A sure fire way to make money from property

Pimperne1

Okay, I think we come to learn from each other and I know a couple of ways to make money on property (even if they do go down 10% by the end of 2012).

This is the first one.

I am going to view a flat in an area that I know extremely well. I have owned a flat in the block before and know that the owner of the one I am going to see didn't participate in the freehold purchase of about 4 years ago (but you can usually easily work this out if the price on offer appears to be out of kilter with other flats in an area you know well). If you don't know your area well then read no further as you shouldn't consider buying anything in an area you don't know.

The lease is now getting down to about 60 years so lots of people will be having difficulty at this time getting their mortgage provider to front up with money for such a purchase (although some do go down further than this so you would need to shop around if you can't afford to buy for cash - which I am assuming you won't). Others are put off because they don't know that you have a right to extend or purchase your lease or think it will be complicated.

The others who own the freehold had to fund the purchase of this lease (and the others who didn't buy) by lending some money to the company. They want their money back and will be keen to see someone willing to buy the freehold share.

I now intend to put in a low offer for the place to see if the owner is prepared to fund the cost of purchasing the freehold. As it is this place is on at a bargain price but not enough for me to be confident of making a decent amount from buying it at its current price so I will only consider it if the owner kicks in a fairly significant amount of the money required to buy into the freehold.

In general terms, what you pay to buy the freehold includes compensation to the freeholder for the ground rent they will no longer receive and an amount which takes into account that a property with a 999 year lease is worth significantly more than one with a 60 year lease. Again, generally, they work out how much more it will be worth and you pay the freeholder half of the difference.

So (and I am making these prices up now just in case the owner is watching?), say you bought the place for £150k, the assessor reckons that it will be worth £180k with a long lease so you end up paying £15k (and that is without the owner kicking in some funds). Straight away you are quids in and the more you get knocked of the price the better off you are. There are some admin fees involved too but they are not too significant.

I will buy for cash so will be putting £150k up front followed by another £15k soon afterwards. I will then apply for a mortgage on the basis that the property is worth £180k (and it will be but I do take into account that some Surveyors don't do their job properly and will value it at less even though someone has just valued it at that amount for freehold purchase). So, I will put in £165k and already the property is worth £180k but these figures don't take into account that I won't buy it if the owner doesn't kick in some more - ideally he will pay the £15k too but in any event he will certainly pay some of it or I won't buy). More likely I will pay something like £157k or less.

How's that (although not quite expecting a round of applause).

nearlynew

Pimperne1 wrote: »

Okay, I think we come to learn from each other and I know a couple of ways to make money on property (even if they do go down 10% by the end of 2012).

This is the first one.

I am going to view a flat in an area that I know extremely well. I have owned a flat in the block before and know that the owner of the one I am going to see didn't participate in the freehold purchase of about 4 years ago (but you can usually easily work this out if the price on offer appears to be out of kilter with other flats in an area you know well). If you don't know your area well then read no further as you shouldn't consider buying anything in an area you don't know.

The lease is now getting down to about 60 years so lots of people will be having difficulty at this time getting their mortgage provider to front up with money for such a purchase (although some do go down further than this so you would need to shop around if you can't afford to buy for cash - which I am assuming you won't). Others are put off because they don't know that you have a right to extend or purchase your lease or think it will be complicated.

The others who own the freehold had to fund the purchase of this lease (and the others who didn't buy) by lending some money to the company. They want their money back and will be keen to see someone willing to buy the freehold share.

I now intend to put in a low offer for the place to see if the owner is prepared to fund the cost of purchasing the freehold. As it is this place is on at a bargain price but not enough for me to be confident of making a decent amount from buying it at its current price so I will only consider it if the owner kicks in a fairly significant amount of the money required to buy into the freehold.

In general terms, what you pay to buy the freehold includes compensation to the freeholder for the ground rent they will no longer receive and an amount which takes into account that a property with a 999 year lease is worth significantly more than one with a 60 year lease. Again, generally, they work out how much more it will be worth and you pay the freeholder half of the difference.

So (and I am making these prices up now just in case the owner is watching?), say you bought the place for £150k, the assessor reckons that it will be worth £180k with a long lease so you end up paying £15k (and that is without the owner kicking in some funds). Straight away you are quids in and the more you get knocked of the price the better off you are. There are some admin fees involved too but they are not too significant.

I will buy for cash so will be putting £150k up front followed by another £15k soon afterwards. I will then apply for a mortgage on the basis that the property is worth £180k (and it will be but I do take into account that some Surveyors don't do their job properly and will value it at less even though someone has just valued it at that amount for freehold purchase). So, I will put in £165k and already the property is worth £180k but these figures don't take into account that I won't buy it if the owner doesn't kick in some more - ideally he will pay the £15k too but in any event he will certainly pay some of it or I won't buy). More likely I will pay something like £157k or less.

How's that (although not quite expecting a round of applause).

Oh dear.


That's all I have to say.

Pimperne1

nearlynew wrote: »

Oh dear.


That's all I have to say.

That's not bad nearlynew. It would be moved off topic on other sites (maybe it will here).

silvercar

You are confusing two bits of legislation. The leaseholders have the first refusal on theright to buy the freehold, but you've missed the boat on that as they've done it without you.

The other bit of legislation is the right to extend your lease. Your calculations could be correct but the bit you've missed is that you have to have owned the property for 2 years to have the right to extend your freehold. A lot can happen to values in 2 years. So people generally buy the lease extension at the time of purchase tied in with the purchase of the flat (ie its bought in the current owners name); this delays the transaction while prices are negotiated for the lease extension. Which is another reason why people aren't keen.

The discount that short lease properties sell for is generally matched by the risk in getting the lease extended quickly and at a reasonable price. There is a bargain to be had if you have the time to wait - either in negotiating now or waiting 2 years and running the risk of the price moving against you.

chucknorris

nearlynew wrote: »

Oh dear.


That's all I have to say.

That's usually what I have to say about most poster's ideas on the way to make money on this website

Pimperne1

silvercar wrote: »

You are confusing two bits of legislation. The leaseholders have the first refusal on theright to buy the freehold, but you've missed the boat on that as they've done it without you.

The other bit of legislation is the right to extend your lease. Your calculations could be correct but the bit you've missed is that you have to have owned the property for 2 years to have the right to extend your freehold. A lot can happen to values in 2 years. So people generally buy the lease extension at the time of purchase tied in with the purchase of the flat (ie its bought in the current owners name); this delays the transaction while prices are negotiated for the lease extension. Which is another reason why people aren't keen.

The discount that short lease properties sell for is generally matched by the risk in getting the lease extended quickly and at a reasonable price. There is a bargain to be had if you have the time to wait - either in negotiating now or waiting 2 years and running the risk of the price moving against you.

I was trying to simplify it.

Basically everyone except a few owners bought the freehold 4 years ago (a friend of mine being one) and they are fairly desperate to recoup their money that they had to pay in to purchase on behalf of the others - emails from the management company betray this desire.

I would envisage that this was not such an unusual occurrence but in any event I would want an undertaking from those in a position to give such that they would allow me to buy or extend the lease immediately - in this particular case I know they would bite my hand off.

diable

You'll make more money being a sperm donor and you'll have more fun..............