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  • Leasehold Property

    Lease extension cost calculator?

    Hi, I am new to the forum and very new to property investing ( still learning and researching, no investments yet )

    I spend an unhealthy amount of time rummaging around Rightmove and Zoopla trying to find a path in. I have come across a leasehold maisonette that is of interest. The agent has told me it is cash only because the lease has only 59 years left to run. The property is on for 99k, my guesstimate with a long lease the property would sell for 105k. I appreciate the cost would well exceed the difference in value, my aim is to evaluate how much I might offer

    My question; is there any way of finding out the cost to get the lease extended, or approximate cost.

    Thank you in advance for the advice.

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    Hi Thomas and welcome to the Tribe.

    There is some useful information here and a lease extension cost calculator >>> here. 

    Forgive me if you already have this covered, but maisonettes are not very popular with lenders, so you may struggle to finance this, even if you get a lease extension.

    Hope this helps for starters?

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    Thank you Vanessa, I shall have a read. May I ask why maisonettes are not popular with lenders?


    Tom

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    I am not 100% sure tbh, but lenders do not have a big appetite for this type of property, a bit like studio flats.  I guess they think that the intrinsic value is less robust than other property types.

    As we repeatedly advise on Property Tribes, always understand the finance aspects first, otherwise you could spend a lot of time looking for deals and then find that you cannot actually finance them.  A call to the specialist team at Property Tribes Financial Services on 01206 654444 will get you the best possible advice and also give you an idea of what lenders there are out there for this property type.

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    The main reason lenders don't like flats over shops is because they have little or no control who or what would occupy the shop.

    One shop could represent a good boost to the value of a flat whereby another could seriously damage it. A clothing shop will be nice and quiet of an evening whereas a takeaway will be busy into the early hours with all kinds of goings on. It is these things that make lenders think about their security if and when they ever have to reposes and dispose of the property.

    Certain shops also carry much higher buildings insurance costs for the rest of the owners such as off licences as they are at greater risk of break ins.

    So in short it is a lack of control on outside factors and influence on the security that put lenders off.

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    Landlord with 25 years’ experience in the property market and a specialist in tenant referencing, ID and credit screening. Creator of identity, credit and anti-money laundering system ValidID.co.uk


    Thanks Chris, this property is only linked to other residential properties.


    Tom.

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    If it is purely residential it will be less of an issue for a lender. The other problem you might come across is if the lender already has a reasonable exposure to the whole development.

    With lenders consolidating into bigger operations such as the Lloyds Banking Group, having a large exposure to a development is easier than you think.

    They like to keep it low just in case something happens with the whole development they don't want to be holding too much security in one place.

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    Landlord with 25 years’ experience in the property market and a specialist in tenant referencing, ID and credit screening. Creator of identity, credit and anti-money laundering system ValidID.co.uk


    Where does he say its over a shop?? He says it's a masionette.

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    It doesn't but I was trying to provide some rational as to why lenders don't like flats and maisonettes.

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    Landlord with 25 years’ experience in the property market and a specialist in tenant referencing, ID and credit screening. Creator of identity, credit and anti-money laundering system ValidID.co.uk

    59 year lease @ 99K and extended lease (say typically add  90 years to total 149 years ) valued @ 105K  seems not enough differential for me

    I would be looking at a 20K difference maybe so either the 105K is underestimating its true value with an extension or more likely @ 99K its overpriced for what you are getting

    So research more thoroughly is my advice to ensure your figures are spot on

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    Jonathan Clarke. http://www.buytoletmk.com

    Jonathan, I agree. Using the calculator Vanessa Kindly linked for me, it came up with a figure of 16 to 17k to extend. I think I am right in thinking I then have to add solicitors fees and costs for me and the land owner plus a few thousand to tidy up the property, it looks like it could do with a kitchen and bathroom update. This brings the total to 25k just to reach market value, so 19k below his asking price to break even. I am guessing the owner knows this and is the reason why he has not extended the lease himself. It does however seem to me the owners situation can only get worse. He also bought the property in 2005 for 130k so is in a negative equity situation. I think it has got to be worth a viewing and hopefully it will be with the owner.

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