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I am considering buying a BTL apartment. Just working out the yield. To me it only seems fair for tenants to pay the monthly service charge, just like they pay for council tax, utilities etc.
However, someone suggested to me yesterday that this was the landlord's responsibility.
Your thoughts would be appreciated.
This should be included in the rent. everyone does it this way.
The landlord pays this I'm afraid.
Obviously, you factor this into your rent, but be careful to check what the market rates are.
Service charges can make flats completely unviable, which is why you're far better off buying a 2-bed house if possible.
Service charges cover repairs, maintenance, building insurance etc., hence they are usually the responsibility of the LL. They do not usually cover utilities (except of communal areas) or council tax, which as you say are usually the responsibility of the tenant.
I own one flat and would not buy another. Why share your profits with an estate management company?The service charges on newer developments and those with lifts seem to be particularly punitive.You have to be really careful that the existing service charges are reasonable and check that there's a good chance they won't escalate in the future.A two bed house personally sounds like a much better proposition - yes more maintenance and increased involvement but also the benefit of being in more control of your investment.
Yes landlord pays
Factor the service charge into your whole investment not just the rent achieved
The tenant doesn't recognise your overheads or whether its a leasehold or freehold
So it you put this levy on the rent ensure your competitors dont leave you in the cold
I used to buy flats because the purchase price was lower than the freehold equivalent in the same block
I took the service charge into account over the term of the mortgage
2 bed freehold 100K
2 bed flat 85K
Service charge £20 pcm = £240 pa
So i would break even only after 62 years if I bought a house
So a flat was better than a house in many ways . I delayed the up front cost
It was in effect incorporated into the service charge
By saving 15K by buying a flat I could also buy another one at 85% LTV
I used that saved 15K as a deposit
What I was doing in effect was `borrowing` an extra 15K and paying it off over 62 years
So look at the whole investment and dont get too bogged down in the detail of who pays what
Jonathan Clarke. http://www.buytoletmk.com
Blimey JC, service charge £240 PA?
Plenty of flats round here with SC more than 10 x that!
Ouch that must hurt!
My lowest is £16.96 pa - but thats a garage so doesn't really count
My highest is £826 pa
Several ex council ones though around the 200 - 300 pa mark
The ones in blocks with communal areas to maintain maybe 700 - 800 pa
LL always pays Service Charge - unless you can hike rent high enough - ie on top of local market rent - which is unlikely
S/C is for maintenance of the fabric of the building/grounds
This is why flats are such useless investments.
I rue the day I bought 4 flats rather than 4 terrace houses.
I would never buy a council flat.
Just look at the poor sods who are having to pay for cladding works after the Grenfell fire while remaining council tenants pay nothing.
The amount I've spent on service charges could have built a loft extension in each house!
For investors private flats outside of London are rubbish investments.
Far better a house as the rents are roughly the same once you have stripped out service charges.
Though I've noticed house rental costs are very near a flat cost so the flat owner is making less than the house owning LL when you factor in ever increasing service charges and ground rents.