Mortgage on Studio with no Management Co

Hourglass

Thanks EdInvestor - I have been writing down the list of questions that I need to ask the solicitors tomorrow and should be able to report back tomorrow with the details. I'm pretty sure that this is why the flat is so cheap as it is in a good area so it may be that once this issue has been resolved the flat will go up in value.

The lease is 85 years - that I do know .

Fitzy29

Hi hourglass,

I work as a buy to let mortgage advisor, the main reason only a few lenders will lend on your studio flat is that in their experince they find that they are hard properties to sell. In the banks view if you don't pay your mortgage then they are going to have to sell it to claim their money back. The same applies to flats above shop, pubs etc...they are a higher risk. You need to ask yourself if you want to be stuck with a slow selling property should you need to move on etc...

Banks will lend money on any property as long as it has a good marketale title, so if lots won't I would be very vary.

MortgageMamma

Bear in mind also there are legal costs associated with setting up a management company for the premises and your own legal work will be higher costs than normal to do all this. At this point, I would stop and ask yourself....is this flat really worth all this? I personally, wouldnt touch it, as I think with it being a studio flat you might struggle to sell in future as it is only marketable to certain types.

Hourglass

Hi everyone - thanks for all your replies and advice.

I have made a decision to see what the vendor's solicitor comes back with tomorrow. If it turns out that there is a leaseholder who is responsible for the communal areas etc then it may be easier. Unfortunately I am looking to move to one of the more expensive areas of the country where a 1 bed flat starts at 85k and as a single FTB earning 17k this is out of my reach. I am hoping to split the main sitting room/bedroom into 2 to create a small bedroom and separate sitting room to add some value later on when I do come to sell.

My first priority is to find somewhere nearer to work as I am currently commuting about 3 hours each day and as I enjoy (well, within reason!) my job and am planning to stay put within the next few years. Therefore I am looking primarily for a home, secondly at future investment.

Once the legal side of things is explained I will post back and hopefully this will become a little clearer. I have asked my Dad whether I should continue with this flat due to all the hassle so far but he has said yes, as it is the only property cropping up in my budget and that it should be easy to add value.

Hourglass

I think basically I see it as a first step on the property ladder as I cannot afford a 1 bed flat in this area or within 20 miles. I'm not looking to move for a few years and by then the way the market is going it should have increased in value a little and I should be earning a higher wage and thus able to get a higher mortgage.

It's a start!

MortgageMamma

Do you have scope in your job for your earnings to increase significantly in the foreseeable future? If so there could be other ways to raise a little bit mroe money for your purcahse and you could perhaps look for something 2 bedroomed and take a lodger in to help with costs

Fitzy29

If you plan to do some alterations to the property ask your solicitor to check the lease to see if this is permitted. Remember even though you are buying the place it still does not actually belong to you, hence 'lease' hold.

Your interest in the property is financial, it's the freeholder who owns the bricks and morter and he may not allow alterations of any sort. I have heard all sorts of stories where people alter property in this way without concent and then end up being sued!

You need to make sure all questions are answered by your solicitor, it will all be basic stuff to them but as a FTB you should ask away....don't burn your own fingers!

Hourglass

The estate agent told me of another owner in the builder who had converted their studio into a 1 bed so it may be possible although the rooms will be very small. I feel that studio flats are becoming more acceptable to buyers especially FTBs like myself as there is not really any other way to get on the ladder. I originally did consider getting a 2 bed and taking in a lodger when I was daydreaming but I cannot even afford a 1 bed flat so.... I think I am just wary of getting in over my head really financially and with the legal side of things here. I'm also not really sure what questions to ask although I've made some notes from advice on here:

Who is the freeholder?
Who owns the lease and what are their responsibilities?
Is there a buildings insurance policy for the whole building to which I would contribute or does each flatowner have their own policy?

Fitzy29

I would also ask, for example, if there was a problem with the roof how much would you have to contribute?

Are you planning to have a survey carried out, any idea how old the building is?

Fitzy29

Also, don't listen to estate agents, they are fool of poo poo when it comes to selling points of property...If someone has altered one of the studio's ask for proof!