leasehold apartment Archives - Apartment Specialists

Tag: leasehold apartment

When selling your apartment, did you know there are more than just commission costs? We know, at Apartment Specialists, that, at the end of the day, you want to know how much you’ll be getting in your back pocket when your apartment has sold. You might be surprised to know that you may even get money back. We’ll help you to get a broader picture of what these other expenses are, understand ALL the costs when selling your apartment,  so you can take them into account.

SUMMARY:

The knowledge of what costs you will incur during the process of selling is so important and it is more than just the agent’s commission.

The costs involved are more than just the commission. There are several others involved but don’t let that deter your choice to sell.

Marketing costs generally are around $600 when a property is selling for under a million and around $2300 for property over and above that price.

Lawyer’s fees can range from anywhere between $800 and $1000 for a property with no mortgage and up towards $1300 for a property with a mortgage. Where there is a sale that is more complicated for example a building that may need more due diligence due to building issues these lawyers’ fees may be upwards to $2000.

Lastly, a cost that is overseen when your property is tenanted during the decision of sale being made, your tenants may leave before settlement date leaving you with no income for several weeks. This is where you need to ensure you are prepared for this and/or bring the settlement date forward if able to.

And the good news; you may sometimes be eligible for money back. If you have covered your Body Corporate fees for the year and sell part way through the year you will receive the overpaid amount back upon settlement. Rates are the same deal and will be reimbursed if any are overpaid.

SUMMARY:

Leasehold land is valued by both the leasehold apartment owners and the land owners gaining fair valuations and the meeting in the middle somewhere to agree upon what the yearly fees will be.

Leasehold land sits under leasehold apartments and depending on the worth of the land that will determine the amount needed to be paid per year.

It is generally calculated by square metre and by both the leasehold land owners and as well as the leasehold hold apartment owners by professional valuers.

From there an agreement is made on the amount which is usually somewhere in the middle. Each lease is paid by the size and value of your apartment, for example a bigger apartment or the penthouse will pay more annually than a smaller apartment lower to the ground.

Something to note as a leasehold apartment owner is by figuring out how the land value can be reduced, this can be due to Council restrictions, building height restrictions and other similar factors. This can work in your favour, by lowering the annual leasehold fees due. This can make the idea of owning leasehold far more attractive.

TRANSCRIPTION:

Good day. Andrew Murray here from the Apartment Specialist, talking about how is leasehold valued. And what I mean by that is leasehold land that sits under leasehold apartments and that then determines how much a leasehold apartment has to pay per year.

How is this figure come about that they pay? And it’s generally a per metre squared figure, i.e. $4,000 or $4,500 per square metre.

Now it’s done through evaluations. So the owner of the land, called the lessor, would get a valuation, and they obviously want the highest possible value. Then you have the lessee, which are the owners of the apartments, and they will get the valuation themselves, and they will obviously want the lowest figure.

Generally what happens is, they meet somewhere in the middle and an agreement is made. There will be that per metre squared amount times by the area of the total land that is being leased, and if they will come to what has to be paid each year.

But they don’t have to pay that full figure value of the land each year. It comes down to a percentage, and this percentage is set in the lease, and it varies anywhere between five and eight percent. So, between five and eight percent of that value of the total land gets paid by all the apartment owners each year.

And what determines how much each apartment owner pays, is by the size and the value of the apartment, i.e. the penthouse will have to pay more than a studio down the bottom, for example.

Now, the big question is how you determine what is a good leasehold unit, and how I look at it is, how can a land be devalued, and that is what’s key here.

So there’s many ways you can devalue land or leasehold land. So I’m going to be looking at things like height restrictions set by the council. I’ll be looking at floor space, i.e. what is the ratio that you can actually build on the land? What are the restrictions? Are the restrictions put in place? Are there things that are going to be happening? Is there a train going underneath the building? All these kinds of things and these different kind of factors. Is the land on reclaimed land?

So there are lot of ways that you can actually– a lot of land in the CBD and other areas that is actually quite attractive due to the restrictions on land which will restrict the future value. Anyway, I hope that helps, with how leasehold land is valued.

If you have any questions, flick me an email at andrew@apartmentspecialists.co.nz or call +6421 424 892 and I’ll be happy to help you with your queries.

Andrew Murray, Apartment Specialist. Cheers.

Summary:

The factors to consider are, how much care you are needing? If a comfortable lifestyle is desired? And if you are wanting to free up capital to enjoy the latter years of your life? Read on in the bio for more information or watch the bio.

What is the better option for my retirement? Leasehold is great for lifestyle and means you can have a fantastic life. The annual fees can be quite affordable and it is more desirable than buying a retirement home or apartment.

Leasehold apartments can be a better option as the properties are usually on the waterfront in a stunning apartment with a beautiful view. It allows you to free up capital to use for external care if needed or to enjoy the latter part of your life with travel, adventures and so on.

