UK Landlord Forum / Life

Hi everyone,




My partner and I have been saving a long while to buy our first investment property together.

We've found a deal for a 1-bedroom flat in Bradford city centre for £125,000 with 107 years left on the leasehold.

Comparables in the building sell for £50-60k, however this has a 25-year guaranteed rent contract with a Housing Association which provides supported/assisted living social housing for vulnerable adults, funded by the local council.

The rent is floored at £13,000 per annum, with annual reviews in line with CPI_1% inflation.

There is a compulsory buyback scheme whereby the developer can buy it back/sell it to a nominated buyer, usually an institutional investor/pension fund, at a minimum of the original purchase price + 30% extra within the first 3 years. They've done the buy back on all their properties so far by the sounds of it.

Overall it sounds like a good deal and we love the aspect of putting our money towards something that's helping people.

However, we're very weary of leasehold properties.

Is 107 years enough time left on the lease, given the above information?

Ground rent and service charges are paid by the Housing Association.

The 25-year contract with the HA is expected to be renewed afterwards, but it's not compulsory, and if it didn't get renewed then we'd be free to sell or rent to the open market.




Any advice would be very much appreciated please. 




We've paid our £5k reservation fee but it's only refundable until 5pm tomorrow, although verbally they did say we could take our time as there have been unprofessional delays in sending the paperwork/legal docs over.

It literally sounds too good to be true. Is a grand a month the going rate for a one bed flat in Bradford and, if so, why are flats going for £50-60k on the open market? I just don't see why a housing association would be tying themselves into a 25 year contract to give you a 10% return when they could presumably borrow the money for half that. I'd be wary... but then again I always am.

Quote from: Simon Pambin on June 27, 2023, 03:25:50 PM
It literally sounds too good to be true. Is a grand a month the going rate for a one bed flat in Bradford and, if so, why are flats going for £50-60k on the open market? I just don't see why a housing association would be tying themselves into a 25 year contract to give you a 10% return when they could presumably borrow the money for half that. I'd be wary... but then again I always am.

Thank you for the reply. We thought the same! We've spoken to approx 5 companies with this model of selling properties with 10-25 year leases with Housing Associations in place. They're all the same, i.e. 2-3x market value of comparable properties because of the long commercial lease. The rents come from the government/DWP via local council authority. Local authority also pays the HA extra for carers, therapy, maintenance, damage etc etc, but ultimately the rent chunk of it is paid from the HA direct to the landlord.

£1k/month is not the going rate in Bradford, more like £450-550 for a 1-bed in Bradford city centre. But the gov is paying these super high rents because they've got ridiculously long waitlists of people needing social housing and they're stuck paying £200/night for emergency hostels, hotels, shelters etc as they haven't got the property themselves to house these people. And there was a law passed a few years ago which says gov can't let anyone be homeless and in temporary housing for more than 50-something days.

Used to just be institutional funds investing these - it's only opened to private/individual investors over last few years.

Asking around and it seems to be somewhat of a small/niche area of property investing at the moment! Not anyone with previous insight into this area.

I can only comment on my own prejudices and then some knowledge of a friend...

I will never, ever, not in a million years go anywhere near another Leasehold property in my life. Part of this stems from a lack of control... which you are obviously willing to forgo anyway, by handing over the property to a HA, so you may not feel like I do - but I feel this way ardently.

Now, the premium being paid. I went to Bradford University all those years ago... and find myself there sometimes... and, no, that rental figure is not the going rate for Bradford... not even for York, and York is posh. But it's all about the fact that Councils are really struggling with this - finding facilities for their 'resident's' needs. I have a chum in Northampton who is setting up a rental for £3,000 a month, so they can set themselves up as some kind of assessment centre for reprobate and dysfunctional families... I don't know all the details, but I've been told a bit 'cos I've been drained of my residential experience about things like planning permission, rent increase and break clauses. Is £3,000 the going rate where they are for a normal house? Absolutely not. It's more like £1,250. But they're willing to pay a premium to a willing Landlord to get the property needed to pass the tests that the Council will do to ensure it's suitable - like space for an office, a playroom, CCTV coverage etc.. And, for this, they could be looking at income close to £30,000 a month (depending on the number of feckless families they're able to squeeze in)... that's the reality of the numbers. I couldn't believe it. But - today - it's real. It doesn't mean it'll always be this way... but Councils are busily spaffing money up the wall to meet their (assessment, care and safeguarding) obligations. And, yes, Landlords are taking advantage of this.

