In previous article, we’ve had listed out the calculations for both freehold property and leasehold property, to determines which one is best for investment and comes out both actually are good for investment as long as the returns are ideally. In today, we will continue to discuss about the pros and cons of these both type of properties;
Before we get started, in case you don’t understand what are the differences between freehold and leasehold property, here is short explain to you.
Freehold property refer to last forever. This type of property can be easily transferred from one person to another or next generation without getting consent from any state or federal government authorities.
On the other hand, leasehold property is basically means that you’re leasing or renting the property from the government and the period of lease granted is normally up to 99 years (maximum). While, if the period of lease grant is expires, the property will be returned back to the state or the government.
Freehold Property |
Leasehold Property |
Pros |
|
| Sell out faster, less stringent limitations of transfer ownership | Lower down payment, depends on each property agreement, terms and entitlements. |
| Easier to obtain bank loan or refinancing bank loan | Higher rental yields |
| Have a better capital appreciations in long-term | Cost of purchase is cheaper |
Cons |
|
| Higher down payment. Need to put down at least 10% of property purchase price | Difficult to get bank loan, according to how many lease left. |
| Lower rental yields | No benefits from increase in land value. |
| Cost of purchase is higher. | Only the state or governments can grant approval for transfer of lease |
In conclusion, what is a ‘pro’ for the freehold property turns out to be a ‘con’ for the leasehold and vice versa. If you don’t have any financial problems, you should go for freehold property. While, if your financial is restricted, you should look for leasehold property as the initial down payment required is lower compare to freehold property.
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