Leasehold Property: What It Is and How It Works

Leasehold Property: What It Is and How It Works

Posted on January 23, 2020 by Great Florida Homes

If you’re seeking out a property contract option that combines the longevity of a mortgage with the affordability of a lease agreement, a leasehold property could be a good option for you.

If you’ve never heard of leaseholds, you’re not alone – they’re a fairly obscure type of property agreement. But, leaseholds do provide significant benefits that you should be aware of. Here, we’ll review the specifics of leasehold properties for people living in South Florida.

What is a Leasehold?

With a leasehold property, you’re leasing the property like a renter, but are committing to living on the property for many years like a homeowner. Leasehold contracts are generally a minimum of 40 years in length, but can last for 100 years or more. This is far longer than your average lease, but the lessee will still pay monthly rent.

With a leasehold agreement, the lessee will also have to put down a down payment, as you would with a mortgage. But, the down payment for a leasehold property is usually a mere fraction of the down payment asked of South Florida home buyers.

Leasehold properties are rare, but they can be found in Florida beach communities more commonly than most other areas around the United States. Since oceanfront real estate is desirable and consistently in high demand but also limited, renters will often want to stay on the property for longer than the average lease term.

Benefits of a Leasehold

Leaseholds can provide a number of notable benefits for Floridians, including:

●You can commit to a long-term property without committing to the high cost of owning a home.
●You have the freedom to sell the leasehold without the property owner’s consent.
●You can purchase a leasehold to use as a rental property and make a steady income.
●You have the freedom to make improvements and changes to the space.

Downsides of a Leasehold

Despite the benefits listed above, leaseholds also prevent a few drawbacks, including:

●Any improvements or renovations that you make to the property will be returned to the owner after the duration of the lease.
●You can’t build the value of the property to sell for a higher price than you paid for it, as you can as a homeowner.
●Your monthly rent may increase over time according to current market values.

Leaseholds may be an unconventional property type, but they could be the right choice for you. Whether you’re looking for a leasehold, rental property, or a home to purchase in South Florida, contact Great Florida Homes Team for further guidance.