£30,000 a month in. Outgoings will be rent, insurance, 24/7 staff, up-front remodeling of the place, some other stuff (I wasn't fully listening)... but they fully expect to be clearing hefty sums of money in due course - assuming they get the right property and have it approved by their Council (which is likely, as they're much needed, as implied above). The rent is set currently at £3,000. If the business takes off the Landlord will raise it to £4,000 ASAP, as that was the original ask from them, but some haggling took place because this is, obviously, a nascent opportunity.

Quote from: Hippogriff on June 27, 2023, 04:17:12 PM
I can only comment on my own prejudices and then some knowledge of a friend...

I will never, ever, not in a million years go anywhere near another Leasehold property in my life. Part of this stems from a lack of control... which you are obviously willing to forgo anyway, by handing over the property to a HA, so you may not feel like I do - but I feel this way ardently.

Now, the premium being paid. I went to Bradford University all those years ago... and find myself there sometimes... and, no, that rental figure is not the going rate for Bradford... not even for York, and York is posh. But it's all about the fact that Councils are really struggling with this - finding facilities for their 'resident's' needs. I have a chum in Northampton who is setting up a rental for £3,000 a month, so they can set themselves up as some kind of assessment centre for reprobate and dysfunctional families... I don't know all the details, but I've been told a bit 'cos I've been drained of my residential experience about things like planning permission, rent increase and break clauses. Is £3,000 the going rate where they are for a normal house? Absolutely not. It's more like £1,250. But they're willing to pay a premium to a willing Landlord to get the property needed to pass the tests that the Council will do to ensure it's suitable - like space for an office, a playroom, CCTV coverage etc.. And, for this, they could be looking at income close to £30,000 a month (depending on the number of feckless families they're able to squeeze in)... that's the reality of the numbers. I couldn't believe it. But - today - it's real. It doesn't mean it'll always be this way... but Councils are busily spaffing money up the wall to meet their (assessment, care and safeguarding) obligations. And, yes, Landlords are taking advantage of this.

£30,000 a month in. Outgoings will be rent, insurance, 24/7 staff, up-front remodeling of the place, some other stuff (I wasn't fully listening)... but they fully expect to be clearing hefty sums of money in due course - assuming they get the right property and have it approved by their Council (which is likely as they're much needed, as implied above). The rent is set currently at £3,000. If the business takes off the Landlord will raise it to £4,000 ASAP, as that was the original ask from them, but some haggling took place because this is, obviously, a nascent opportunity.

Thank you for your reply and for being one of the only people on these forums to read the whole case and provide a polite, well-thought out response!

Honestly, our fears about LH are the same as yours. Heard too many difficulties from friends and family who've had to buy or rent LH in earlier years. But it's getting difficult to find FH property in our budget that would provide any returns, especially with such high mortgage rates at the moment. Out of curiosity, what are your main concerns and troubles with LH?

We were astonished at the rental figures these councils are paying too - as you've saying £1k/month is double the average in Bradford, plus the costs for maintenance, carers etc etc.

It's really interesting to hear about your friend's experience so far. To confirm, he's setting up as the housing association/non-profit organisation in charge of managing the properties?

Do they have independent landlords approach them, i.e. people who have a property they purchased at normal market rate, but want it to be used for social housing? Or is it always developers who have several/many units in a block at once?

We're considering doing it this way, but are unsure of how to get a property set up for and managed on a long social housing contract. E.g. who pays for the cost of getting the property initially ready/verified as social housing? The landlord or local council?

Only found one company who take independent landlords (rather than developers) and are awaiting further details from them.

