What are the benefits of a flat with a short lease?

Ever found yourself wondering, "Why would anyone buy a flat with a short lease?" It's a perfectly fair question, and frankly, it's one we get asked a lot. I'm going to lay out exactly why they can be a genuinely good option, whether you're an investor or just looking for a home to call your own.

Lots of homeowners tend to gloss over short-lease flats. They can sound a bit daunting, or perhaps you're simply not quite sure what's involved. But here's the thing: if you understand the process, there's a real opportunity here. And that goes for both seasoned investors and those of you simply looking to get onto the property ladder.

For Investors: It's About the Figures (and Adding Value!)

A good chunk of this applies to homeowners too, but for investors, the biggest draw is undeniably financial. Properties with shorter leases are, by their very nature, worth less than their long-lease equivalents. Imagine two identical flats in the same block: one with 100 years on the lease might fetch £100,000, while the one with, say, 40 years will be worth significantly less.

This lower purchase price offers a couple of key advantages:

• Lower Stamp Duty: A reduced buying price directly means less stamp duty to pay. With recent increases making stamp duty more of a pinch, especially for investors, any saving here is a definite bonus.
• A Clear Path to Adding Value: A short lease isn't a problem; it's an opportunity to genuinely add value. You might pick up a flat that's in perfectly good condition, ideal for a buy-to-let, and get a tenant in straight away - the lease length truly makes no difference to them. But because you're buying it at a discount (thanks to that shorter lease), you're essentially buying equity into your investment as soon as you extend the lease. Why do people invest in property? To get an income and grow their wealth! It’s not just about the rental income; it's about building that equity over time. That's where the real long-term wealth in property comes from.

So, you're buying at a discount. Not only do you benefit from long-term capital appreciation, but as soon as you extend that lease, you immediately see an uplift in value. Factor this into your sums, and you could quite easily find yourself buying properties below market value, simply by sorting out the paperwork for a lease extension. It can be that straightforward.

Beyond "BRR": Consider "BLR"

Many investors are familiar with BRR (Buy, Refurbish, Refinance). That's where you buy a property that needs work, do it up to add value, and then refinance to pull your money out. Well, I'd like to introduce you to BLR (Buy, Lease Extension, Refinance).

It works in much the same way as a refurbishment. You add value to the property by extending the lease, and then you can refinance afterwards to pull some of that money out if you wish. Or simply refinance to recoup your initial cash, or even to cover the cost of the lease extension itself. There are plenty of options here, and it’s something people often overlook. It might not feel as hands-on as ripping out an old kitchen, but the effect is identical: you are able to add significant value to that property.

From an investor's point of view, it boils down to a cheaper purchase price, lower stamp duty, and a solid opportunity to add value and build in some equity.

For Homeowners: Making Your Ideal Home More Attainable

Now, let's look at it from your perspective as a homeowner. Why would you want to buy a flat with a short lease?

Some of the benefits overlap with investors: a lower purchase price and lower stamp duty. Ultimately, this means an easier path to getting onto the property ladder. Plus, if you extend the lease, you're building equity in your own home. While you might not be buying with "investment" front of mind, property in the UK is a huge wealth vehicle for most people. So, even if it's your dream home, adding value and building equity is certainly no bad thing - it's a very welcome bonus!

Another compelling reason for homeowners is that it can allow you to access properties you might not have been able to afford otherwise. Are you a first-time buyer finding your options limited to one-bedroom flats? A short-lease flat might suddenly make a two-bedroom property achievable, or even a place with a garden! The discount due to the shorter lease can unlock those extra features you’d actually quite like to have.

And you don't need to always worry about mortgages. Depending on the lease length, you can still secure them on flats with short leases.

Could a Short Lease Flat Be Right for You?

So, there you have it. The options are definitely there for both investors and those looking to buy a home. While I'll admit I'm biased (yes, I help people sell them, and yes, I invest in them myself), I genuinely believe short-lease flats can be a good option regardless of your situation of investing or buying to live. Though, of course, your individual circumstances always need to be right – I always have to add that caveat!

If you'd like to discuss your circumstances, understand how lease extensions truly work, or if this is an idea you hadn't considered before, please don't hesitate to get in touch.