Property investment advice needed

[t1grm]

All

I have a leasehold studio flat in Brighton that I bought last year as a buy to let that is now bringing in a reasonable amount of beer money after paying for itself. Now the freeholders have put the freehold on the market. There are 5 leases on the freehold including mine (4 private dwellings and one commercial premises). As usual this has gone out to the leaseholders for first refusal but the deadline passed without them agreeing to buy it so a single individual can now buy it. So… I’m thinking of buying the freehold for the whole place lock stock…

Thing is I’m not actually entirely sure what the benefits about owning the freehold are. I rent a couple of other properties but they are both freeholds with no leases on them, which is a lot simpler to quantify. All the leases are 99-year leases with almost their full terms to run. On the one hand this is not going to generate any more rental income for me (apart from ground rent which is not much and I will probably end up spending on maintenance) and I think I’ll end up picking up a proportion of the maintenance costs and hassle for a fairly substantial building. However, the lease does not seem that expensive for the size of the property. They’re asking 7.5K GBP.

Perhaps someone could explain to me what the benefits of owning the freehold would be in both the short and the long term? Obviously there must be something in it if they are selling it. Clearly owning the whole property in 100 years time would be one . Can I borrow against the full value of the freehold even though most of it is let out to other lessees? Are there any extra rental income streams to be had?

As I have said I rent a couple of other properties and have been renting property quite successfully for about 3 years now so I am reasonably confident of being able to handle the “logistics” of maintaining a place this size. The way savings account interest rates and the equity markets are at the moment if I have a lump of cash kicking round can I do much worse than invest it in this? (Maybe buy an S )

Any advise much appreciated

Cheers

Gary

[summs]

I am no expert, but having just sold a leasehold flat, I can tell you that it would be shed-loads easier if it was freehold. I was at the complete mercy of my freeholder (seemingly) and his (in)ability to answer the buyers solicitors questions sensibly. I almost lost the deal after months.

If I had the money spare I would buy it, try and make a little more beer money, and you will get the full value back plus more when you ever come to sell the house.

[Leadfoot]

Pros: master of your own destiny as far as maintenance etc is concerend.

Cons: liabilities as the freeholder. Having to pay out for upkeep & thern collect ground rent & maintenance charged from your leaseholders.

I would have thought that the best way is for all (5?) of you leaseholders form a ltd company & then bid for the freehold? That way you all get to share the costs, & everything is on a formal basis.

I know what you mean on the freehold/leasehold situation, we've got one of each.

[Eric Mc]

The "property management company" is a popular route to obtaining title to a freehold of a block of flats/apartments. Once you go down that route you will be obliged to produce annual limited company accounts. file them with Companies House each year and keep Companies House informed of any important changes (directors, company secretary etc). Limited company accounts also need to be submitted to the Inland Revenue although dispensation can be obtained from this obligation if the Inland Revenue are satisfied that flat management is the only activity carried out by the company.

Failing to keep Companies House up to date can have serious consequences for a flat management company. If things slip too far into arrears, the property can end up "vesting to the Crown" and it's a devil of a job (and expensive too) to retrieve the situation. I know - I've seen it happen.

[icamm]

I'm certainly no expert but I guess you need to consider the following.

You would then own the freehold rights to your flat (as well as the others) so it might make your flat easier to sell when the time comes. You can also add the cost of the freehold rights to the price of the flat (or sell it seperately).

However, you will have to maintain the building and grounds and collect the ground rent from the other tenants.

You may find that any potential buyer of your flat won't want the hassle of owning the freehold for the entire building so you might end up stuck with it (or have to sell it seperately).

I would get a full survey of the property done so you know the real condition of the site. If you buy it then you could potentially end up with some serious bills if their is some sort of major problem with the building itself.

However, if you just have to put a lick of paint in the stairwells every few years and make sure any garden area is kept tidy you might
not have too much of a problem..

Also, check out what the current total ground rent is and what your rights are for increasing it. (Don't forget to take into account you nolonger have to pay this on your own flat when calculating).

[plipton]

More to the point is what happens if someone else buys the freehold!!!

Tough one. Good luck