| The
best way to describe Fee Simple, is to say that it is the
type of ownership that most of you are accustomed to. You
purchase property, receive title and it's yours or your heirs
forever, or until such time that the property is disposed
of. Leasehold, conversely, is property to which title remains
yours for a specified period of time, at the end of which
the property reverts to the party that holds title in Fee
Simple.
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The most common use of Leasehold title is
to convey land upon which improvements have been or are to
be made, such as a condominium or a single-family residence.
the lease is usually for a period of time in excess of fifty
years during which time you may exercise the rights of ownership
as if you held title in fee.
Your probable immediate negative reaction
to this type of purchase may be erased by a little insight
into the reasons for and benefits of conveying this type of
title to you.
The first reason is that the Fee holder wishes
the property to remain in his estate but would like to drive
some income from the property. Secondly and predominately,
it makes the property affordable. Let's take for example a
three-acre parcel of land, oceanfront, and zoned apartment.
The Market price for the land alone is $4
million. The developer constructs forty condominium apartments
of equal size and sells them Leasehold on a seventy-five year
lease. The lease payments are fixed for a term of thirty years
at which time the lease is renegotiated. The fixed payments
are 200 for the first ten years, $250 for the second ten years
and $300 for the third ten years.
Now compare these monthly payments to the
payment that you would make if you had purchased the apartment
fee simple. The price would be $100,000 more for each apartment.
Your down payment would be at least $20,000 more and you would
be financing an additional $80,000, representing an additional
monthly payment of over $1000, depending on the interest rate.
This higher down payment and monthly payment could well take
the property out of an affordable price range for you.
There are tax benefits in purchasing Leasehold
properties. However, taxes are unique to the individual and
it is suggested that you consult a tax expert.
Real
Estate Contracts | Fee
simple | Leasehold
vs. Fee Simple | Buying
the freehold of a flat |
Buying
the freehold | What
is freehold land? | Best
Real Estate Property Investment Potential |
Consolidation
Loans Being Free | Freehold
and Leasehold Property in Chandigarh |
