Episode Details

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. 

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