Advice for buying Leasehold flat for investment

Lee_T.

We are after advice. We are very lucky that we have some spare capital after having paid our mortgage off. What we are thinking of doing is buying a reposssed 3yr old flat which is on a 99yr lease for cash and then renting it out.
What do we need to look out for with the flat being a leasehold property and what do we need to do and know as landlords? We really are new to this so any advice would be great.

Many thanks in advance.

Lokolo

Firstly you need to check the lease and whether letting it out is allowed.

If it's not, the rest is a complete waste of time.

bodmil

Make sure you have full understanding of the service charge and sinking funds and get as much information about the management company as possible as it may greatly impact your profit margin. If it's managed by the residents you could be in luck as no doubt they will have their best interests as priority. My management company (a social housing company) are utter rubbish and charge extortionate amounts!

Werdnal

Read this:

http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12

and all the link it contains.

Find out if the your lease permits letting. Make sure any tenancy agreement is drawn up to specifically mention relevant clauses in your lease, as if tenant breaches them (no pets etc), then you are the one in trouble with the freeholder!

Conrad

In the main most flats can be let, so as long as the service charges are reasonable and the yield is appropriate (about 7%+ is the gross yield I'd expect otherwise it's not a great investment of course), then all should be well.

A lease is considered short once it starts getting below about 85 years. I am just buying one with a 73 yr term but it bothers me not because the price was cheaper as a result and this is a long term income generation endeavour. My kids can renew the lease one day! It costs more to renew the shorter the lease gets but as this is reflected in your purchasing price, so what!

want2bmortgage3

conrad,
is that not like putting your cash under your bed as you will be sitting on a depreciating asset?
the cost for your children to extend the lease later on could be astronomical!?!

tim123456789

want2bmortgage3 wrote: »

conrad,
is that not like putting your cash under your bed as you will be sitting on a depreciating asset?
the cost for your children to extend the lease later on could be astronomical!?!

easily solved by doing it before your children have to

tim

onlyroz

Check out how much the service charge is and what it covers. This could easily be a few thousand a year. Also check out what "major works" are in the pipeline and how much you would be expected to pay for them. These are usually things like new double glazing, doors, or upgrades to the lifts, secure entry points and communal areas. You often have no choice about whether the work is carried out (e.g. paying for double glazing that you don't want), and are often given extremely short notice of when the owed amount is due.