Reply to: Flats make rubbish B2Ls. Discuss.

[d000hg]

Got a link for this? Would like to have a look.

Couldn't find a great example but the postcode is DH1 4GS and the road is called Highgate. It's right underneath the railway station, if you know Durham.

I don't know what the hell the owners were thinking, but here's one very badly decorated example:

4 bedroom house to rent in Highgate, Durham, DH1, DH1

Here's a picture, the main point is they were forced by the council to not make them look like a boring row of identical houses:

[Martin@AS Financial]

I was considering in W. London where I currently live, but the market seems to have gone completely bonkers. Stuff is selling for over asking price before the ads even hit Rightmove etc, so I'm considering further afield.

Do you guys with multiple properties look to buy within a radius of home in case of emergencies, or do you go for wherever is cheap with a good potential return? Oop North, where my folks are from, it seems possible to get terraced places for £80k, with a claimed rental income of ~ £500/month.

I live in Ealing and I 100% agree with you - it seems that property isn't even making it onto Rightmove etc before it is under offer.

I would say to look where you get the best rental return even if it is a bit further out. Because of the way house prices are going in London, it is getting harder to meet the lenders BTL rental calculation which tends to be - loan size x 5% / 12 x 125%. This means that a lot of the time, you have to put down more than the standard 25% deposit depending on the lender you go to.

[sasguru]

I'm firmly of the opinion that BTL is the only inflation-proof way to sort out your retirement. What else are you going to do - the financial industry products: pensions/annuities etc etc are all cons designed to make their administrators lots of cash.
With BTL hopefully someone (several people) pay off your mortgage and then you have a pure cash generator (minus maintenance costs) for your old age, inflation-proof since rents will probably rise with inflation.
The leasehold argument I think is only valid for a short lease - the usual 125 years is more than good enough for an investment.
But my one luckily is share of freehold - I think this is becoming increasingly common in London so find a non-leasehold one.

[b0redom]

It depends where you are investing really. Here in London, the majority of homes are flats and provide a fairly decent return in terms of rental income and long term equity growth. The average rent rose in London by £29 in Feb 2014 according to the report below.

As you say however, ground rent and service charges are not cheap and have to be factored in.


UK rental yields reach 18-month high:

UK rental yields reach 18-month high

I was considering in W. London where I currently live, but the market seems to have gone completely bonkers. Stuff is selling for over asking price before the ads even hit Rightmove etc, so I'm considering further afield.

Do you guys with multiple properties look to buy within a radius of home in case of emergencies, or do you go for wherever is cheap with a good potential return? Oop North, where my folks are from, it seems possible to get terraced places for £80k, with a claimed rental income of ~ £500/month.

[northernladuk]

There's a really nice one in Durham which we sadly couldn't afford to buy in - houses with high ceilings, big wide hallways, etc - they don't really feel like new builds at all.

Got a link for this? Would like to have a look.

[d000hg]

This is very true. I did think about looking at new builds as you get a discount buying off plan and can negotiate pretty hard if you have plenty of cash behind you. They are also very well designed and attractive to young families that are going to stay a good number of years. I am just nervous about the quality of them and that fact some new estates can look very dated over the next decade compared to older houses. Maybe it's just because I am not used to newer houses having always lived in solid old ones.

I'm not really a fan of modern housing - they are sturdy enough but so noisy with the modern walling techniques. On the other hand they do maximise space.

I never thought we'd buy a new-build after looking round a few typical new-build developments - tiny box room, everything oozing cheapness, etc - but we discovered there are new build developments, and new build developments. In more expensive areas, the developments can be much nicer. There's a really nice one in Durham which we sadly couldn't afford to buy in - houses with high ceilings, big wide hallways, etc - they don't really feel like new builds at all.

But the ones they squeeze into every bit of land and advertise "buy from only £89,000" are horrible although probably far better as rental properties.

[Martin@AS Financial]

Hi All,
I've never really understood why people do B2L on a flat, or even buy them. It seems to me that you buy a lease on something for around the same price as a house, and then the clock starts ticking until the freeholder gets it back. You also have to pay ground rent and maintenance which also come out of the gross rental income.

