How to Let

kriss_boy

Rather than buying a small house or flat to live in... Im considering staying with my parents another year, and instead buying a small flat to let.

How does this work.

Do you simply purchase and mortgage the property as though you were going to live in it, then have an estate agent advertise and manage the tenants?

So I simply pay the council tax and mortgage repayments and the things like electricity and gas are put in the tenants name? Or is there a fixed price you ask for elec/gas on top of the standard rent?

It would make sense because if it meant the rental virtually covered all my expenses... then I could continue to live at home, being able to save more, whilst having my tenants pay my mortgage for me.

djm1972

Not quite as straight forward; but there's not a lot more to it.

First, you have to buy the property on a "Buy To Let" mortgage, which is a particular type of mortgage product that has permission to let "built in". Most ordinary residential mortgages require consent to let and this can be expensive.

Next, because the flat will almost certainly be leasehold, you will also have to obtain consent to let from the freeholder. This is unlikely to be refused - freeholders know that a lot of people purchase flats as an investment and intend to let them out; but if in doubt do confirm that this is going to be acceptable before buying.

Normally, the landlord (you) will pay maintenance charges and ground rent, and your tenant will pay all bills and council tax. If you advertise the property with a management agent they will normally sort all of this out for you on their fully managed service.

kriss_boy

djm1972 wrote:

Next, because the flat will almost certainly be leasehold, you will also have to obtain consent to let from the freeholder. This is unlikely to be refused - freeholders know that a lot of people purchase flats as an investment and intend to let them out; but if in doubt do confirm that this is going to be acceptable before buying.

I dont understand that bit What do you mean by leasehold and fre hold?

djm1972

A freehold is where you actually own land and buildings.

A leasehold is where you own the right to live in a specified part of a building (i.e. a flat) for a certain amount of time.

The two are related, so where there is a leasehold there must be a freeholder that actually owns the building in which your leasehold is situated.

It is this freeholder from whom you must obtain consent to sub-let your flat.

Hope this helps!

kriss_boy

But surely if im buying the flat then Im the freeholder... the landlord... so I wouldnt need consent to then do what I wish with it?

Is there a distinction between a big block of flats, that shares lifts etc, and just a hosue thats been turedn into 3 flats? Becuase the flats im talking about are jsut like regular houses.. only split into ground and top floor apartments.

djm1972

You need to look at the details of the flat you are interested in. Even if it is just a conversion in a house; the most likely scenario is that somebody else owns the house as a whole with the flats being sold leasehold.

It is not impossible however that the flats jointly own the freehold - but you would almost certainly still require the agreement of your fellow leaseholders in order to sub-let your flat.

kriss_boy

When I hear 'lease' I think of pubs for exmaple, where people pay a lease to own it for a year and work in it.. but they dont own the actual building themselves. They basically renting it.

But Im talking about buying a flat... not buying a lease... to then let to someone else.

If im getting confused its cool! I think ill just buy something!

djm1972

kriss_boy wrote:

But Im talking about buying a flat... not buying a lease...

What it boils down to is that you can't really own a flat, because somebody else owns the building in which the flat is situated.

So when you "buy" a flat, you are really only buying a leashold - the right to live in that flat for a certain amount of time; exactly the same as the pub landlord you mention.

For example, here is a flat for sale on RightMove...

http://www.rightmove.co.uk/viewdetails-5962407.rsp

Scroll down past the photo and notice how is says "Tenure: Leashold". You will see this against almost all flat for sale advertisments...

kriss_boy

Ahhh.... sorry, the flats Im talking about arent like this.. I dont mean like a big block of flats... I mean...

http://espc.com/EspcPublic/UniversalPages/PropertyDetails.aspx?rid=231981

djm1972

kriss_boy wrote:

Ahhh.... sorry, the flats Im talking about arent like this.. I dont mean like a big block of flats... I mean...

http://espc.com/EspcPublic/UniversalPages/PropertyDetails.aspx?rid=231981

There's no real difference other than size - they are both buildings that contain flats - and somebody has to own the building.

Phone the estate agent on monday morning and ask them what the "Tenure" is on that property - they will almost certainly say "Leasehold".

It is more likely however that in a conversion such as you are considering the flats may jointly own the freehold, and if this is the case the estate agent should be able to give you details of this arrangement...

kriss_boy

Is it different in scotland because most of my mates have flats like these... and i didnt think there was any difference to them that other small houses.