Key Highlights

When it comes to UK property investment, navigating between opting for a freehold property or a leasehold one can be complicated. It is important investors understand the benefits of having either a freehold or leasehold property and what the tenets are for the legal aspects, value, management, and legal implications.

This UK property investment guide aims to assess the benefits of each and how it can affect your investments, so you can make a more informed decision while expanding your property portfolio.

Freehold Properties

Freehold property means that the buyer has complete ownership of the property they have just purchased — as well as the land it sits on. As the buyer owns the land that the property is on, it means that the buyer owns it indefinitely. There are no annual ground rent costs towards the landowner and slightly lower service charges. It also means you are completely responsible for all maintenance of the property. Freehold is the most common form of property in the UK for houses. Flats are usually leasehold, though this isn’t always the case. 

Freeholds are particularly attractive for investors as they provide long-term security, full control, and the potential for higher returns. The ownership of a freehold property is permanent and complete. You get to decide what happens to the property and it is yours indefinitely. As mentioned, there are no annual charges or fees paid to a landowner as you are the landowner. A large advantage is that investing in a freehold property provides a good return on investment. According to experts, freehold residences can generate returns of around 6 to 7% per year, which is higher than other types of investment. These properties also tend to appreciate in value very well. Investors can also make more changes to their property to suit their needs and business goals. It also just provides more peace of mind as there is no lease that will expire eventually.

Leasehold Properties

Leasehold is when an investor will own a property they have purchased for a certain timeframe, but they do not own the land the property sits on. The most common leasehold properties are usually flats. The property and land are “leased” from the landowner for a set number of years.  Once the lease term expires, ownership of the property reverts back to the freeholder unless the lease is extended.

Not every flat is a leasehold and some houses can even be leasehold properties. There are a few pros and cons associated with leaseholds, just like freehold properties. 

Benefits mean that leaseholds are sometimes cheaper than freeholds and require a smaller deposit, meaning a greater chance for a higher ROI. Management is often the responsibility of professional third-party companies, who will organise and execute repairs and other maintenance tasks. In flats, when it comes to communal areas such as hallways, roofs, and gardens, the freeholder will be responsible and must maintain it themselves, meaning one less thing for an investor to consider. 

A disadvantage is that the property comes with higher service charges and ground rent, paid to the landowner. However, a lot of the time these charges aren’t overly high and in rare cases can be more of a formality . The ground rent of most Leasehold property that NPG provides are peppercorn as we have filtered and aim to bring the best investment opportunity to the investors. Leasehold ownership is also only valid for a fixed period, after which ownership returns to the freeholder. Short leases can reduce the property’s value and make it difficult to sell or remortgage. However, homeowners and investors can extend the lease. At North Property Group, we don’t sell any properties with a short lease, giving you peace of mind. 

There are also restrictions on modifying the property, but for investors, this really isn’t an issue. For leasehold flats, investors can still update properties and modify kitchens and bathrooms without permission. It is only large changes that affect the property’s structure that need permission. If you’re an investor looking to rent out a leasehold property, then this shouldn’t be necessary anyway.

Freehold vs Leasehold

As always, each type has a lot of potential for growth and each comes with its own set of risks and benefits. For investors looking to purchase flats or properties in high-demand urban areas, leasehold properties can still offer attractive returns, but careful attention must be paid to the terms of the lease and any associated costs. Freehold properties provide long-term security, full control, and fewer ongoing costs, making them a better choice for investors who are looking for stability and long-term capital appreciation. Ultimately, it depends on your investment goals and strategy.

UK off-plan property investment and freeholds

It’s not every day you see freehold off-plan properties on the market. These tend to be highly coveted and come with strong rental yields. They also tend to appreciate in value faster. Off-plan and freehold offer the best of both worlds: flexibility, complete ownership, and – very enticingly – comes with no ground rent charges.

Castle Irwell

Castle Irwell is a new development right in Salford’s green and peaceful north, positioned next to the River Irwell. Drawing on nature and natural surroundings, this high-spec development is a series of off-plan, freehold houses ranging from 2 to 4 bedrooms.

What’s notable about this development is that it is in a more residential area away from Salford city centre, which is currently experiencing exponential growth and skyrocketing house prices. As Salford expands and the population grows, we can expect to see strong house price growth in the surrounding areas. This, coupled with the fact that the property is a freehold one, makes it an interesting and lucrative opportunity for investors.

To find out more about Castle Irwell, click here.

Wharfside Mews

Wharfside Mews is an exclusive collection of 3 freehold townhouses right in the heart of London. It has great transport links and is only a short distance from Canary Wharf – the UK’s economic and financial capital. These stunning freehold opportunities can be secured with just a 10% deposit. A freehold opportunity like this in London isn’t seen very often so be sure to call today to lock in.

More information can be found here.

The Meadows

A unique investment from an esteemed developer, The Meadows is a series of 59 curated freehold homes located in Spalding – a popular commuter town. Nestled in a quaint and picturesque area, these homes are a great chance for investors looking to build cash over a relatively short period through capital appreciation and an assured 5% net yield over the course of five years.

Find out more by calling us today.

Summary

North Property Group is a property investment agency that also offers a full end-to-end lettings service. We have a core focus on off-plan property, often selling predominantly leasehold but some freehold opportunities as well. Freehold is a fantastic chance for investors to net deals and see more capital appreciation and lower fees. 

Specialising in off-plan property, we are delighted to showcase a series of high-specification freehold units to investors – a truly one-off opportunity. We have freehold homes across England, offering unbeatable ROI and a unique investment opportunity. What’s more, is that this doesn’t come with ground rent and appreciates in value much more than a leasehold property. Book a free consultation with us today to find your next freehold opportunity in the UK real estate and UK off-plan property industry.