13th April, 2017 BACK TO ALL PODCASTS

Last week it was Scotland v England (or RobD v Rob B) at the Meetups as Rob D ventured to Edinburgh to our brilliant Meetup there, led by Karen & Bill. Rob B took over the helm at the King’s Cross Meetup and both locations were very busy.

Rob D spent a bit more time putting the finishing touches to his new book ‘How to be a Landlord’ but we’ll tell you more about that over the next couple of weeks.

Now on to this week’s big topic – all about lease hold.

Something that puts some people off – and fear often comes from lack of knowledge. So let’s get educated.

What is leasehold? 

  • You don’t own the land – you lease the land for a period of time. At the end of that time it reverts back to the freeholder if you don’t renew
  • Typical lease terms are anything from 100 to 999 years
  • You pay ground rent every year as payment for the lease
  • The lease has conditions about what you can and can’t do
  • Most common for flats, increasingly new build houses too

 

What you need to know 

  • Lease extension is always possible and follows a set formula – BUT
  • Gets more expensive with under 80 years left – marriage value
  • Under about 60 years becomes hard to get mortgage

 

Things to check before you buy:

  • Length of remaining lease term
  • Ground rent, and if it increases after period of time
  • Any restrictions – like not being able to sublet!
  • Service charge is a bit different but this is important too
  • Get your solicitor to look over the lease in detail

 

How to extend: 

  • Extension is always for an additional 90 years, with no ground rent payable for this new 90 years
  • Get a specialist valuer to value the extension and a solicitor to serve notice on the landlord, offering terms and how much to pay
  • Landlord has 2 months to respond, either accepting or stating their own terms

 

  • Negotiate. After 2 months either party can apply to tribunal for decision
  • Wait for tribunal decision, which is final
  • Can take a year or more from start to finish by the time you’ve waited for various deadlines
  • If it’s close to 80 years and you’re buying, get the vendor to start the process and transfer it to you because you can’t do it in first 2 years

 

How to make money from leases: 

  • Buy properties with short leases and extend them. Will need to be cash buy or bridging until you’ve done the extension. Make sure there’s a profit even after the extension costs.
  • Buy freeholds. Ground rents give an income stream.

 

 

News story: Household savings ratio falls to record low.

This is a bit worrying in itself, but we’re particularly concerned given that mortgages are cheaper than ever. What will happen when the cost of mortgages goes up? Take a look at this story here. 

Resource of the week

This week’s resource of the week is Pocket Explore. This is an extension of a previous ROTW Get Pocket. Explore Pocket takes this a bit further and helps you find high quality blogs on any given subject. Check it out.

Continue the conversation over in the forum

Have you invested in a leasehold or have you been put off?

Let us know your take on this important subject and join the conversation over in the forum!

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