With the purchase of either a retirement home or apartment your cost is much higher as you are paying for the facilities and staff involved. These are often in areas that are not as desirable as Leasehold apartment areas and when it comes to selling you are only entitled to get back 75% of what you pad.

As I am not yet in that demographic I can’t be accurate in what is the correct choice but I can suggest that the Leasehold option shows more desirable attributes than being in a retirement village or apartment complex.

TRANSCRIPTION:

Good day, Andrew Murray here from The Apartment Specialists, and today we’ll be talking about a retirement home and leasehold apartments. Now, I’ve recently just taken an elderly couple through a lovely penthouse which would have been probably worth about a million and a half if it was freehold, and obviously it was going for a fraction of the price, being leasehold. Now, leasehold is great for lifestyle. Of course, you  have those outgoings, and all the numbers worked for them and it was great.

But that’s not what really got me thinking, because what they did is, they actually talked to me about their other option. And that was going into a retirement home or retirement apartment and the costs involved. I checked this all out, and what they said was 100% true. Basically, their other option was to go and purchase an apartment in a retirement sort of village complex. They’re purchasing at freehold prices, and there’s not enough of them so the prices are very, very expensive.

Yet when they choose to sell that apartment, for whatever reason – if it’s because they’ve passed away. They suddenly change their mind for whatever reasons, and they only get back 75% of what they paid, even if the market had doubled. Whether that was at 1 year; or 5 years; or 20 years down the track. Then on top of that, they had to pay for the renovation of the apartment to get it ready for sale. On top of this, there were all these costs involved of having people on call 24/7.

This got me thinking. Leasehold is about lifestyle, it’s about freeing up capital to be able to use in other areas to create more income. It’s just simply to enjoy your lifestyle because you’re asset rich, cash poor. But it made me start thinking about – is this actually or could it be an option that’s better than this retirement option seems to be? It shocked me, and the reason why I’m thinking that is the lifestyle is clearly – you’re on the waterfront.

You’re living in a apartment that is stunning. It’s only the last couple of years where you really need the care, in my opinion. Now, please take it that I can’t talk for the demographic that’s actually involved here, because I’m a younger male and I don’t have the authority to do so. So, this is more about just getting people to consider or ask questions. But if you could organise a private firm to come and be on call 24/7 in your huge apartment on the waterfront, at the push of a button.

You’ve got all this capital to go on cruises or holidays, which is actually the better option? And as I said, I don’t know because I’m not in that demographic, because there’s so many other things to consider. But from a financial and lifestyle point of view, it seems like a no-brainer to  all those people who are in that demographic, it’s something to think about.

Check out the  numbers on both sides, and the lifestyle, and what you need. I’ll be really interested to hear from you on what your thoughts are. Anyway, Andrew Murray, Apartment Specialists.

You can email me at andrew@apartmentspecialists.co.nz or call +6421 424 892 and I’ll be happy to hear your opinions.

Cheers!

Apartment Specialists Podcast No: 103

Summary:

Are you willing to buy a leasehold apartment? We all know that leasehold apartments are cheaper than its freehold counterparts and many buyers would want to take advantage of this option. In this podcast, Andrew will shed some light on whether a leasehold apartment is the most suitable option for you. Get all the answers from this video.

TRANSCRIPTION:

Good day, Andrew Murray here from Apartment Specialists. Today we’re talking about leasehold apartments. Now, the question I get asked a lot is, “Should I buy a leasehold apartment?” And it’s not about, there is a yes or no. It’s only really if you can figure that out, and it’s whether it suits you.

It suits people who want to use their money in other areas. For example, the benefit of buying a leasehold apartment is the price. For example, a $600,000 freehold apartment, if it’s leasehold, is about $200,000. A $2,000,000 freehold apartment, if it’s leasehold, is about $800,000. It’s all about the mortgage and the opportunity cost of what you could do with that money because the definition of an investment is one that brings you income. If you’re living in your apartment, it’s not actually an investment. I hope that you get that because an investment has to be bringing you income.

So, the benefit is the mortgage – you don’t have one, or it’s a lot smaller. For example, if you look at, say a $600,000 loan for a freehold property, then you went to purchase this apartment. You would have paid it off over 25 years, and let’s say it was at 6% – I just did the figures before – it came out at, over 25 years, you will pay $1,159,742. That’s almost double your whole loan amount, and that’s at only 6%. That’s as if the interest rates are always 6%. But we know they go higher than that. So that’s a lot of money you’re paying back to the bank.

