildings insurance, maintenance, repairs and usually a management fee to a managing agent.

On the plus side, the managing agent should be a 'building management professional' who will schedule maintenance, arrange contractors when repairs are required, etc (But not all managing agents are as good as they should be.)

If you buy a freehold house, you'd have to do that yourself. But if you're happy to 'shop around' to find good tradesmen / contractors (and you can spot and avoid 'rogues' etc), your costs might be lower. 



Edit to add...

If the house is a relatively new one on a 'development', there may still be service charges for communal areas, roads, parking areas, etc.

If that's the case, you would have less legal protection regarding the service charge as a freehold house owner, than you would as a leasehold flat owner.

jumperabv3

No, I was asking just hypothetically ... I'm looking actually on a house from 1997, it's a freehold house.
As a landlord of a freehold house do I mainly need to take care of the property insurance? The rest is just regular upkeep of the property?
And with a freehold house it would be easier to Airbnb the place later on once Coronavirus is gone?

eddddy

jumperabv3 said:

As a landlord of a freehold house do I mainly need to take care of the property insurance? The rest is just regular upkeep of the property?
And with a freehold house it would be easier to Airbnb the place later on once Coronavirus is gone?

It sounds like you might have a lot of research to do before you move forward.

If you want to do AirBnB, the things you need to consider include:

• Insurance (regular landlord's insurance probably won't cover it)
• Mortgage (a BTL mortgage wont allow it)
• Planning consent (you might need planning consent for change of use)
• ... and therefore pay business rates on the property

jumperabv3

eddddy said:

jumperabv3 said:

As a landlord of a freehold house do I mainly need to take care of the property insurance? The rest is just regular upkeep of the property?
And with a freehold house it would be easier to Airbnb the place later on once Coronavirus is gone?

It sounds like you might have a lot of research to do before you move forward.

If you want to do AirBnB, the things you need to consider include:

• Insurance (regular landlord's insurance probably won't cover it)
• Mortgage (a BTL mortgage wont allow it)
• Planning consent (you might need planning consent for change of use)
• ... and therefore pay business rates on the property

1) Insurance - OK. How much would it cost approx?
2) Mortgage - already have it
3) Do you need a consent from which party? The council?
Thanks!
PS It's not something I'm looking to do anytime soon, definitely not during this climate.

ProDave

I suspect for Air B&B you would need it insured on a small hotel / guest house policy.