First time investment questions

Newuser2019

Hello,

First time investor and i have a few questions.

The property is going up for auction soon at a guide price of £94k so of all goes as usual then should sell for £104k (roughly 10% above guide price based on my research this id what usually happens).

I only have £70k so i wont be able to buy it howevet in the future should i come across a property that i can afford i do have questions . Also, it could end up not selling at the auction so i have contacted the sellers solicitor and the auction company informing them of my interest at £70k. Hopefully the buyer might let it go for much cheaper... worth a try anyway.

My questions are:

Will i get my money back at the very least but obviosuly a profit is what i am looking for in the future? Even a year in the future after i purchase it onwards?

It has only 71 years remaining on the lease so as time goes on how much will the value be affected?

How much do i pay for lease extension?

How much marriage value do i pay if i do have it extended?

How much are solicitor fees for the auction?

This property is ideal for me as it’s local so i inow the area and i think it is a oretty good deal.

Already has a tenant in place paykng £830 per month!

supa34

Firstly go to the the auction early, get the guide and predict the prices will sell for on each property, you will be suprised how much some go for. Some below asking which means unsold, some at asking and some alot more.

Auctions I have been to do have alot of sold prior but that must mean they got a good offer. Under offer doesn't count.

Action can charge 5 to 8% on top so read the small print.

71 years lease is nothing and that is why it's going to auction. I would avoid it. Sometimes you can't get it extended. Forget this property.

Newuser2019

@supa34

Thanks for your input. Are you an investor?

That’s what i initially thought as i have looked at properties for years and also foscuased with my father who knows a bit about this and was also an accountant so almost like a financial advisor.

Thing is 71 is not nothing from my research as anything above 50 years still has 75% of it’s value.

It is cheap for the location though so perhaps i’m wrong about it’s true value vs the lease length?

Also, from my breif research i am allowed to legally get a lease extension after two years of owning it.

Surely at the proce it is going for (hopefully doesn’t sell so posisbly even less!) There is miney to be made? I mean it is in london approx 10 miles from the city and in quite a nice area nothing special but definately not a run down area.

I just REALLY want to get on the property ladder so not only will i be getting an income but my savkngs would be getting such a better return than vs interest from savings account.

It has to be in london as i plan on managingn it myself ao anything put of london would be impractical and tok much of a hassle.

I’vs listed a property wanted ad on gumtree two days ago but no replies...

I doubt i’ll find anything for anything near £70k in london i know this but i am hoping someone wants a quick sale. They must be out there since london has so many properties and people.

I wont give up but i don’t see it happening anytime soon .

Surely i can get the property lease extended but do i have to pay marriage value on the whole value of the property after the extension or just on the value that has been added becuase of the lease extension if you follow? I think it’s 50% to the oroginal owner.

Tom99

Newuser2019 wrote: »

Surely i can get the property lease extended but do i have to pay marriage value on the whole value of the property after the extension or just on the value that has been added because of the lease extension if you follow? I think it’s 50% to the [STRIKE]original owner [/STRIKE]freeholder.

Example:
Value of 70yr lease £100,000
Existing value of freehold £3,500
Value of the new 160yr lease £108,000
Marriage Value = £108,000 less £100,000 less £3,500 = £4,500

So you pay £3,500 plus 50% of £4,500 = £5,750 plus both sides costs

anselld

supa34 wrote: »

Firstly go to the the auction early, get the guide and predict the prices will sell for on each property, you will be suprised how much some go for. Some below asking which means unsold, some at asking and some alot more.

Auctions I have been to do have alot of sold prior but that must mean they got a good offer. Under offer doesn't count.

Action can charge 5 to 8% on top so read the small print.

71 years lease is nothing and that is why it's going to auction. I would avoid it. Sometimes you can't get it extended. Forget this property.

Sold prior means sold, not under offer. Deposit paid and contract signed on auction terms, same as if the hammer had gone down at auction.

There is nothing wrong with a 71 year lease so long as the price is right. Just budget for a future extension. The fact that you and many others avoid it can make it attractive to a cash buyer, again if the price is right.

AdrianC

Newuser2019 wrote: »

The property is going up for auction soon at a guide price of £94k so of all goes as usual then should sell for £104k (roughly 10% above guide price based on my research this id what usually happens).

Some properties sell above guide, some sell for guide, some for less. The margin above or below varies widely.

You simply cannot generalise - the hammer price depends entirely on whether two avid HUtH viewers get fixated or not...

