First time investment questions

Comms69

Newuser2019 wrote: »

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.

Haha, please don't become a landlord.


You have no idea.

Newuser2019

Tom99 wrote: »

[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]

Ok so where i am confused is why is the freehold anything to do with this when we are only dealign with leasehold and why is the freehold only £3500 when freehold should be MUCH more becuase it is the value of the entire building and the land? So shouldn;t it be mor elike £300,000?


BTW i do completly understand whta you have just wrote but i didn't even know that i had to pay freehild value which is the total amoutn of ground value for the remaining lease before the extension. So much to learn...


That's one of my concerns - that they ask an unreasonable lease extension price or they deny a lease extension altogether!

AdrianC

Newuser2019 wrote: »

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

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?

You're working backwards...

How much would this flat be on the market for, if not for the short lease rendering it unmortgagable?

This is quite probably the easiest question of any in this situation.

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?

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.

<boggle>
Now you're scaring me.

Newuser2019

Comms69 wrote: »

Haha, please don't become a landlord.


You have no idea.

Can you please go away if your not going to be helpful! I am new to all of this and i did say that! My fmaily already are landlords and that has had it's downs but nothing out of the usual and overall it has been a good experience which is generating income so there.

Comms69

Newuser2019 wrote: »

Can you please go away if your not going to be helpful! - I'm fine here, thanks. I am new to all of this and i did say that! - but instead of taking AC's point seriously, you suggest that a simple insurance policy and contract will prevent you not suffering thousands, or tens of thousands of pounds worth of debt, which experienced landlords end up lumbered with... My fmaily already are landlords - yet you don't take advice from them and post here instead? and that has had it's downs but nothing out of the usual and overall it has been a good experience which is generating income so there.

'So there'? Really, your anecdotal example is somehow now relevant?


I'm going to ask again how you expect a property with a 9.9% yield to be sold for even less. It's ludicrous.

Tom99

Newuser2019 wrote: »

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

70yrs to 160yrs will add about 7-8% approx.
Clearly that assumed you have paid the right price for the 70yr lease.
You should know, having researched other sales, what a long lease of this flat is worth otherwise how would you know whether £100k is the right figure for a 70yr lease? It might only be worth £80k but because you happen to be bidding against an equally uninformed buyer you each bid it up to £100k

AdrianC

Newuser2019 wrote: »

My fmaily already are landlords

Great.

Then run your last answer - the bit about "contracts and insurance" past them - and let us know their reaction...

Let's go back a step. You're banking on £830/mo coming in, right? Well, that's lovely... If it happens.


If your tenant leaves, then you have a void plus expenses while you advertise the place, check references, wait for them to move in... Maybe you want to take that opportunity to refresh the place. More expense. Eventually, you'll get some of that rent in.

Or you have a big void of unpaid rent, followed by eviction hearings, followed by all the repair costs... It could be a year before you're ready to get a tenant in, and thousands of pounds. Insurance...? You got your landlord's insurance in place in time, did you? And it covers all that lot? Good luck with the claim.


£830/mo on a £100k flat is extremely good - damn near 10% yield. At that return, you will not be paying £100k, because you'll have far more clued-up and seasoned investors out-bidding you. Not that you can afford £100k, of course, because as soon as the bidding hits £70k, you're out, right? In the massively unlikely event you pay £70k for it, that's damn near 15% yield. Ain't. Going. To. Happen.

Newuser2019

“ “ What's the long-lease value, and what's the ground rent?
”
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?
by Newuser2019 ”
You're working backwards...

How much would this flat be on the market for, if not for the short lease rendering it unmortgagable?


REPLY: A rough guestimate would be £300,000.


This is quite probably the easiest question of any in this situation.


I agree. £300,000.


“ “ 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?
”
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.
”
<boggle>
Now you're scaring me.



What if the tenant hands their notice in the day after the auction?


REPLY: £It has a Assured Shorthold Tenancy for a term of 12 months from 4th August 2018 until 3rd August 2019 at a current rent of £830 per calendar month. I have though about this, the very worst situation is i advertise it for a new tenant which shouldn't tale long this being a London location. Also, if i wanted i could always use it myself in the meantime should i choose... I know that's not a good thing to say but your right they very well could say they are leaving which is thier right so i have no chocie but the reaosn it hink it's a good investment in that respect is i don't think it will stay vacant for long because of it's location and it is quite nice inside.


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?


Seriously? Ar eyou deliveratly trying to be difficult? How many times does this actually happen in reality to the average landlord with one or tow properties, i mean come on! As i said why the heck would a tenant take such a risk? I would be covered with landlord insurance and house insurance if the property is burnt down... As for the rent worst case scenario i lose one months rentm best case i get it back from the courts... It's court fees i am unsure about?

AdrianC

Newuser2019 wrote: »

How much would this flat be on the market for, if not for the short lease rendering it unmortgagable?

REPLY: A rough guestimate would be £300,000.

Great, so there's your answer.

And plugging those into the lease extension calculator says that the statutory lease extension will be about £28k now, or £31k in two years time when you can go for it.


Now, what do you think the chances of paying £100k for a (£300k-30k) flat are?

BTW, £830/mo rent for a £300k flat is an abysmal yield. Not worth the hassle.

Comms69

Newuser2019 wrote: »

“ “ What's the long-lease value, and what's the ground rent?
”
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?
by Newuser2019 ”
You're working backwards...

How much would this flat be on the market for, if not for the short lease rendering it unmortgagable?


REPLY: A rough guestimate would be £300,000.


This is quite probably the easiest question of any in this situation.


I agree. £300,000.


“ “ 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?
”
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.
”
<boggle>
Now you're scaring me.



What if the tenant hands their notice in the day after the auction?


REPLY: £It has a Assured Shorthold Tenancy for a term of 12 months from 4th August 2018 until 3rd August 2019 at a current rent of £830 per calendar month. I have though about this, the very worst situation is i advertise it for a new tenant which shouldn't tale long this being a London location. Also, if i wanted i could always use it myself in the meantime should i choose... I know that's not a good thing to say but your right they very well could say they are leaving which is thier right so i have no chocie but the reaosn it hink it's a good investment in that respect is i don't think it will stay vacant for long because of it's location and it is quite nice inside.


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?


Seriously? Ar eyou deliveratly trying to be difficult? How many times does this actually happen in reality to the average landlord with one or tow properties, i mean come on! As i said why the heck would a tenant take such a risk? I would be covered with landlord insurance and house insurance if the property is burnt down... As for the rent worst case scenario i lose one months rentm best case i get it back from the courts... It's court fees i am unsure about?

WHAT?


it take on average 6-9 months to evict someone.


The courts DO NOT pay you out.