Now, that’s where the opportunity cost comes in. Because if you can buy a leasehold property for a fraction of that price and don’t have that mortgage – yes, you have the lease payments, but there’s quite a difference there. And a lot of people are finding out that buying a leasehold property works even better. They have a better lifestyle, they get to live in an apartment that would normally could cost millions, and have the best location without the outlay of cash. And they can use that money elsewhere in other investments, other types of property, or they’re using it for their business or other opportunities, or just living the lifestyle – travelling, things like that.

That’s the benefit of leasehold, and if you think you fit into that category, it’s definitely something you want to look into. Look at the figures, see if they work for you – the numbers – and it gives you a great opportunity to be able to buy your dream place without having to pay so much money.

Hope that helps, and yes, leasehold. Just before I go, one of the best things about leasehold is actually the negative stigma that’s around the leasehold market and that’s why these prices are so low. So, my feeling is they’re undervalued at the moment. I’m not saying leasehold is definitely something to buy with a capital gain focus, but I’m saying it’s definitely undervalued because of this stigma that’s come out on the market about leasehold.

Anyway, hope that helps, and it is case-by-case basis for leasehold, so give me a ring if you think all those leasehold could suit you, or email andrew@apartmentspecialists.co.nz.

Talk soon. Cheers, bye.

is it a good idea to buy leasehold apartments in auckland

In New Zealand, many Kiwis want to buy their own apartment and acquire additional property assets, but it is expensive. One thing that many would-be owners do not know is that there is a cost effective way of owning assets – buying leasehold apartments.

What is a leasehold apartment?

What is leasehold and what is the main difference with freehold? In my previous podcast, I mentioned that, “yes the building may be there, and in most cases all the owners own the building but, they don’t own the land that’s underneath the building.”

Leasehold is commonly used in commercial and rural properties, but it’s now being utilised all over the country because it’s miles cheaper than buying the land and building. The most visible leasehold properties are located in Central Auckland where it is estimated that around 15 per cent of the city’s apartment buildings are built on leasehold land. People want to buy cheaper properties and the allure of leasehold is a significant factor in the apartment market.

If we are going to compare both leasehold and freehold apartments, aside from the ownership of the land, the difference is the extra cost, which is the levy to the land owner – that will be dependent on complex to complex.

Why some people are wary of buying a leasehold apartment in Auckland

Now, one reason why leasehold property prices have dropped can be attributed to the annual ground rent, which is reviewed every 7 to 21 years. Rent reviews can vary depending on the lease that was entered by the land owner and building developers.

Now, how much the owners pay is based on the land’s value. Most of the time it is a fixed percentage of the value. In Auckland City alone, the soaring land prices can be a shock for most apartment owners. They don’t expect their annual rent to reach outrageous amounts.

So what makes leasehold apartments inviting?

You might wonder why so many buyers are interested in leasehold apartments that they decide to invest in this type of property.

One thing that attracts many buyers, especially investors to leasehold properties, is the opportunity cost. Some freehold apartments in Auckland cost millions. With leasehold you buy them for a fraction of the price and given the correct valuation and right conditions or circumstance, you can resell them for a higher price.

There are many other benefits to buying a leasehold apartment. For an in-depth discussion, check out this podcast on the subject.

Final Thoughts

Most buyers and investors are not aware of circumstances surrounding leasehold apartments so they cannot make a well-informed decision. They need an apartment specialist who can give them all the necessary information about leasehold properties or at least direct them to better options based on their budget and circumstance.

If you have any question about leasehold apartments, feel free to drop us a comment or send an email to andrew@apartmentspecialists.co.nz.

Apartment Specialists Podcast No: 102

Summary:

Are you planning to buy a leasehold apartment in the Auckland CBD? Do you know the extra cost and how it affects the value of the apartment? All these questions will be answered by Andrew Murray on this podcast as well as the other negatives of purchasing a leasehold apartment.

TRANSCRIPTION:

The negatives of purchasing a leasehold apartment in the Auckland CBD. Now, a leasehold apartment has it’s negatives because it has an extra cost – and this affects it’s value. That’s why they’re so much cheaper. When you look at leasehold apartments, generally, they don’t have the same amounts of capital gain opportunities as possible, so generally freehold apartments will have more capital gain in the future than a leasehold apartment.

This is because that ground root will increase over the years. Having said that, leasehold has had such a bad stigma in New Zealand that my feeling is with a lot of buildings – not all – but in a lot of buildings in the CBD they’re undervalued and some yes, there is capital gain there.

And then the other side is if you’re buying something so cheap, on a percentage term it goes up – say you buy it for $200,000 and it goes up to $220,000 then that’s a 10% increase. But if you pay $600,000 for the freehold equivelant and it went up 10%, well then it would have to go up $60,000.

It is a tough one, but basically speaking leasehold apartments are more about living lifestyle, being able to free up your money to use in other ways. Because an investment is an investment, unless if it’s giving you income – and if you’re living in it, that means technically it’s not an investment.

