Freehold question

[andye30m3]

Got a bit board this morning so looked on rightmove with dreams of starting my property empire and stumbled across a flat I can make work well as a buy to let. It's on for £100k with a potential rental value of £700-750 a month, with my deposit I'd only need £550 a month to cover a 15ish year mortgage. you'd be lucky to find a 1 bed flat with a rental value of £550 in the area.

Now there is a problem, The estate agent has quite openly has stated it is not mortgageable.

Apparently this is because the flats are freehold. Not share of a freehold with a management company but actually freehold in their own right and this means there is no obligation for others in the block to insure etc.

Has anyone every come across this before? and what issues are likely to arise?.

I could fund this by re-mortgaging my own place which I own 100% of but don't want to end up in a world of grief.

Apparently the residents have in the past spoken about setting up a management company but nothing was agreed.

[edg516]

Hi,

I have a lease hold flat at the moment, bought it when it had 55 years left on the lease and figured that I could extend the lease, I have looked into this in more detail (when bought I confirmed it was possible to extend) and found that they want 30k to extend the lease to 125 years (its now got about 45 years left)

If I had my time again I would not touch leasehold with a barge pole, as its a right pain to extend the lease. I am now stuck with either paying £30k or going via a leasehold tribunal to get it reduced to a fair value.
From what I remember to extend the lease you take the value of the property with an extended lease and subtract the current value. Then take this value (the marriage value) and divide by two.
this gives you the sum you have to pay for the lease extension. Other fees you have to pay are things like the freeholders costs etc. (this includes their nominated surveyor and legal fees), add on your fees and it can come to quite a lot.

Its a not a good explanation of the process, but I would recommend looking at this site, loads of good info http://www.lease-advice.org/

cheers

Ed

[Wings]

Of all the rented properties I own, the one that causes me the most problems is a leasehold one. Whilst there is a Management Company in operation, the other three leaseholders all have differing interests and values, so to get an agreement to carry out any repairs, improvements of any significant value is virtually impossible. As another poster stated, never again will I purchase a leasehold property.

There are always ways of raising monies to purchase the type of property the OP describes, but one will pay with possibly a higher deposit be required together with higher interest rates being charged.

[edg516]

The other thing I have found difficult is to establish who owns the freehold, (I have the mgmt company name) as when you look at the companies house info it starts on a long trail of small companies/companies who only exist on paper etc. As far as we can tell the actual freehold is owned by some holiday company. We were trying to go direct as the mgmt company take weeks to respond to anything including the ground rent payments, lost track of the number of times I have to re-issue a cheque for the ground rent as they dont pay the cheque in on time (best one was three years worth of cheques not being cashed as they forgot to do the banking )

[Wings]

This link might offer some help/advice;

http://www.lease-advice.org/aboutus/

[blueg33]

Freehold flats are un-mortgageable because you dont own the ground its on and it is vague who maintains the building. Because they are unmortgageable they have a lower price (limited market)

Its a risky purchase.