Property investors have most likely come across the terms ‘freehold’ and ‘leasehold’ before while scouring listings online for properties. Whether to invest in a leasehold property or a freehold property is highly dependent on what you are looking to get out of your property investment. In this article, we will discuss the key differences between leasehold and freehold properties, the distinct benefits of both, and key incoming legislation that is set to impact them for property investors in the future.
What is a Freehold Property?
A freehold property is one that you own with no fixed time limit. If you purchase a freehold property, you would own the building and land permanently. This means you do not have to pay any ground rent or maintenance fees, but you are responsible for the maintenance of the property and the land.
Most houses are freehold properties, though in some cases, such as shared estates, additional fees may apply.
Benefits of a Freehold Property
- Complete ownership: You own both the land and the building.
- Permanent ownership: No fixed time limit—your ownership lasts indefinitely.
- No landlord: You are in control with no landlord to answer to.
- Capital appreciation: Freeholds generally appreciate in value more easily.
- Easier to sell: Freehold properties tend to be more straightforward to sell or flip.
- No extra fees: No ground rent or maintenance fees (unless part of shared areas).
What is a Leasehold Property?
A leasehold property is a property that you own for a set period of time, but not the land that it is built on. A leasehold is owned by a freeholder, who rents out the land to the leaseholder to use. A length of the lease will be agreed in the lease agreement, commonly between 90 and 999 years, and the property will return to the freeholder upon expiry of the lease.
While most flats are leaseholds, some houses are also sold this way. As a leaseholder, you’ll typically pay ground rent to the freeholder and may need their permission to make major alterations to the property.
For buy-to-let investors, renting out a leasehold property may require approval from the freeholder.
Benefits of a Leasehold Property
- More affordable: Leasehold properties tend to have lower upfront costs.
- Lower maintenance costs: The freeholder is usually responsible for structural repairs and maintenance.
- Shared amenities: Leasehold properties often include access to communal amenities, like gardens or gyms.
- Easier collective enfranchisement: Leaseholders can group together to buy the freehold in certain cases.
- Good for buy-to-let investors: The lower initial costs can make leasehold properties attractive for rental investments, leading to higher returns.
What is the Difference Between Freehold and Leasehold Property?
A freehold property means you own both the building and the land it sits on, giving you complete ownership with no fixed time limit, while a leasehold property means that you only own the building for a set period of time, essentially renting the land from the freeholder who owns it outright. With a leasehold, you need to pay a ground rent to the freeholder and may require their permission for significant changes to the property.
What is the Leasehold and Freehold Reform Act 2024
The Leasehold and Freehold Reform Act 2024 is a UK law that aims to make it easier and cheaper for leaseholders to buy their freehold or extend their lease. The act was passed by the Conservative government in May 2024. Although it hasn’t been fully enacted yet, the changes will include:
- Banning new leasehold houses (except in exceptional circumstances).
- Extending lease terms to 990 years for both houses and flats.
- Transparency over service charges, enabling leaseholders to challenge unreasonable charges at a tribunal.
- Improving rights for freehold homeowners on private and mixed-tenure estates.
- Allowing leaseholders in some buildings to take over management if more than 50% of the property’s floor space is residential.
The act will also introduce an online calculator to help leaseholders calculate the cost of extending leases or purchasing the freehold.
Key provisions include:
- Abolishing marriage value, which had previously inflated the cost of lease extensions for properties with under 80 years remaining on the lease.
- Providing discounts for leaseholders who’ve made improvements to their property.
- Banning new leasehold flats in England and Wales.
Advantage’s Freehold Properties
At Advantage Investment, we offer select freehold property investments for property investors seeking freehold properties for sale.
Freehold Property: Anglesey Freehold Off-Market
- Prices from: £400,000
- Projected STL yield: 10%
- Completion date: Q2 2025
Located in one of the UK’s most sought-after coastal destinations, this 3-bedroom, 2-bathroom property offers an exclusive investment opportunity with a projected 10% return. With no stamp duty, council tax, or utilities included in the £5,000 annual land lease, this investment offers both cost-effectiveness and ease.
Freehold Property: Freehold Houses – Off Market
- Prices from: £78,000
- Projected yield: 10%
- Completion date: Completed
Looking for secure and high-yield property investment? These off-market freehold houses present a rare opportunity to invest in a government-backed scheme with excellent returns. Offering a 10% net rental income guaranteed for 25 years, these properties are ideal for investors seeking reliability and long-term growth.
Fully renovated, furnished, and tenanted from day one, ensuring immediate rental income. The full repair and insurance lease covers all repairs, renewals, and damages, making it a hassle-free investment. Robust government initiatives support these investments, ensuring guaranteed rental income for the long term.
Advantage’s Leasehold Properties
At Advantage Investment, we offer select Leasehold property investments for property investors seeking leasehold properties for sale.
Leasehold Property: Northern Quarter – Off-Market
- Prices from: £245,950
- Projected AST yield: 5.5%
- Projected STL yield: 14%
- Completion date: Completed
The Northern Quarter – Off-Market is the perfect opportunity for investors looking to enter Manchester’s property market. The Northern Quarter is one of Manchester’s trendiest and most vibrant areas, full of independent and eclectic shops, cafes, and restaurants. This boutique development is strategically located in the heart of this thriving cultural centre, making it highly desirable for both long-term tenants and short-term guests. This property offers a 999-year leasehold and has approval for short-term lets.
Leasehold Property: Hull – Off-Market
- Prices from: £110,000
- Projected AST yield: 8.9%
- Completion date: Completed
This Hull – Off-Market property presents a golden opportunity to enter one of the UK’s most up and coming property investment hotspots. Hull is a thriving UK city, with major regeneration projects driving growth in this North-western city. This property is fully furnished, all bills included, and is turnkey ready to generate income from day one. This prime city centre location is positioned right in the heart of Hull’s regeneration zone, priming it for considerable capital growth. With a 999-year leasehold in place, this Hull off-market investment opportunity represents a golden chance for property investors to gain a high return property for below market value.
Leasehold Property: Smithfield House
- Prices from: £229,995
- Projected AST yield: 6%
- Completion date: Q2 2027
Smithfield House presents an exceptional investment opportunity in Birmingham. This landmark development features 211 stylishly designed one- and two-bedroom apartments, set within the £1.9 billion Smithfield regeneration project. Scheduled for completion in Summer 2027, Smithfield House is poised for significant capital growth as the surrounding area undergoes extensive redevelopment. Offering a 999-year leasehold, this property guarantees long-term security and sustained value, making it an ideal choice for forward-thinking investors.
Freehold or Leasehold Property Investment: Which is Right For You?
Choosing between freehold and leasehold properties depends on your investment goals. Freehold properties offer more control and long-term ownership, but they come with higher maintenance costs. Leasehold properties may be more affordable upfront, but they may involve additional costs like ground rent and require permission for changes.
Contact us today, and we will help you discover your ideal property investment. At Advantage Investment, we’ll help you assess your goals and guide you toward the property type that best fits your investment strategy. Whether you’re interested in a freehold, leasehold, buy-to-let, or off-plan investment, we’re here to help you find the right opportunity.
