Why on Earth would you choose not to own the land beneath your home?

Why would you accept “limited” ownership?

And why, if you’re serious about building wealth, would you deliberately buy something cheaper?

Buying a leasehold property in the UK has advantages most people don’t talk about, such as how the money saved versus a more expensive freehold can make you much wealthier in the long term.

In my book Minimalist Investor I talk about buying the right property, with examples on what this can mean financially for you in the long term — or, how “buying the biggest house you can afford with whichever bank will lend you the most” is a reason most people spend their lives paying off mortgage debt rather than accumulating wealth.

Have you considered stretching your mortgage to the max rarely makes you wealthy?

Buying beneath your means does, so let’s take a pragmatic look at why you would buy a leasehold property:

What is a leasehold property?

Let’s start with the basics.

When you buy leasehold, you own the property for a fixed term. The land underneath — the freehold — belongs to someone else.

When the lease expires, ownership returns to the freeholder.

That sounds alarming. It rarely is.

Most leases run 99, 125, even 999 years, so most of the time you’re not buying something which vanishes in your lifetime. And in reality, most leases are extended long before they expire.

When the majority of buyers will opt for a freehold over a leasehold because they have the borrowing capacity to do so, for you buying a leasehold can be an opportunity to buy what you need at a lower price point – which can save you a lot of money in the long run.

Lower upfront costs

Leasehold properties are usually flats, and flats are usually cheaper.

A cheaper purchase price means:

• Lower deposit
• Lower mortgage
• Lower Stamp Duty
• Lower Land Registry fees

Compared to the costs of owning a freehold or larger property, all these costs add up and make a big difference.

For you, that can mean money left over at the end of the month to enjoy your life, invest for your future, and less of the financial stress others are suffering (but won’t tell you about).

It’s not only the monetary savings in mortgage, fees, and tax, but heating bills are often much cheaper in flats thanks to your neighbours providing heat for you – all these little savings add up over time, and offer less stress for you compared to those paying through the nose to heat their freehold properties.

Let’s say your savings from buying a leasehold were £500 per month. What would you do with that extra money?

That’s a nice weekend away, some lovely meals out, the freedom to pursue hobbies, or invested in the stock market earning compound interest over the coming years can be life changing.

In short – when others are paying much more for a property they don’t really need, you’ll be paying off your mortgage much quicker, or quietly building wealth behind the scenes.

Lower stamp duty (and often none at all)

Because the purchase price of leaseholds is lower, Stamp Duty Land Tax is lower too.

Many first-time buyers fall under the threshold entirely, and that’s thousands of pounds saved from day one.

Isn’t it better to keep hold of your hard earned money rather than hand it over to HMRC?

Council tax, utilities and ongoing costs

Let’s assume a leasehold is both cheaper and smaller than what you could push to buy as a freehold.

The difference in ongoing costs can be significant:

• Lower council tax band.
• Lower heating bills.
• Less to furnish.
• Less to repair.
• Less to replace.

A bigger home doesn’t just cost more to buy. It costs more every single year you own it.

Having a more minimalist view to property reduces financial drag.

It doesn’t necessarily mean sacrifice either, as many flats are very practical, with more than sufficient living space, and when you spend the time to find the right one – can offer you a very zen standard of living.

Maintenance and gardening taken care of

With leasehold, you’re responsible for your own flat. The freeholder handles communal areas.

Roof. Stairwell. External structure. Shared gardens.

Yes, you pay service charges, but it takes away the stress of endless maintenance jobs which eat in to your evenings and weekends.

Time saved has value too.

Buildings insurance sorted

The freeholder arranges buildings insurance for the block, which you contribute via service charges.

It’s structured and handled.

Simple.

Access to communal facilities

Many leasehold properties offer shared gardens, parking areas, refuse storage, and sometimes gyms or roof terraces.

You enjoy the benefit.

You don’t carry the full cost.

Would you rather privately fund space you barely use?

Or share it and invest the difference?

Leaseholds as future investment properties

Here’s something many people overlook.

A well-bought leasehold flat can become a powerful investment later.

This may not be something you consider when buying a property, but you definitely should. A few years from now you’ll likely be in a better position financially, so having a leasehold with the potential of being a high-yield rental or AirBnB can take you one step further towards being wealthy.

Before buying a leasehold, check with the lease to find out if you can do the following:

• Convert it to buy-to-let
• Rent it long-term
• Use it for short-term lets (where permitted)

Flats are often in high-demand areas — near transport links, city centres, universities.

That’s exactly where renters want to be.

Because leaseholds are usually cheaper than houses, you may be able to acquire more than one over time rather than tying all your capital into a single large freehold.