Yes, the big one is – leasehold doesn’t have the same capital gain future that apartments have in my opinion. That doesn’t mean that’s set in stone, but that’s how I see it.

Anyway, hope that helps. Cheers.

leasehold apartment building landowner


Apartment Specialists Podcast No: 101

Summary:

In this podcast, Andrew Murray talks about leasehold apartments and how much apartment building owners have to pay the landowner. This is an important topic about leasehold apartments that every apartment buyer should know about. Get all the details from this video.

TRANSCRIPTION:

How is it decided how much a leasehold apartment building has to pay the landowner?

This is again a question that I get asked a lot and it’s quite complicated.  Andrew Murray here from Apartment Specialists and I’m talking specifically about leasehold apartments, and today about how much a building has to pay a landowner for the use of the land. How it is done especially if there’s nothing on the land but the building. It all comes down to the lease and how everything is done or be put up in points – if I have the latest value, how often it’s valued and that kind of thing.

Because each lease is different and I will talk about this in general terms. So, the number one thing that it really does come down to is the percentage. What is the percentage of the land value all the owners together have to pay each year for the lease of the land? That’s maybe 7, 8, 9 percent and so that’s very important.

The next thing that’s important is how is the apartment or how is the value of the land determined? And that can vary from the best use of land to otherwise. In general terms, it comes down to owners of the land giving evaluation and the apartment owners giving evaluation. The owners of the land wanting it to be higher and the apartment owners wanting it to be lower.  Generally, they meet in the middle somewhere and agree and the terms each year is set out.

This is not done every year. As I’ve mentioned it’s done 7  to 21 years. Ideally, you want it to be as short as possible because you’re not having big jumps.

For example, 21 years ago – sorry 21 years, 21 years ago,  the land wouldn’t have been worth that much. All of a sudden,  it changes in 21 years’ time and it’s going to be a very big difference. And it’s going to change especially the owners with living costs, and things like that. Ideally, you want it to be 6 to 7 years so you can keep up with the market and it’s more, you know, steep. So this is a rough, very general idea of how it is calculated when you talk about specific leases becasue every single lease is different and every single patch of land is different.

That gets quite complicated and so I suggest sending an email and ask me question below about specifics and I can honestly, quite easily, as its something I’m familiar with, evaluate all the leases in the Auckland CBD in particular, or if not find a lease, I can read through it and explain it to you.

I hope this helps. It’s something that you might not be aware of.

Talk soon! Cheers!

difference leasehold apartment freehold apartment

Apartment Specialists Podcast No: 99

Summary:

Do you know the difference between a leasehold and a freehold apartment? This podcast will explain the various factors and differences between these two types of apartments. Learn more about it by watching this video.

Be an informed buyer, download our Buyers Guide.

TRANSCRIPTION:

What is the difference between a leasehold apartment and a freehold apartment? Good day, it’s Andrew Murray form the Apartment Specialist, talking about freehold apartments and leasehold apartments.

The main difference, which is pretty obvious, is you don’t own the land. So that with a freehold apartment, next your complex or all owners together actually own the land of where the apartment was, or apartment complex was. Now, the leasehold apartment, yes the building may be there, and in most cases all the owners own the building but they don’t own the land that’s underneath the building. Because of that, that means there is an extra cost involved.

The difference is not just because you don’t own the land, that means there are other differences. When you look at websites like Trademe and things like that, and you’re looking through apartments, and you see this amazing apartment for hardly anything. For such a cheap price, than compared to the freehold value. This is because there’s extra cost involved which is called your leasehold levy or your leasehold fee, which you pay to the owners of the land. For example, you may have an apartment that’s worth $600,000, $700,000 when it’s freehold than if you buy it leasehold, it will be only $120,000. That because of that leasehold fee. That lease hold fee means your outgoing is more expensive.

When you actually look at a freehold apartment, you have your body corporate levy, which you pay to manage the building and look after the building and make sure it’s looked after in the future. That is the same with a leasehold apartment. Then your rights, as freehold apartment owner you still have to pay, that is the same with a leasehold apartment owner.

The difference is there’s an extra cost which is that levy to the land-owner, that will be dependent on complex to complex. So leasehold apartments that has a lower levy is worth a lot more than a leasehold apartment that has a higher levy. The big difference is there when it comes down to the value is because of that extra levy.

There are other factors as well as how long that lease is, for example. For some apartments, they only have about 40 years left on them, approximately. Where other leasers have 999 years on. That obviously is a factor as well. The main difference is about leasehold apartment and a freehold apartment is collectively as owners of the complex you don’t own the land.

In another podcast we’ll go through what that means. What are the positives, what are the negatives of buying a leasehold apartment versus a freehold apartment and how that will all hopefully help you figure out if leasehold is for you.

Cheers, see you.