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I'm looking for a BTL flat, which will probably be a leasehold.
Let's assume I have 2 similar properties, one with a lease period of 250 years and one with 100 years.
The one with 100 years left is ~ 15K less than the other one.
Which one would you go for?
In addition, what is the minimal lease period you would buy?
Thanks in advance
I guess I would work out the cost to extend the 100yr lease to 250yr
If more than 15K go for the 100 yr one
And that 15K can be used towards a depsoit on another flat and get two lots of rent
If holding for 30 years is the aim then the 250yr one maybe
If selling in 5 years then the 100yr one
There is no minimal lease i wouldn`t look at as the price would reflect that
Leases can be extended so its the cost and hassle of that which is factored in
Below 80 is more problematic if borrowing is needed so that has to be factored in
Jonathan Clarke. http://www.buytoletmk.com
Thank you very much Jonathan. How can I find the cost of extending the leasing? Should I contact the freehold in this stage?
This would be the place to start I suggest
Its a dot org site so trustworthy and has a leasehold calculator to punch in the figures
The term of the lease is only part of the consideration, assuming a minimum term of circa 100 years.
What are the service charges and ground rents for both flats - and frequency and amount of increases particularly for the ground rents?
How big are the blocks, do they have lifts as will impact on service charges?
Where are the flats and what competition is there for them?
How well are the flats maintained?
Does the lease require you to advise the freeholder and pay a fee every time you have a new tenant, if so how much is the fee?
Is there a difference in what the flats would rent for?
Essex is right. But if both flats are similar on those, then buy the short lease one, it will only cost around £5-6k to extend at this stage
Thank you all for the helpful information.
How did you assess the value of the lease extension. Usually it's based on discounting ground rent and reversionary values. How did you do it without this information. I'm intrigued.
Chartered Accountant, Tax Advisor and Mortgage broker
(and BTL portfolio owner)
With 100 years remaining the premium itself will be just a few hundred pounds, maybe 1 k. The surveys and legals will be around 5k.
Although the premium might be higher to extend on a new build flat with a high and increasing ground rent, where the freehold is sold by the builder.
That won't fly in London where reversionary values are much higher. I'll buy 100 year reversionary in London for £1000 all day long.