Diversification reduces risk!

And, if you later move to a house, keeping the flat as an income-producing asset can be a smart transition strategy (you’ll find some great tips in the book on how to offset tax from rental income).

Always check lease terms first — subletting restrictions do matter.

But done properly, leasehold can be an entry point to property investing, not a dead end.

No more ground rent on new leases

Following the Leasehold Reform (Ground Rent) Act 2022, new leases can no longer include ground rent charges.

One of the biggest historical criticisms of leasehold has largely been removed for modern purchases.

It’s not a perfect system, but it’s evolving.

The disadvantages of leaseholds you must understand

Buying a leasehold does come with trade-offs, so I advise you to consider them carefully.

These tradeoffs may matter more, or matter less to you depending on your budget, borrowing power, salary, and the location you plan to buy in.

Let’s take a look…

Restrictions on use

Your lease will contain covenants.

You may face restrictions on:

• Subletting
• Running a business
• Pets
• Structural alterations

Ignore them and you may risk legal action. Read the lease carefully.

You may also have to deal with unruly neighbours, or renters who don’t care about where they live as much as you do.

Limited ownership rights

You may need permission to make improvements, and sometimes improvements are prohibited entirely.

If you want full autonomy, freehold may suit you better. However, given the cost of tradesman these days you can argue not being able to blow your money on home renovations is a perk, not a hindrance.

If you want a stable, manageable base while investing aggressively elsewhere, leasehold can really work.

The 80-year rule

Remember this number: 80.

If the lease drops below 80 years, extending it becomes significantly more expensive due to “marriage value”.

Mortgage lenders also become cautious, and this seems to be more the case now than ever – so be warned, this can lead to getting your hopes up in buying a leasehold you’ve fallen in love with, only to find lenders bail out after conducting a valuation.

Always check the remaining lease term, and keep in mind extending earlier is usually cheaper than waiting.

Service charges and major works

Always consider the cost of maintenance and likelihood of major works in the coming years which can lead to an increase in maintenance costs.

For example, a flat in a beautiful historic building may look appealing, but may lead to unexpected service costs in the near future.

It is recommended you review past accounts thoroughly to give you an idea of major works which have occurred before, and remember a cheap purchase price isn’t an excuse to not do due dilligence.

Selling can take longer

Generally selling a leasehold isn’t too much different to selling a freehold, but it’s worth factoring in leaseholds involve more paperwork and there may be additional fees.

It’s worth keeping in mind selling a leasehold can be slower than a freehold, so factor that in.

That said, affordable properties in the right areas sell quicker than larger properties, or properties in more rural areas. That means, if you need to sell the flat later, you should have a larger market of potential buyers.

Investment returns vs property growth

The UK property market has been very stagnant for many years, and regulatory changes have made it harder for investors to buy additional properties – combined with less-favourable regulations when renting properties.

There are various factors which have led to property prices in the UK remaining flat, or in some areas falling, in recent years, yet many people don’t like to hear this.

Needless to say, prior generations who grow up in the 20th century benefited more lucratively from property price booms and property investments.

In recent years, global equity markets have frequently outperformed UK property growth, which has meant those savvy enough to put their money in index-funds like the FTSE 100, S&P 500, or World All Cap funds have made much more money than those who’ve put all their money in UK property.

Not only have investors made more money, but it’s also a lot easier to invest money and let it earn money than it is to run Buy To Lets and deal with tenants.

Also, buy minimalising on your own property and only buying what you need – such as a cheaper leasehold – gives you a wonderful opportunity to diversify and invest as well.

Keep in mind property also carries friction:

• Stamp duty
• Legal fees
• Maintenance
• Mortgage interest
• Estate agent fees

If you deliberately buy a modest leasehold instead of stretching for a large freehold house, you may free up substantial capital over your lifetime.

I consider it much better, therefore, to keep your property costs low, and maximise contributions to savings accounts such as tax-free ISAs, pensions, and even better – leveraging any salary sacrifice scheme offered by your employer.

I task you to see what an extra £5k a year in an ISA will amount to with compound interest at 7 to 10% over the next 10 or 20 years.

It may show you how some become very wealthy, and most don’t.

So why would anyone buy a leasehold property?

Buying a leasehold can have numerous benefits:

• Lower your upfront costs
• Reduce monthly pressure
• Minimise lifestyle inflation
• Free capital for higher-return investments
• Provide flexibility for future rental income
• Serve as a stepping stone rather than a financial anchor

The real question isn’t:

“Is leasehold perfect?”

It’s:

“Does this property meet my needs without limiting my ability to invest?”

If it does, then it may not just be acceptable.

It may be financially intelligent.

And financial intelligence compounds!