Are you searching for leasehold land for a building project?
Leasehold land is, in many respects, an excellent choice and an ideal alternative to purchasing real estate. We can list seven advantages that speak for themselves:
- Availability: Highly coveted building land is increasingly only available under a leasehold. This may be due to political considerations, tax issues and/or social factors.
- Financing without a bank: You don’t need a bank to broker a leasehold agreement. By agreeing to the leasehold, the landlord essentially provides the financing for the land under reasonable conditions.
- Less capital expenditure: Less capital is required because the building land does not have to be purchased.
- Growth in value: A frequent topic of discussion is whether leasehold land increases in value the same way as purchased land does. The answer is, in most cases, ‘yes’, because building land at good locations is so scarce that its availability, even under a leasehold, is factored into the price. This also applies to real estate projects that are developed under a leasehold.
- A compensatory investment option: Instead of buying the land, you can use all available capital for other investments. This often allows you to achieve higher rates of return and even overcompensate for the ground rent (if you invest the full building land purchase price elsewhere).
- Improved feasibility: If you were to take out a mortgage, then, depending on the calculation method used by your bank, you might end up with the ‘worst-case’ minimum rate. However, with a leasehold, you only have to pay the long-term actual agreed ground rent, which generally requires lower revenues to cover costs.
- Your legal rights: A leasehold agreement is a reliable and remarkably robust entitlement that, from a legal perspective, is comparable to owning real estate.
We have compiled further information for investors here. Landowners, please click here.
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