1. A leasehold property is usually less expensive than a comparable fee simple property. This is due to leasehold property having a finite period of ownership.
  2. Since the lease is depreciable, there may be tax advantages for the purchaser.
  3. If a person only wants to live here for a finite period of time, or they are elderly and know that they will not outlive the lease, a leasehold property is a viable option since the person is not concerned about appreciation and the leasehold would be cheaper than a comparable fee simple property.


  1. A leasehold property is not as transferable as fee simple property because of loan restrictions regarding leasehold property. Lenders usually require that the remaining term of the lease be at least 5-10 years longer than the term of the loan, though lending requirements constantly change.
  2. Lenders may also have concerns regarding renegotiated rent. Loans backed by the Veterans Administration and Federal Housing Administration have additional funding restrictions.
  3. The lessor has to consent to the lease, though by law it is not supposed to be unreasonably withheld.
  4. Ownership is for a finite period (the length of a lease).
  5. Possible lease constrictions such as the lessee not being able to build an improvement on the property.
  6. Subject to the surrender clause, the lessee must remove themselves at the end of the lease.
  7. Though the land may appreciate in value, the lessee cannot take advantage of the appreciation since they do not own the land. At the end of a lease, the leasehold owner no longer has an interest in the property so they do not get to take advantage of property appreciation.
  8. The value of a lease decreases over time since the remaining period of the lease diminishes over time.

Questions to ask

  1. How long is the lease term?
  2. When is the expiration date?
  3. Is there an extension clause?
  4. How much is the lease rent?
  5. When are the lease rent renegotiation dates?
  6. How will the new lease rent be determined?
  7. What are the terms of the surrender clause?