Investing in Ground Rent

[MarillionFan]

I forever see these on Auction sites. Does anyone have any experience in purchasing freeholds for ground rent.

I was always under the impression that it was solicitors who tended to invest in these but is that true?

Allsop LLP Residential Online Catalogue - Auction Home

[OwlHoot]

I forever see these on Auction sites. Does anyone have any experience in purchasing freeholds for ground rent.

I was always under the impression that it was solicitors who tended to invest in these but is that true?

Allsop LLP Residential Online Catalogue - Auction Home

I'd have thought you'd be buying into a potentially huge amount of obligations and work for not much return.

After all, technically freeholders have to consent to lease transfers and are ultimately responsible for maintaining the properties they own, and I imagine can even be sued for negligence in the event of accidents caused by disrepair etc.

OTOH, it could be a good investment if you find a property with a lot of lazy unmotivated tenants, or where the conditions to permit compulsory freehold purchase are not met (more than seven tenants for example I think?), with remaining lease periods at a borderline value of about 80 years. That way you can just sit on it for twenty years or more and watch the so-called marriage value soar.

[moorfield]

Buy shares in British Land instead and reinvest divis.

[Green]

I have often thought about investing in these but not ever done it. I think try it out with a small outlay and a good yield and see how it goes. There are companies which manage lots of small ground rents for you. I think you make the money on the insurance and lease extensions.

[Paddy]

I forever see these on Auction sites. Does anyone have any experience in purchasing freeholds for ground rent.

I was always under the impression that it was solicitors who tended to invest in these but is that true?

Allsop LLP Residential Online Catalogue - Auction Home

The last lease renewal cost me over £60k in legal fees and a rent renewal cost me £30 in legal and RICS fees.

Best is to buy properties with a peppercorn rent for about £500 to £2000 freehold.

Then you wait for the person to default payment of £10 pa rent or when they are dead, you get the property.

[alreadypacked]

I have often thought about investing in these but not ever done it. I think try it out with a small outlay and a good yield and see how it goes. There are companies which manage lots of small ground rents for you. I think you make the money on the insurance and managment fees.

[Green]

The last lease renewal cost me over £60k in legal fees and a rent renewal cost me £30 in legal and RICS fees.

Best is to buy properties with a peppercorn rent for about £500 to £2000 freehold.

Then you wait for the person to default payment of £10 pa rent or when they are dead, you get the property.

Paddy, how can the LEGAL costs be 60K? Normally, when you renew the lease, say from 70yrs to 125 yrs, if the property pricce uplift is gonna be 120K, then you have to pay half i.e. 60K to the freeholder. Are you sure its not this? i think this is where you make money as freeholder as well as from insurance and management fees.

[OwlHoot]

Paddy, how can the LEGAL costs be 60K? Normally, when you renew the lease, say from 70yrs to 125 yrs, if the property pricce uplift is gonna be 120K, then you have to pay half i.e. 60K to the freeholder. Are you sure its not this? i think this is where you make money as freeholder as well as from insurance and management fees.

Exactly - That's where the real money can be made (uplift being pretty much the same as the marriage value I mentioned, or closely related anyway).

You can make a bit on management fees; but I think there are tribunals which tenants can appeal to if management fees are much more than token amounts.