What's the general consensus on leaseheld city flats from an investment point of view

ruperts

(not to rent out but to live in)(possibly renting out later i suppose)

I've been renting for a while and would like to buy, but city house prices are prohibitively expensive and moving too far out of town is not an option at present.

The ideal solution would be to buy a modest two bedroom flat for about £80k - £120k. The mortgage repayments would be about the same as my current rent.

However, I'm concerned about leaseholds from an investment point of view. It almost seems like paying rent with the added hassle of 'buying' and 'selling' and the added risk of the value of the flat going down.

What's the general consensus on this? Worth more research or just continue renting until I can buy a freehold?

Meeper

Generally, leasehold arrangements are for a 999 year lease, and the rent is peppercorn.

There is no more risk of the price of the flat going down than there is in any other property purchase.

You have the potential added bonus that the building maintenance is the responsibility of the freeholder, not the leaseholder, so you don't need buildings insurance and any repairs are their responsibility. You may have a service charge to pay as well as the ground rent however, depending on the property and location.

chewmylegoff

Meeper wrote: »

Generally, leasehold arrangements are for a 999 year lease, and the rent is peppercorn.

125 and 99 year lease periods are also common, although IME new build flats and older purpose built developments tend to be more likely to be 999, older conversions tend to be 99 / 125 years so in some cases are starting to run quite short now.

You have the potential added bonus that the building maintenance is the responsibility of the freeholder, not the leaseholder, so you don't need buildings insurance and any repairs are their responsibility. You may have a service charge to pay as well as the ground rent however, depending on the property and location.

and of course the service charge will be more than if you were paying for it yourself. the freeholder (assuming not the same as the leaseholder) is not a charity and is in the business of being a freeholder to make a profit. they will therefore e.g. arrange insurance not on the basis of the best insurance policy for you, but the insurance which pays them the biggest kickback.

suggest if you are thinking of buying a leasehold flat, and a share of freehold is not included in the sale, you should find out who the freeholder is at a very early stage (i.e. before you bother to put an offer in) and just do some google research. if they are unscrupulous and greedy there will be some complaints about their behaviour voiced on line, quite possibly on this site.

atush

Don't buy a short lease. They can be extended, but this costs and won't factor into a FTB budget. And a share of the leasehold is best, but if not do as Chew suggests.

If you are buying to live in, but want tor ent in future, keep your renter's hat on when viewing and shoose something that will appeal to a renter (ie near transport links, shops etc).

mike88

Why pay rent when you can buy? It always surprises me how many people say they wish they had bought such and such a property when the property market was depressed. What are you waiting for? For the prices to rise and then buy? The converse argument is that property will become cheaper. But what does it matter? If you are living in it and it about the same price as renting what have you got to lose. It's a no brainer.

vax2002

A lease is a bit of paper that allows you to occupy, you own nothing but the paper its written on.
If you are happy with that situation and have budgeted for maintenance charges which are usually always increased above inflation.
Then go for it

mike88

vax2002 wrote: »

A lease is a bit of paper that allows you to occupy, you own nothing but the paper its written on.
If you are happy with that situation and have budgeted for maintenance charges which are usually always increased above inflation.
Then go for it

A lease is much more than a piece of paper allowing occupation. Above all else a lease is a purchaseable and saleable commodity. It is something you buy and can sell just like anything else. Surely that is a known fact or is there a sense of irony in the post which is lost on me.

The owners of leasehold property also have a statutory option to group together and purchase a lease from the freeholder. But that is a separate issue which at this stage will only complicate the basic question.

I agree with the previous poster in regard to budgeting for management charges which usually involve all costs associated with cleaning communal areas, heat and light in these areas and maintaining the fabric of the building.

vax2002

mike88 wrote: »

A lease is much more than a piece of paper allowing occupation. is there a sense of irony in the post which is lost on me.

Nope no irony, the paper is the only dead cert, everything else is Fluff and liable to change at any time.
The value of these leases is seriously over inflated as they are based on value of flats which are themselves seriously inflated, so it is course that if your new shiny block is run down in the next few years and a housing association starts to take on empty flats, lets remember, immigration is out of control under the Tories, the down side of this is all these people will need somewhere to live, in turn they are here to work for less money than those before "doing jobs we dont want to do" so unemployment will rise amongst those holding leases, banks will re-poses the documents and rent the flats out to gain income.
It is a very vicious circle, if you buy a house, you at least have some protection from the circle as you can sell the house.
The lease on the other hand, as a saleable commodity is directly linked to the standard of living offered in the "block" once that goes down, the value of the lease does as well.

mike88

vax2002 wrote: »

Nope no irony, the paper is the only dead cert, everything else is Fluff and liable to change at any time.
The value of these leases is seriously over inflated as they are based on value of flats which are themselves seriously inflated, so it is course that if your new shiny block is run down in the next few years and a housing association starts to take on empty flats, lets remember, immigration is out of control under the Tories, the down side of this is all these people will need somewhere to live, in turn they are here to work for less money than those before "doing jobs we dont want to do" so unemployment will rise amongst those holding leases, banks will re-poses the documents and rent the flats out to gain income.
It is a very vicious circle, if you buy a house, you at least have some protection from the circle as you can sell the house.
The lease on the other hand, as a saleable commodity is directly linked to the standard of living offered in the "block" once that goes down, the value of the lease does as well.

It seems that the message from the above post is never to buy any leasehold flat in case it is taken over buy a Housing Association or immigrants. Indeed the same kind of problems could apply to freehold property purchase if Housing Associations purchase properties next door and move in undesirables. Bad neighbours in an area will lower prices irrespective of whether the property is owned freehold or leasehold.

If the views expressed in the above post were taken to their logical conclusion nobody anywhere would ever buy a property and merely rent.

However, I concede that the doomsday scenario painted in the above post could and does happen. But if the OP wants to get on the housing ladder then now is as good a time as any to buy. The risks highlighted will always be there.

Derivative

How does a leasehold actually work from the freeholder's point of view?
Does the freeholder have to own outright? What happens if the freeholder decides to sell - do the leaseholders simply get transferred with?