Property Investment 101: The ONLY reason to buy is freehold status?

Property Investment 101: The ONLY reason to buy is freehold status?

Freehold versus Leasehold, which is better?

This question is as old as time… Truth is, when everything is exactly the same, of course buy freehold property is better lah! Now, tell me frankly, if everything is the same, then what’s the price of the same property if it’s freehold versus leasehold? Yeah, you are right, the freehold would be more expensive. It could be 10, could be 15, could even be 20 percent higher. This is why your ONLY reason to buy must never be freehold status yeah.

Beware if the only way the developer is selling you is to talk about freehold

You look at the banner and saw the price. Hmm… looks a little higher than many properties nearby. However, it has a bold and big word on the banner too. It says ‘FREEHOLD.” In Cantonese, some would ask this question. “wah, freehold big all meh?” Translated, it means “freehold beats everything else?” The answer is no. The reason why the property developer put this big and bold is because they could not think of other even more important reasons why one should buy that property.

Think very logically yeah. Aren’t these below selling points better, when we think of buying a property?

“Big sized with 4 rooms and 4 baths and fully furnished.”

“Right next to a top university with 10,000 student population.”

“Opposite [private hospital name] and we will manage the property for you.”

“The ONLY property with both seaview and hillview in this area.”

Well, if you ask me, I would prefer the above statements much more, depending on the reason I am buying. However, just a big bold freehold status alone will not convince me to buy yeah.

Following would be a few things to think about the leasehold property too

Do tenants care and pay you higher rental if your property is freehold and not leasehold? Answer: No. the tenant wants to rent a place, not to care whether it’s leasehold or freehold

Can leasehold properties be renewed and do you think state governments want the revenue? Answer: Yes. Leasehold status renewal is good income for the state government, 99 years later.

Can leasehold properties be in a very good location within a mature township? Answer: Yes. In other words, a good buy can be a leasehold or a freehold.

If a highway which is for the public’s benefit is to be built and it has to pass through both leasehold and freehold properties, do you think they will stop the highway since it passes through freehold land? Answer: No. It will continue and compensation will be paid regardless of leasehold or freehold.

Is it proven that only freehold properties increase in price while leasehold properties stay the same? Answer: No. Sometimes, leasehold properties could appreciate more, depending on circumstances.

Never buy simply because of freehold vs leasehold

Buying a property is very expensive. Most probably the most expensive thing we will ever buy in our life. Please do not just rely on the status of the property. Look at all the right reasons. For example, the Price (too high is too high regardless of status), Place (location, location, location), Property Developer (a background check is always encouraged) and last but not least the Product (actual unit and all the features). Happy deciding.

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