all right! Let’s find ourselves a house cheap houses.. what? 65 grand for a house
I’ll take it whoa whoa whoa cowboy slow down there’s a reason why the price
point is so low there’s some stuff in the fine print you really need to pay
attention to so stick around and I’ll explain why see you on the other side what’s going on guys this is Patrick
calling from Keller Williams and today we’re going to go over the difference
between leasehold and fee simple and that’s the main reason why you might be
seeing properties for like 65 grand here on Zillow and there’s a real important
reason why it is priced so low and the reason why is because it’s a leasehold
property not a fee simple property and what I’m going to do today is I’m going
to go over the differences the pros and cons and when it would be a good idea to
go with the leasehold property and when it would not be a good idea so for us to
fully understand the difference between fee simple and leasehold let’s look at
each one as an individual okay so now fee simple this is ninety percent of
what you’ll see nationwide when it comes to real estate now here in Hawaii we do
have a large portion of leasehold properties and that’s why you might see
properties that are for 100 grand 135 grand what have you very cheap compared
to what you see out there in the market when it comes to a home that you
actually own outright and that’s the main difference when you purchase a fee
simple home you own the land and the house when you purchase a leasehold
property you own the house but not the land you’re essentially renting or
leasing the land and depending on how long that lease is really will reflect
what the price is all right guys so let’s take a look at this property that
actually one of my clients showed me and call me they were super excited about it
they said we found this house it’s 135 grand we want to get it can you look
into it for me and as soon as I heard that I knew right away it’s most likely
lease hold that but I said let me look into it and see how long the lease is
and see if the numbers make sense for you to actually purchase it and I’ll
explain later when it makes sense to purchase a leasehold property but in the
meantime if you do see a property that’s this low it most likely is leasehold and
what you’re gonna want to do is figure out how long is that lease and how much
is it a month to rent essentially the land okay
so if you scroll down to the bottom usually in the description area it will
tell you how long it is until that lease expires now we can see here that this
lease expires in 2027 so more or less it expires in
seven years seven eight years so what does that mean that means that when this
expires you basically have two options first one is you basically just have to
give the house back because you don’t own the land right so you basically have
to give the house back after seven years the other option is sometimes the owner
that has that lease is willing to sell the lease but that price can be very
high it’s based on what the land is valued at and we can see down here just
based on the tax assessment the land is worth three hundred and seventy seven
thousand dollars so that’s the tricky part here is that you need to find out
even if you start looking at a home is there an option to purchase the lease
after it expires and how long is it till that leased actually expires because if
it’s a long time it might make sense to buy it and you can maybe use it as
investment property rented out and if the cash flow is there and it covers the
expenses it might not be a bad idea but in this case it’s seven years till
it expires so I highly suggest it to my client that it really doesn’t make sense
I highly suggest you be careful when you see these properties that are very cheap
and the things that you want to look at is how long is it till the lease expires
and what is the monthly lease rent you have to pay so that is something you
guys want to pay attention to and that is leasehold in a nutshell and what it
means so if you guys have any other further questions feel free to reach out
to me and I’d be happy to help so as you guys can see yes it’s a very affordable
price home but from an investment standpoint it’s not really the best
option for you because like you saw on this property this thing is done in
about seven years and you basically have to give the house back and what’s the
point of buying a house if you have to give it back after seven years you might
as well just rent something you save enough cash to actually buy a
few simple property now there are some cases where this would be a good
strategy for an investor let’s say you find a property that’s you know 200
grand and it’s leasehold and it doesn’t expire for 15-20 years you can get that
property for a very low price the lease probably isn’t too bad and you could
probably find somebody to rent it and have a positive cash flow but you
wouldn’t make any money after you sold it essentially because as that lease
expiration date gets smaller and smaller and smaller and your property actually
depreciates and what you can actually sell it for because it’s not that
attractive when you sell it and that lease expiration date gets shorter if
that makes sense but anyways if you guys have any other further questions in
regards to fees simple versus leasehold properties by all means reach out to me
I would love to go in more detail with you but today I just wanted to give you
a brief overview of what the difference is and why you need to be careful when
you find properties that seem a little too good to be true because they
basically are anyways that’s it for now guys thanks for checking out this video
if you have any further questions feel free to hit me up otherwise if you like
the video share comment like and subscribe
I’d really appreciate it anyways have a beautiful day I’ll talk to you soon
Aloha hey guys thanks again for checking out my video if you guys have any
questions or comments please put them in the comments section down below I will
personally reply to each and every single one of them so I look forward to
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