I'm in the market for a 2nd B2L, but the market seems to have gone mental, so I either stump up a massive bunch of cash for a 1 bedroom house, or slightly less for a flat.

Am I missing something? Do B2L flats have any upside I'm missing?

It depends where you are investing really. Here in London, the majority of homes are flats and provide a fairly decent return in terms of rental income and long term equity growth. The average rent rose in London by £29 in Feb 2014 according to the report below.

As you say however, ground rent and service charges are not cheap and have to be factored in.


UK rental yields reach 18-month high:

http://www.mortgagesolutions.co.uk/m...-18-month-high

[vetran]

Alternatively, buy in Scotland and have it nationalised when the RPS is formed.

FTFY

[SueEllen]

Alternatively, buy in Scotland and don't have this leasehold nonsense!

Yeah well there aren't as many jobs up there.

[SueEllen]

L

I think the investor works for Ford because he turns up every now and again with a new Ford motor which still has the plastic wrappings on the seats.

Point proven.

[Brian Potter]

Nosey neighbour is obviously a bit dim

LOL...he told me the gossip, but he is a bit dim. The flat in question belongs to some investor who bought it during the liars loan/self cert boom at about half it's market value, obviously due to the lease issue. I'm assuming he paid cash, but it wouldn't surprise me if the place was bought on a mortgage with the banks back then not checking anything!

Story goes that he then rented it out and would turn up every other month to tell the neighbours how much money he was making on the place? According to local gossip, he approached the owners of the nearby flats to make them a "take it or leave it" offer on their flats. Of course, they told him to feck off.

I think the investor works for Ford because he turns up every now and again with a new Ford motor which still has the plastic wrappings on the seats.

[v8gaz]

Alternatively, buy in Scotland and don't have this leasehold nonsense!

[SueEllen]

. The block along from me has 20 years left on the leasehold with the freeholder demanding £20k to renew...or so my nosey neighbour tells me!

Nosey neighbour is obviously a bit dim.

When you buy a leasehold you are advised to look at the length of the lease and if you ask the solicitor they will give you useful information.

For example anyone with a leasehold is told to extend their lease before there is less than 80 years remaining as once there is only 79 years the freeholder can charge them a hell of a lot to extend the lease due to the increase in marriage value as a short lease isn't mortgageable.

Also Right To Manage has been exercised in estates (there is a private estate near me that has exercised it), blocks of flats, houses converted into flats and maisonettes. The issues a couple of people I know found that with Right To Manage is that you don't get ripped of by your freeholder any more but if you have issues with your other company directors, they have issues with you or you have issues with the leaseholders who didn't buy the part of the freehold it can get nasty.

[northernladuk]

That seems a bit of a dodgy statement to begin with.Many, many houses are also leasehold - this is not at all limited to flats.Again, many houses have similar things. Modern housing developments for instance like the street on which I live - and yet these are evidently great rental properties based on the number which were bought new as B2L.

This is very true. I did think about looking at new builds as you get a discount buying off plan and can negotiate pretty hard if you have plenty of cash behind you. They are also very well designed and attractive to young families that are going to stay a good number of years. I am just nervous about the quality of them and that fact some new estates can look very dated over the next decade compared to older houses. Maybe it's just because I am not used to newer houses having always lived in solid old ones.

One thing to watch with lease hold though, particularly blocks of flats where they have bought the lease, is the sub letting rules. If it is written badly saying you can't sub let it by way of mortgage it is possible you will not be able to let it out. Get some tenants in and they could pull the clause on you. It can get very grey as to whether you are letting or sub letting so make sure you get your solicitor to check very carefully.

[d000hg]

you buy a lease on something for around the same price as a house

That seems a bit of a dodgy statement to begin with.

then the clock starts ticking until the freeholder gets it back.

Many, many houses are also leasehold - this is not at all limited to flats.

You also have to pay ground rent and maintenance which also come out of the gross rental income.

Again, many houses have similar things. Modern housing developments for instance like the street on which I live - and yet these are evidently great rental properties based on the number which were bought new as B2L.