Buying Leasehold with 76 years left - Pros and Cons

NewBuyer2025

Hi

I would like some advice on below:
I am a first time buyer and need to know if it is worthwhile buying a place which has 76 years left on its lease. It was a 99 year lease to begin with. 
I would like to stay there for a few years while I save up a deposit for a small house and then rent this flat to get a small income monthly which I can also use towards my mortgage payments for my house when I buy one.

I am unable to apply for a mortgage now due to my circumstances.
I also don't know if its worth extending the lease due to the length of time left to what the costs would be. The person who is selling this flat has only been there for a year.  At present there is ground rent and service charge a total of £350 annually.

Can I rent this flat out for the rest of the lease period and then let the freeholder have it?
I would have covered my cost and made some money during this period. It's a place I need for short term instead of renting.

Please let me know the pros and cons for doing it like this.

eddddy

In general, you should make a 'profit' by extending the lease.

i.e. The value of the flat after extending the lease should be more that the current value of the flat plus the lease extension costs.

If the numbers aren't working out like that, the flat is probably over-priced.

But you don't have to extend the lease - you could let it run down to zero and give it back to the freeholder. But then it's probably the freeholder who makes the 'profit'.


Also, check the lease to see what it says about sub-letting (i.e. renting it out). Some leases don't allow that, some leases require you to pay a large fee each time a new tenancy agreement is signed, etc.

Mark_d

NewBuyer2025 said:

Hi

I would like some advice on below:
I am a first time buyer and need to know if it is worthwhile buying a place which has 76 years left on its lease. It was a 99 year lease to begin with. 
I would like to stay there for a few years while I save up a deposit for a small house and then rent this flat to get a small income monthly which I can also use towards my mortgage payments for my house when I buy one.

I am unable to apply for a mortgage now due to my circumstances.
I also don't know if its worth extending the lease due to the length of time left to what the costs would be. The person who is selling this flat has only been there for a year.  At present there is ground rent and service charge a total of £350 annually.

Can I rent this flat out for the rest of the lease period and then let the freeholder have it?
I would have covered my cost and made some money during this period. It's a place I need for short term instead of renting.

Please let me know the pros and cons for doing it like this.

I'd be unsure of buying a property with only 76 years left on the lease...but your solicitor would advise and possibly get a lease extension as part of the purchase.

Buying the flat might incur stamp duty.  There are also other costs associated with buying a property/moving home.  When you rent out the flat, you will likely have to pay buy-to-let mortgage interest rates, agent costs and your rental income will be taxable.

Assuming you can always find tenants then you can let the place out for the next 76 years, at which point the property will have no value unless you arrange a lease extension.

Typically the buy-to-let models works where your rental income covers your mortgage repayments and your property increases in value.  Personally I think there's a lot of uncertainty on both counts.