buying freehold

amanda47

Sorry if this is in the wrong place feel free to move me .
I applied to buy the freehold on my property and have received a reply today would you say this is a good price £1700 for the freehold and £1000 for costs.76yrs left on lease. your views much appreciated :beer:

Blacksheep1979

excellent price - anything under £5k is amazing

sorry, taking the Michael there, you don't say what the property is, where it is, value, how many other properties on the land, what the ground rent is etc.

Fire_Fox

Everything leasehold here:
http://www.lease-advice.org/publications/

amanda47

Sorry DUH LOL . Mid Terrace property worth right now £110.000 ground rent £18.00 a year, house nr Caerphilly south Wales.

marcg

Freeholds are often offered up for sale by developers and typically sell for 4% yield. This means the price reflects a return income of 4%.

I don't know if this is applicable to a one-off like yours but if it was then your £18 year would represent 4% of £450.

£1700 means 1% as income which is the sort of value you'd expect a blue-chip company investment to return. ie Barclays Bank has a 100 year leasehold on AN Other building somewhere, paying £1000 a year in ground rent. We don't really expect them to go bust (I know, I know) so would be willing to buy the freehold for £100,000 since we know that we will get 1% of that back almost for sure for the next 100 years.

So I think £1700 is too much. But then again it's only a small amount of difference in the long term. Why do you want the freehold? If it's only costing you £18 a year why not keep your £1700 in the bank and pay them £18 a year from the interest and pocket the rest?

amanda47

Thank you the reason we are buying the freehold when the house is left to children I don't want any problems for them.
a friend of mine died last year leaving her house to her children and there have been so many problems there wasn't many years left on the lease and it has cost them thousands.

thank you for explaining

Ian_W

marcg wrote: »

Freeholds are often offered up for sale by developers and typically sell for 4% yield. This means the price reflects a return income of 4%.

I'm sorry marc I don't think that is a particularly helpful comparison. A developer is a willing seller and a commercial buyer is only prepared to pay what for them provides a sound financial return. It is certainly one way of valuing the sale of a freehold - but it is a completely different one from the valuation placed on a freehold that a leaseholder wishes to buy.

Fire Fox linked to lease-advice in an earlier post but THIS PAGE specifically deals with leasehold house FAQ's. Whilst the price may be on the high side, you should consider it the first stage of negotiation and if you are still interested make them a (much) lower offer. They can only refuse or make a counter offer.

I don't know how old the OP is and, of course, they're unlikely to know when the house is likely to pass to their children but as time passes the reducing length of the lease becomes more of a problem. Purchasers and lenders become more wary and the freeholder is likely to ask for more the shorter it gets.

Only you can decide whether the purchase is worth the money. With 70+yrs there shouldn't be many problems but once it gets into the 60's it will start to become a bit more of one. At that point the freeholder knows he has you over a barrel - you can force a sale but it's an expensive process.

amanda47

Thank you all for your advise. Ian can I ask please how much you would offer them ? and what would I say in a letter back to them not much good at this sort of thing and theres no one I can ask advise from.

thank you so much.

Richard_Webster

1700 for the freehold and £1000 for costs.76yrs left on lease. your views much appreciated

I don't know if this is applicable to a one-off like yours but if it was then your £18 year would represent 4% of £450.

Taking just a 4% yield on a 999 year lease would be give a figure that was reasonably what you would pay - but in this case there is also the value of the reversion, i.e. what sum when invested at a reasonable rate (not sure whether we are looking 4-5%) would bring in £110,000 in 76 years time when the freeholder would be entitled to have the property revert to him. If you work out this figure assuming 5% compound interest (which would be appropriate for flats following the Sportelli case - but I'm not sure how far it is applicable to houses) then you get about £2,700 - add that to the £450 and you get £3,150 so in that context the figures suggested don't seem that unreasonable.

The lease-advice.org website gives detailed explanations of the calculation should be done and the method used does depend on obscure things like the rateable value of the property!

amanda47

thank you .