Buying a 40yrs lease council owned flat

mymini

Hi, everyone.

I am thinking of buying a flat with 40yrs lease left. It owned by the council. It is a repossession property and it advertised by the local estate agency for £65k. The similar property in the same area is around £80k, the potential rental income is around £500pcm. I am a cash buyer.

If I am renting the property out, Is it a viable investment?

If I decide to renew the lease on the flat, How much do I have to pay? How much is the solicitor charge for the service? Do I have to wait for 2 years?

Thanks in advance.

poppysarah

You can find out in advance - yes you have to wait 2 years.
There's a leasehold forum somewhere with a calculator.

Flats also have issues with service charges and repair charges.
Make sure you're fully aware of your liabilities.

mymini

Thanks for your reply.

http://www.tenancy-agreements.co.uk/lease.php

Is this the calculator you talking about?

What is the yield value based on?

Many thanks

Fire_Fox

Do you mean a similar property is for sale for £80K or actually sold for £80K? Lease calculator on link below, however I don't think you can use any of the online calculators for short leases. Also an article explaining the lease extension process and another detailing you obligations to contribute to repairs and improvements to the block. Note that with councils these occasionally run to tens of thousands of pounds!
http://www.lease-advice.org/

mymini

Fire_Fox wrote: »

Do you mean a similar property is for sale for £80K or actually sold for £80K? Lease calculator on link below, however I don't think you can use any of the online calculators for short leases. Also an article explaining the lease extension process and another detailing you obligations to contribute to repairs and improvements to the block. Note that with councils these occasionally run to tens of thousands of pounds!
http://www.lease-advice.org/

Thanks for your advice.

A similar property is for sale for £80K with 90 years of lease.

Fire_Fox

mymini wrote: »

Thanks for your advice.

A similar property is for sale for £80K with 90 years of lease.

For sale prices are what the vendor wants/ needs/ hopes for to be able to afford a larger place: look at land registry sold prices to find the true value. www.houseprices.co.uk

Ulfar

I take it you aren't using a mortgage to buy this property, if you are I am surprised a bank will lend on it.

Banks get very funny once the lease is less than 80 years.

The property that is up for £80k with 90 years on the lease is that also a repossession ?

seabright

Most lenders want 30-40 years left on the lease AFTER their mortgage ends, so on a 25 year mortgage you need a 55-60 year lease.

You could try and find a lender who'll accept 30 years when the lease ends and then apply for a 5 year mortgage, giving you your 2 years plus time to get the lease extension sorted.

But, this might not be a normal high street lender, so you might have to pay higher rates of interest and higher fees.

<sebb>

The OP said they were a cash buyer so mortgage isnt a problem. However without the lease extension, it will be very difficult to sell on.

silvercar

65k for a 40 year lease vs 80k for a 90 year lease.

I would guess that the longer lease is better value, given the hassle involved in extending leases and that you have to pay both sides legal costs.

mymini

Ulfar wrote: »

I take it you aren't using a mortgage to buy this property, if you are I am surprised a bank will lend on it.

Banks get very funny once the lease is less than 80 years.

The property that is up for £80k with 90 years on the lease is that also a repossession ?

Thanks for your reply.

No, it is a private sale.