“To be or not to be?” --- When to Enter a Leasehold Contract

After maybe some research, you now have a renewed interest in real estate. Then, you come across terms of ownership of properties and then you read about the leasehold scandal. You dig a little deeper and you find yourself contemplating if leasehold is a worthy risk for you as an investment.

There are considerations before deciding to explore a new endeavor or agreement. Here are some pointers to mull over to see if you can afford to enter in a leasehold agreement:

1. You are eyeing at properties at locations where lands come at premium prices.

Leaseholds work in some locations better than others. As with any real estate dealings, location is the key. The terms of a leasehold agreement can be a good choice for you if you buy commercial spaces or urban housing for rent in places where there is limited land availability. This way, you can save up on the cost of property ownership since buying outright can be very expensive.

2. You have more than enough finances to back you up.

While leaseholds may be friendlier in terms of paperwork and entail less hassle, it can come with an upfront payment that is higher than the rate for property purchase. This is when you have to check your finances and how they can hold up after you shell out money for down payment.

3. You have considered generating profit from the property.

Leaseholds can be a good investment only if there is a good potential for profit in the property. Purchasing residential properties can get you your money back only if there is a good pool of apartment seekers in the area. Otherwise, you will just be incurring losses over time in paying monthly dues and increasing rent rates.

4. You have a trusted lawyer and real estate agent.

This is crucial because unlike renting properties, leaseholds tie you in a contract for at least four decades. Needless to say, you need to be guided and advised by people who know the market and the legalities so you do not become a victim of predicaments like the leasehold scandal.

Leaseholds are the type of agreements you cannot enter with basic research alone. This is a major undertaking that requires a lot of thinking and planning.