I only have £70k so i wont be able to buy it

Ooooooookay.

Also, it could end up not selling at the auction so i have contacted the sellers solicitor and the auction company informing them of my interest at £70k. Hopefully the buyer might let it go for much cheaper... worth a try anyway.

I wouldn't hold your breath.

My questions are:

Will i get my money back at the very least but obviosuly a profit is what i am looking for in the future? Even a year in the future after i purchase it onwards?

Riiiight. So literally all we know about this property is that it's being auctioned, with a guide price of £94k, you think it'll go for £104k, but you might be able to buy it for £70k. Will you make a profit in a year...

Hold on a sec, I need to get my polishing rag out...

It has only 71 years remaining on the lease so as time goes on how much will the value be affected?

In 71 years, it will be worth £0 without an extension. Draw a line between the two points.

Will it be YOUR problem in 71 years time?

How much do i pay for lease extension?
How much marriage value do i pay if i do have it extended?

https://www.lease-advice.org/calculator/
What's the long-lease value, and what's the ground rent?

How much are solicitor fees for the auction?

You're the one with the auctioneer's catalogue in front of you.

This property is ideal for me as it’s local so i inow the area and i think it is a oretty good deal.

You don't seem to know nearly enough to know whether it's a good deal or not at any given hammer price.

Already has a tenant in place paykng £830 per month!

That's... nice.

And what about all the other things you need to know to decide if that contributes to it being a "good deal" or not?
What if the tenant hands their notice in the day after the auction?
What if the tenant never pays you a penny in rent, then does a runner leaving a smouldering ruin the day before the court case for possession?

Newuser2019

Tom99 wrote: »

Example:
Value of 70yr lease £100,000
Existing value of freehold £3,500
Value of the new 160yr lease £108,000
Marriage Value = £108,000 less £100,000 less £3,500 = £4,500

So you pay £3,500 plus 50% of £4,500 = £5,750 plus both sides costs

I am not 100% clear but thatnls for your input. Let me go through this so i can nail it down:


Value of 70yr lease £100,000
Valye of freehold - i'm just buying the lease for the property, the free hold belongs to the vendor and also i don't get why the freehold is worth £3500?
Value of the new 160yr lease £108,000 (I get this, so th enew lease is a 90 year lease extension right?)
Marriage Value = £108,000 (value of lease extension less £100,000 (value of less £3,500 = £4,500


marriage value is the increase in the total property value following a lease extension or collective enfranchisement. so wouldn't the marriage value ismply be £8.000 then i have to give 50% of that to the freehold owner which is 50% and my quesiton was do i legally have to give the original owner 50% of the total value or of just the increased value from the lease extension which is half of £8,000 so i owe £4000 to the owner and the rest is all mine?


I am new to this as i'm sur eyou can tell.

Newuser2019

anselld wrote: »

Sold prior means sold, not under offer. Deposit paid and contract signed on auction terms, same as if the hammer had gone down at auction.

There is nothing wrong with a 71 year lease so long as the price is right. Just budget for a future extension. The fact that you and many others avoid it can make it attractive to a cash buyer, again if the price is right.

That's what i was thinking after doing some research. Anything less than 80 years isn't ideal but 71 years is still a long time and also after two years you legally have the right to ask to extend the lease right? That's exactly what i was thinking. I just need to know how much th enew lease extention for say a further 90 years would be. I can fidn this online though.

Comms69

Newuser2019 wrote: »

Hello,

First time investor and i have a few questions.

The property is going up for auction soon at a guide price of £94k so of all goes as usual then should sell for £104k (roughly 10% above guide price based on my research this id what usually happens).

I only have £70k so i wont be able to buy it howevet in the future should i come across a property that i can afford i do have questions . Also, it could end up not selling at the auction so i have contacted the sellers solicitor and the auction company informing them of my interest at £70k. Hopefully the buyer might let it go for much cheaper... worth a try anyway. - There's a reason it's being auctioned.

My questions are:

Will i get my money back at the very least but obviosuly a profit is what i am looking for in the future? Even a year in the future after i purchase it onwards? - huh?

It has only 71 years remaining on the lease so as time goes on how much will the value be affected? - You're assuming the lease wont be extended?

How much do i pay for lease extension? - a lot.

How much marriage value do i pay if i do have it extended? - marriage value - as above

How much are solicitor fees for the auction? - It depends

This property is ideal for me as it’s local so i inow the area and i think it is a oretty good deal. at 30% below value, or at £100k?

