Buying a leasehold flat to rent

Mr_Big

Hi guys,

Just after some advice, I've already read many threads on the forum and gained some good knowledge but would just like to see if there's anymore advice I can get from experienced landlords.

I have roughly £50k in life savings. I'm looking to buy a one bedroom leasehold flat for around that same price so it can be paid in full. The intention is to live there for roughly three years technically rent free but saving up money to then move out and start renting the flat.

Anyway, I've seen a one bedroom flat for £60k which I think I could knock down to £50/£55k (hopefully). I just want to ask, is there any advice of what I should look out for before potentially buying this property? The biggest thing I've read is about the lease, and the service charges that can come along with it. The agent said it has roughly 90 plus years left on it (but I'm gonna ask for the official documentation). I've seen that it can cost up to £15k to extend a lease/own the freehold, is this only if the lease has 80 years or less left on it? Is there anyway I can find out online how much it would cost to extend the lease or buy the freehold of the specific property in question? I've also noticed that they have not mentioned the ground rent or service charges on the property page, is there a way I can find this out also? (Besides asking the estate agent of course). Any other advice is appreciated, this would be first purchase so I'm a complete newbie and don't want to end up with a wasted investment. Thanks for your help guys

Pixie5740

Mr_Big wrote: »

Hi guys,

Just after some advice, I've already read many threads on the forum and gained some good knowledge but would just like to see if there's anymore advice I can get from experienced landlords.

I have roughly £50k in life savings. I'm looking to buy a one bedroom leasehold flat for around that same price so it can be paid in full. The intention is to live there for roughly three years technically rent free but saving up money to then move out and start renting the flat.

Anyway, I've seen a one bedroom flat for £60k which I think I could knock down to £50/£55k (hopefully). I just want to ask, is there any advice of what I should look out for before potentially buying this property? The biggest thing I've read is about the lease, and the service charges that can come along with it. The agent said it has roughly 90 plus years left on it (but I'm gonna ask for the official documentation). I've seen that it can cost up to £15k to extend a lease/own the freehold, is this only if the lease has 80 years or less left on it? Is there anyway I can find out online how much it would cost to extend the lease or buy the freehold of the specific property in question? I've also noticed that they have not mentioned the ground rent or service charges on the property page, is there a way I can find this out also? (Besides asking the estate agent of course). Any other advice is appreciated, this would be first purchase so I'm a complete newbie and don't want to end up with a wasted investment. Thanks for your help guys

What do you mean you'd technically be living rent free? Under what circumstances would you ever pay yourself rent to live in a property you own?

Download a copy of the lease from the Land Registry it only costs about £3.

As for extending your lease read the MSE guide.

https://www.moneysavingexpert.com/mortgages/extend-your-lease/

What sort of tenant will your £50k 1-bedroom flat attract in the future? How much do you expect to be able to rent it out for 3 years down the line?

macman

How much will you have to spend to bring this £50K property up to a standard where it will attract tenants at a commercial rent?

jonnygee2

Buying leasehold, ask:

- What's the groundrent?
- What's the service charge?
- Exactly how long is the lease on it?

You'd expect to know these before you make an offer.


Before exchanging, you also want to know what condition the building is in and how the service charge fund is managed. If major works are needed, and there's no sinking fund, you could get a big bill for fixing the external structure. So take a good look at the external structure, especially the roof, windows etc. You'll get details about how the service charge is being managed later in the buying process as part of the searches - just make sure you pay attention!

If it's a tower block, check the cladding!!!

sal_III

It never ceases to amaze me how people expect to knockdown 10-15% of the asking price when buying. Knocking off 5-10k from a 150-200k property is one thing, doing the same with a £60k property is simply unrealistic.

There is nothing inherently wrong with Leasehold properties, they are about 20% of the properties in the UK. In the majority of cases they are not actually more expensive than a freehold. The service charge you pay goes to maintenance and sinking fund, with Freehold you will have to do the same on your own or risk coming to a lump sum expense for a repair without savings. The cost of extending the lease is more or less reflected in the initial price you pay - generally Leasehold properties are cheaper than Freehold. Long term the costs are roughly the same.

somethingcorporate

sal_III wrote: »

Long term the costs are roughly the same.

Anything to back that up?


The difference is with freehold you get the choice what and when you do repairs and what you prioritise.


Leasehold you are beholden to the decisions of the management company. If they decide they want to do the roof refurb or external works or internal decorating or replacing the lift for many £k then you're paying the bill when they do it, no choice in the matter.


I've been leasehold and would never do it again.

Cakeguts

I dread to think what kind of tenant you think you are going to get.

sal_III

somethingcorporate wrote: »

Anything to back that up?


The difference is with freehold you get the choice what and when you do repairs and what you prioritise.


Leasehold you are beholden to the decisions of the management company. If they decide they want to do the roof refurb or external works or internal decorating or replacing the lift for many £k then you're paying the bill when they do it, no choice in the matter.


I've been leasehold and would never do it again.

You are correct that with Freehold property you are making the decisions, while with a Leasehold they are made by someone else. But if the roof leaks and need repair, ultimately the cost will be roughly the same for a comparable properties.

If you have a lift as a Freeholder (most likely scenario would be a share of Freehold) and it breaks how is it any different if the flat was Leasehold? Or are you telling me you will just leave it broken?

You are falling into the trap of comparing apples to oranges - e.g. Flats (generally leasehold) to houses (generally freehold).

Mr_Big

Thanks for the responses so far guys. Got a few questions to answer and ask so bare with me.

I said technically rent free because the money I would be saving from paying rent is gonna be saved towards another property in the future. So the money I'm saving is not gonna be free money to spend etc. It's gonna saved like I was still paying rent. I was looking on land registry and it said it cost between £9.99 - £49.99 to get the leasehold details, can I ask where you get it for £3? Could be request the estate agent to give me these details about the leasehold as a potential buyer?

Judging by what I've seen of the property so far, it really doesn't need additional work done it. Of course I need to do my own checks and will get a surveyor to get a full run down but if it's as it seems, the flat can pretty much lived in straight away, it's very modern as it was renovated.

It's not a tower block thankfully! I was told it has 90 plus years on the lease by the estate agent, I just want to make sure that's the truth because I hear if it's 80 years or less then it's a problem and very expensive.

In terms of knocking them down price wise, as I said in my initial post that's me being hopeful, not expecting it but to be honest the flat has been up for a little while now and £10k has already been knocked off so it seems that seller is after a quick sale and I know the reason for the sale which may also help.

Does anyone recommend staying leasehold? I assumed that you would just get property insurance that would cover any kind of big damages like rooftops etc. If you buy the property freehold?

Does anyone know if there's a site where I can find out how much it would cost to buy the freehold of a specific property?

Thanks again guys

Mr_Big

Cakeguts wrote: »

I dread to think what kind of tenant you think you are going to get.

What exactly do you mean by this? There's always a risk with any tennant but are you saying judging by the price of the property you think I wouldn't get a decent type of tennant? Please expand

Mr_Big

Sorry guys, missed some details and my profile won't let me edit/delete my posts for some reason.

The property has been renovated so it's very modern. Going by the current prices around the area and judging by the property, I think I can rent it for £450 per month. Maybe a bit more but not sure as it's only a one bed flat. I think because it's modern and seeing myself how hard it is to try get a rent property around my area due to high demand, I don't think getting tennants will be difficult, but I'm gonna be picky in that process as I obviously want to try and get the best tenants possible. The room is big enough for a couple to live there so the target audience would be for a young single person or couple.