Apartment with sitting tenant

young_investor_2021

Hello everyone!

I've been reading this forum for a while, and been getting lots of useful advice. Now that I'm preparing to make the biggest investment of my life, I would like some advice from the whitty people in here. 

I'm planning to buy a property for letting, and my main focus is to maximize the yield. I saw an apartment with ~140 years left on lease, which has a sitting tenant that started the tenancy 2 months ago. I don't plan on taking a mortgage. The yield works out around 5.7% (after subtracting the ground rent, service charge and agent management fees). My questions to the community are the following:

1. Is it safe to buy with a sitting tenant? I'm wondering if the owner had some problems and wanted to sell right after the tenancy started.

2. After reading about leasehold, I've heard the agreement may have restrictions (e.g. asking permission for renovation or bringing pets). However the owners seem to not want to share the lease before an offer was agreed.

3. Would you advise the yield is acceptable? (The location is rather close to the city centre) Am I missing any higher profit strategies and risking to lock my money in?

Thanks in advance for the advice!

GDB2222

I would insist on a new tenancy agreement, done under my supervision. You obviously need to vet the tenants etc.

GDB2222

Oh, and has this been window dressed for sale? Is the rent the current market rent?

Just be very careful indeed.

theartfullodger

GDB2222 said:

I would insist on a new tenancy agreement, done under my supervision. You obviously need to vet the tenants etc.

The tenant does not have to agree to any new tenancy, nor any changes to the existing one, other than change of landlord 

Ask tenant (yes, tenant, not vendor not agent not solicitor) when they 1st moved in.  

Just because there's a recent new tenancy doesn't mean it's an AST.

Artful: landlord since 2000

GDB2222

I agree that the tenant doesn’t have to play ball. But I would need it done as a requirement for purchase. If not, I’d walk.

young_investor_2021

GDB2222 said:

Oh, and has this been window dressed for sale? Is the rent the current market rent?

Just be very careful indeed.

The agent said that the owner didn't know how long the sale would take, so they didn't want to lose money meanwhile. It makes sense, but you can never know for sure. The advantage I don't have to pay for marketing the property, but it also makes me wary.

The rent is the current market rent for sure, there are apartments marketed in the same building within the same range (£25 more pcm, but I don't think that's big enough difference for the owner to drop the whole deal)

user1977

young_investor_2021 said:

GDB2222 said:

Oh, and has this been window dressed for sale? Is the rent the current market rent?

Just be very careful indeed.

The rent is the current market rent for sure

And is it actually being paid? (and not being paid by some pal of the Vendor, for example?) 

What reason have they given for not exhibiting the lease to you, given that's a standard part of due diligence (and available from the registers anyway if you wanted to bypass the vendor)? 

young_investor_2021

theartfullodger said:

GDB2222 said:

I would insist on a new tenancy agreement, done under my supervision. You obviously need to vet the tenants etc.

The tenant does not have to agree to any new tenancy, nor any changes to the existing one, other than change of landlord 

Ask tenant (yes, tenant, not vendor not agent not solicitor) when they 1st moved in.  

Just because there's a recent new tenancy doesn't mean it's an AST.

Artful: landlord since 2000

I will ask them if I view the property again (and if they are be in). The agent said two months ago, you think they could be lying about this? There are so many things that I could ask everyone, that it's gets overwhelming sometimes. 

GDB2222

Nothing the agent tells you matters. Some of it might even  be true, but none of it is contractually binding. 

canaldumidi

1) yes, assuming you have seen and checked  the tenancy agreement, all the tenant vetting documents,  the tenant set-up documents (gas, gov leaflet etc etc), rent schedule, deposit docs, etc. Take nothing for granted.

2) it's usual for the lease tbe made available during conveyancing. Some sellers willbe helpful andprovide it earlier, or if the Land Ragistry has a copy you can apply for it on Form OS2 - GOV.UK for £7 by post

3) using cash means no mortgage nterest tooffset against ax. Have you done a full budget? Your costs willbe much greater than you have listed.

As others have said, you iherit the existing tenance. The tenant does not need to sign a new one with you, and why should they.

Don't forget to comply with the Landlord & Tenant Act 1985 S3..

Post 7: New landlords (1):advice & information :see links in next post

Post 8: New landlords (2): Essential links for further information

Post 9: Letting agents: how should a landlord select or sack?

young_investor_2021

GDB2222 said:

Nothing the agent tells you matters. Some of it might even  be true, but none of it is contractually binding. 

True but I can't get all contractually binding info even before making an offer right?