Last week it was Scotland v England (or Rob D 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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