What are the benefits of buying a leasehold apartment?

Summary:

Your ability to have little or no mortgage with a Leasehold property is appealing as there is much less interest owed to the bank. You can then use that money to use in other areas, whether this be investment in other areas or lifestyle choices. The property you purchase will usually be high end in a great area with a view.

The added bonus, is that with the negative stigma around Leasehold, means there are less buyers in the market and more choice for you. If you would like more information regarding Leasehold purchases, contact Apartment Specialists.

TRANSCRIPTION:

Good day, Andrew Murray here from Apartment Specialists. Today we're talking about leasehold apartments. Now, the question I get asked a lot is, "Should I buy a leasehold apartment?" And it's not about, there is a yes or no. It's only really if you can figure that out, and it's whether it suits you.

It suits people who want to use their money in other areas. For example, the benefit of buying a leasehold apartment is the price. For example, a $600,000 freehold apartment, if it's leasehold, is about $200,000. A $2,000,000 freehold apartment, if it's leasehold, is about $800,000. It's all about the mortgage and the opportunity cost of what you could do with that money because the definition of an investment is one that brings you income. If you're living in your apartment, it's not actually an investment. I hope that you get that because an investment has to be bringing you income.

So, the benefit is the mortgage - you don't have one, or it's a lot smaller. For example, if you look at, say a $600,000 loan for a freehold property, then you went to purchase this apartment. You would have paid it off over 25 years, and let's say it was at 6% - I just did the figures before - it came out at, over 25 years, you will pay $1,159,742. That's almost double your whole loan amount, and that's at only 6%. That's as if the interest rates are always 6%. But we know they go higher than that. So that's a lot of money you're paying back to the bank.

Now, that's where the opportunity cost comes in. Because if you can buy a leasehold property for a fraction of that price and don't have that mortgage - yes, you have the lease payments, but there's quite a difference there. And a lot of people are finding out that buying a leasehold property works even better. They have a better lifestyle, they get to live in an apartment that would normally could cost millions, and have the best location without the outlay of cash. And they can use that money elsewhere in other investments, other types of property, or they're using it for their business or other opportunities, or just living the lifestyle - travelling, things like that.

That's the benefit of leasehold, and if you think you fit into that category, it's definitely something you want to look into. Look at the figures, see if they work for you - the numbers - and it gives you a great opportunity to be able to buy your dream place without having to pay so much money.

Hope that helps, and yes, leasehold. Just before I go, one of the best things about leasehold is actually the negative stigma that's around the leasehold market and that's why these prices are so low. So, my feeling is they're undervalued at the moment. I'm not saying leasehold is definitely something to buy with a capital gain focus, but I'm saying it's definitely undervalued because of this stigma that's come out on the market about leasehold.

Anyway, hope that helps, and it is case-by-case basis for leasehold, so give me a ring if you think all those leasehold could suit you, or email [email protected].

Talk soon. Cheers, bye.