Investing in property with a short lease can be a lucrative niche sourcing strategy and with a little knowledge on what to look for and how to proceed you will be spotting deals that others miss.
At UK Distressed Property we include a wide range of short lease properties in our weekly UK Distressed Property List
A short lease typically refers to a leasehold property with a remaining lease term of less than 80 years. While some investors may be hesitant to invest in such properties due to concerns about lease extension costs or potential depreciation, there are advantages that can outweigh these risks. Here are some key benefits of investing in UK property with a short lease:
- Lower purchase price: Properties with short leases generally come with a lower purchase price compared to those with longer lease terms. This can provide an opportunity for investors to enter the market at a more affordable price point, potentially maximizing their returns in the long run.
- Negotiation power: When purchasing a property with a short lease, investors have an advantage in terms of negotiation power. They can negotiate a lower purchase price or request the current leaseholder to extend the lease before completing the purchase. This can provide an opportunity to secure a longer lease term and potentially increase the property’s value.
- Potential for lease extension: While short leases may be a concern, there are legal provisions in place for leaseholders to extend their lease terms. The Leasehold Reform, Housing, and Urban Development Act 1993 provides an opportunity for leaseholders to extend their lease term by an additional 90 years, subject to certain conditions. This allows property owners to secure a longer lease term and maintain the property’s value.
- Rental income: Investing in UK property with a short lease can still provide a reliable source of rental income. Demand for rental properties remains high in many areas, and as long as the property is well maintained and located in a desirable location, it can attract tenants and generate consistent cash flow.
- Location advantages: Short lease properties may often be found in prime locations with good transport links, amenities, and high rental demand. Investing in such properties can provide investors with the opportunity to benefit from capital appreciation and higher rental yields.
- Diversification: Investing in properties with short leases can be a way to diversify your property portfolio. By having a mix of long leasehold and short leasehold properties, investors can mitigate risks associated with leasehold terms and take advantage of different investment opportunities.
While it’s crucial to carefully evaluate the risks associated with short lease properties, investing in UK property with a short lease can have significant advantages. Investors who conduct thorough due diligence, negotiate effectively, and consider the potential for lease extensions can make informed investment decisions and potentially benefit from higher returns in the long term.
Want to see some of the deals currently available? Take a look at these.
Want to get the full list delivered to your inbox each week? Just add your email address here to receive the full collection of short lease investment properties for sale throughout the UK each week.