Already has a tenant in place paykng £830 per month!

Really, a 9.9% yield and it's being sold at auction?...

Tom99

Newuser2019 wrote: »

I am not 100% clear but thatnls for your input. Let me go through this so i can nail it down:
Value of 70yr lease £100,000
Valye of freehold - i'm just buying the lease for the property, the free hold belongs to the vendor and also i don't get why the freehold is worth £3500?
Value of the new 160yr lease £108,000 (I get this, so th enew lease is a 90 year lease extension right?)
Marriage Value = £108,000 (value of lease extension less £100,000 (value of less £3,500 = £4,500
marriage value is the increase in the total property value following a lease extension or collective enfranchisement. so wouldn't the marriage value simply be £8.000 then i have to give 50% of that to the freehold owner which is 50% and my question was do i legally have to give the original owner 50% of the total value or of just the increased value from the lease extension which is half of £8,000 so i owe £4000 to the owner and the rest is all mine?
I am new to this as I'm sure you can tell.

[FONT=Verdana, sans-serif]No that's not how its calculated.[/FONT]
[FONT=Verdana, sans-serif]Using my example the current 'total' value is Lease £100k Freehold £3.5k = £103.5K[/FONT]
[FONT=Verdana, sans-serif]After the lease extension the 'total' value will be Lease £108k Freehold £Nil = £108k[/FONT]
[FONT=Verdana, sans-serif]Marriage vale is the increase in what I have called 'total' value so £108k less £103.5k = £4.5k[/FONT]
[FONT=Verdana, sans-serif]Its this marriage value of £4.5k which is split 50/50 but remember you also have to pay the freeholder their current value of £3.5k so you pay a total of £3.5k + £4.5k/2 = £5.75k plus both sides costs.[/FONT]
[FONT=Verdana, sans-serif]The above figure are only approx examples just to illustrate the method used[/FONT]
[FONT=Verdana, sans-serif]The freehold will be worth the value of receiving the ground rent for 70yrs then a reversion to the full value of £108k, £3.5k is my approx, I don't know what the ground rent is.[/FONT]
[FONT=Verdana, sans-serif]Until you have firmer figures budget at least £2k for costs, remember since you are paying the freeholders costs they have no reason to make them cheap, fair yes but cheap no.
[/FONT]

Newuser2019

AdrianC wrote: »

Some properties sell above guide, some sell for guide, some for less. The margin above or below varies widely.

You simply cannot generalise - the hammer price depends entirely on whether two avid HUtH viewers get fixated or not...

Ooooooookay.

I wouldn't hold your breath.

[qutoe]My questions are:

Will i get my money back at the very least but obviosuly a profit is what i am looking for in the future? Even a year in the future after i purchase it onwards?

Riiiight. So literally all we know about this property is that it's being auctioned, with a guide price of £94k, you think it'll go for £104k, but you might be able to buy it for £70k. Will you make a profit in a year...

Hold on a sec, I need to get my polishing rag out...


In 71 years, it will be worth £0 without an extension. Draw a line between the two points.

Will it be YOUR problem in 71 years time?


REPLY: It's not simply a matter of will it be my problem in 71 years though is it becuase i may end up not keeping it that long but say a few years down the line i may need the money for whatever reason it would help in terms of resale value to have a longer lease...




What's the long-lease value, and what's the ground rent?


REPLY: I don't know what the long-lease value is and the link you sent is asking me to guess the vlaue of the flat after the new lease extension ha sbeen added which i have no idea? how much does 90 years extension add in value on a flat?


The ground rent is £100 PA.


You're the one with the auctioneer's catalogue in front of you.

You don't seem to know nearly enough to know whether it's a good deal or not at any given hammer price.

That's... nice.

And what about all the other things you need to know to decide if that contributes to it being a "good deal" or not?
What if the tenant hands their notice in the day after the auction?
What if the tenant never pays you a penny in rent, then does a runner leaving a smouldering ruin the day before the court case for possession?[/QUOTE]


As for the following questions:


And what about all the other things you need to know to decide if that contributes to it being a "good deal" or not?
What if the tenant hands their notice in the day after the auction?
What if the tenant never pays you a penny in rent, then does a runner leaving a smouldering ruin the day before the court case for possession?[/QUOTE]


That's why you have contracts and insurance and all the nessesary paperwork to cove ryou should any of that happen! I wouldn't invest if i wasn't covered.