Buying ex council...

theartfullodger

You've no clear idea of yield until you know what actual rent and expenses and voids.

need_an_answer

How far down the buying process are you...solicitors,searches,nearing exchange?

Often people have wobbles about a purchase,I did too with my first BTL,however I didn't go in at the one bed entry level that you are.

I hope it works for you but reality tells me you'll have not the easiest of rides with your choice.

I remain of the thinking that if you wouldn't choose to live there or in the area yourself its not worth making what should be a very considered and expensive purchase.

As a LL running a business you need to be focusing on a range of tenants and quite frankly your rents are never likely to increase significantly when the market you are aiming at is the lower end.

ThePants999

hazyjo wrote: »

The one thing that would scare me is the fact it's ex-LA. They are renowned for sending large bills to private owners for works. If there's a lift or cladding, I wouldn't touch it with a bargepole. If the roof or windows need replacing, run for the hills.

Hugely agree with this - I would never have the council as my freeholder again.

AdrianC

theartfullodger wrote: »

You've no clear idea of yield until you know what actual rent and expenses and voids.

And you can never know that in advance, only in retrospect.

All you can do is put together a prediction, based on (to nick Rumsfeld's turn of phrase) known-knowns, known-unknowns, and a good guess at unknown-knowns. It's the unknown-unknowns that can really bite you on the backside.



Over time, the past actual figures may well allow you to predict ahead more accurately, but it will never be more than a prediction.

girllikeme1

We are in the early stages of the purchase so it's not too late :eek:

There's no lift.

This may be a silly question so forgive me, but if the Council were the freeholder would it be obviously the Council on the title? (It's not, it's a company.)

AlexMac

girllikeme1 wrote: »

We are in the early stages of the purchase so it's not too late :eek:

There's no lift.

This may be a silly question so forgive me, but if the Council were the freeholder would it be obviously the Council on the title? (It's not, it's a company.)

The advice, above, especially by Adrian is good. I wouldn't dismiss the plan however if you check the numbers and apply common sense to choices of area, type of property and tenants

I have two ex-Council BTLs and they've been very successful; but

I chose flats with traditional construction; brick /tiled roof , not system built or clad, in low rise blocks (so no lifts), on small estates in commutable areas. The fact that yours has no lift is a good sign - I'd hate to share costs of lift replacement or even scaffolding for a tower block's external decor . Nevertheless I get bills of up the £5k every 5-10 years for major works like external decor or wondow replacement (which I see as fair) in addition to routine Service charges of £500-800 p.a. (for insurance, minor maintenence, grounds and caretaking).

In my case it helps that the local Council, who are my freeholder, are very fair and reasonable as regards both service-charges and communication with leaseholders. I'm surprised that the freehold of the one you are considering is either owned by, or managed by, a Commercial Company. Check 'em out.

I walked away from one purchase when I found that the freehold Company were pants, and had successfully fought off a "Right to Manage" court case by unhappy leaseholders. Do your own "due diligence"; google 'em, check their company history, ask around, and ring 'em. At least try to find out what the service charge is (even though the Estate Agent will claim not to know because they fear misrepresenattion accusations or haven't got the info from the vendor, and you can't take what they say as gospel til it's in writing).

The dodgy freehold Company I mention above refused to speak to me other than in response to a solicitor's enquiry for a fat fee; which I couldn't have done til after I'd committed, had an offer accepted and started to spend money on solicitors.

I check tenants throughly (the usual references; credit /bank / employer /past landlord...) myself or via an agency, then treat 'em right- replacing boilers, washing machines, fridges etc the minute they break. I've never has a bad 'un and most reciprocate by treating the place with respect- and that includes ones on what used to be called Housing Benefit.

I'd also usually regard property as the best long term investment... But the most amazing plus about my two little flats which regrettably you will not enjoy is the rate at which their value has increased! The one I bought 20 years ago has increased by a mind-blowing sum; six or seven-fold because of particularly high local House Price Inflation in the late 20th Century. Even the second has inflated by over 75% in the 7 years since I bought it.

That level of inflation just isn't going to happen in the next few years? In fact in some areas, prices are currently flat of falling check zoopla or siimilar averages for your postcode.

The final point I'd make is that if you do decide to invest, and don't want the hassle of being a landlord, check if any social landlords (Council or Housing Associations) are prepared to take it on to house their tenants? I have one such long-term licence deal with an HA, and they manage everything, including gas safety, maintenanace etc, with a gauarantted rent only 10-20%h below the market rent, and no agency fees or voids.

Over to you; happy choosing

girllikeme1

Thanks. I have Googled the seemingly commercial company, if you Google the Balkhi case they come up as there was a dispute, although this is the only issue I have come across on Google's limited results.

I have pressed the estate agents for details regarding the freeholder, and got nothing; I only found out who it was from the LR as I downloaded the title.

The general response was that the solicitor's searches would provide this info - didn't really want to incur all the fees before knowing history of charges and planned works, but as expected was made to feel I was being over the top and expecting too much too soon.

need_an_answer

All will become apparent as you move along the process.
I'm not surprised that you wont get details of service commitments and accounts for the management of the property until much later down the line. its also the time that you find out how many permissions to sublet you need and sometimes the extortionate set up costs that involves..but its all part and parcel of buying something leasehold rather than freehold.

You are however aware I assume that there is probably a lease on the property,I don't think anyone else has touched on that subject but hopefully you are purchasing something with a healthy lease left?
Ideally the EA should be able to indicate the length remaining.

If you can find out the managing agents details a google will usually throw up expected charges...the vendor will know whom they pay their service charges to so that's a good point to ask of them.

Cakeguts

If you buy this you are going to have to consider tenants who don't pay the rent, tenants who wreck the flat, long periods when it is vacant and lots of hassle.


It is too cheap to be a hassle free buy to let. Single working people do not rent in bad areas. The only person you are going to get there is a single person with no job. LHA pays enough for a single person to rent one room in a shared house so that is what you can expect as rent. Your imaginary numbers are not going to happen they are for a 1 bed flat in a decent area that has never been owned by the council or next to a council estate. They are what you get for a nice 1 bed flat from someone who is working not what you get for an ex-council flat in an area where no one wants to live. You can tell that it is not an area where people want to live by the price you are paying. If it was in a decent area you would be paying over £100k.



You don't seem to know who your target market is because you don't know what the LHA single person will get.



I can tell you who our target market is, families and couples. 3 or 4 bed houses with offstreet parking near to shops and transport. No ex council property and in expensive areas. We have very few voids or damage. Started letting property in 1990. Several properties and only one small mortgage. You will always need to do repairs. Things wear out. We don't have any flats because of our target market and the fact that only one property is in the South East. The houses that are not in the South East cost considerably more than £88k.

girllikeme1

need_an_answer wrote: »

You are however aware I assume that there is probably a lease on the property,I don't think anyone else has touched on that subject but hopefully you are purchasing something with a healthy lease left?

Thanks, it has a 125 year lease, one thing to be thankful for!

Although with the advice given above, I'm feeling this property is going to be a no-go for us anyway - now to start feeling sorry for the seller.