No, they are becoming some kind of monitoring / assessment facility for families who have 'lost their way'... and the council needs accommodation for that, which it simply does not have. So it's not really basic Landlording, but Landlords are involved. In this case my chum will be the Tenant. There needs to be some expertise in the field as well (even though staff are employed for day to day operations). Landlords were initially most definitely not lining-up to provide their property for this endeavour... in fact, they had to be persuaded with a premium rent offered, the aforementioned £3,000 a month for your typical large family house, and a long fixed term. This is not a vanilla tenancy and Landlords were actually very wary of what was being proposed... but, in the end, good old £ signs won the day with the Landlord population and, once it was clearer to them (explained in a Zoom call with a few open-minded Landlords who had suitable properties - arranged by a Letting Agent, I think), they were falling over themselves to be the Chosen One. Who'd believe it?

I cannot say any more as 1) I was only partially listening and 2) they have not actually commenced operations yet... but I know they do have some needed Council approvals, they do have a property lined-up, they have had that property assessed for suitability. There still remains more to do before they can start receiving our money in eye-watering amounts. I don't think this is something a first-timer would get involved in, but your situation is a similar thing in some regards... the point that I was making is that it's certainly possible to get silly money coming in when you're dealing with an organisation who has some kind of legal obligation but limited means of meeting that obligation. In that case... cash is needed for Landlords to consider handing over their property to... deplorables (I don't say that out of my own head - your standard Insurance policy probably does) and Councils have a lot of our cash (even though they always protest they do not have enough).

Re. Leasehold. Just consider the fact that everything anyone involved does is always with the intention of extracting further money from you. That premise will stand. But it all comes back up to control, for me. I sadly have two Leasehold properties and wish I had zero. On one there is escalating Ground Rent every five years, with an out-of-control Service Charge and a looming 2 x lift replacement coupled with a meagre sinking fund due to mismanagement. On another I pay only £60 Ground Rent per year; I had a Standing Order setup... silly me (no one else's fault) but it ended because I must have not set it perpetually but, instead, for a specific number of years thinking I'd never forget to come back to it... and one year it was late / missed... the next thing I know I have some legal beagle firm on my back wanting £1,500 for the one-time £60 missed (I would call it late through a lack of awareness) payment. I ended up paying £300, IIRC, to settle it amicably(?) To me Leasehold offers no value or benefit at all and only comes with, and introduces, hassle. Everyone at the "other side" only has a purpose of using technicalities to effectively extort money. I consider the whole idea as a big con-trick. I cannot wait for Leasehold Reform to be an actual thing. The fact that it's even in the works just solidifies my thoughts.

Freehold 4 Eva!!!

I agree with Hippogriff about leasehold.My first 3 were flats,and I did not grasp the implications.Then the time left went down to 60 or so years,and there was no choice but to form a company to buy the freehold.I won't weary you by going into details,but between Companies House and the other leaseholders a new world of pain opened up to me.Never again.In your case this is not the same,for one thing the remaining lease is much longer,and changes to the law will make it easier and cheaper than the £35k I had to fork out if you decide to get the freehold.

I fully understand the temptation.I have 2 properties with charities who house vulnerable adults.The rents are reliable,but only the average for the area.The terms and types of residents are very different to what you could end up with.

There are 3 properties near me who have been taken on by the council.They have all caused a great deal of misery to the neighbours,police and local shopkeepers.The woman who bought my own previous home is now next door to a council HMO.She is in tears every time I bump into  her.She loves her home,but she could not even sell if she wanted to.She is currently seeing a solicitor to see if she can sue the owner.Another house has been given to a lady with several children.The neighbours have been sworn at and scared by her many male visitors,and they have had her kids seeking shelter. Some of the neighbours have found out where the owner lives (it used to be her own home) and they have paid her a visit.She has promised to take action,but the are also getting legal advice.The third place has piles of sofas and old mattresses on the front lawn,and police cars often outside.
         
I am not judging you for thinking of doing this,but it would not suit me.I like money,but I am lacking the hardness and emotional detachment required.Two of my favourite sayings are "Hell is other people" (Jean Paul Sartre) and "No good turn goes unpunished" (Oscar Wilde)

Quote from: Hippogriff on June 28, 2023, 06:48:09 AM
Re. Leasehold. Just consider the fact that everything anyone involved does is always with the intention of extracting further money from you. That premise will stand. But it all comes back up to control, for me. I sadly have two Leasehold properties and wish I had zero. On one there is escalating Ground Rent every five years, with an out-of-control Service Charge and a looming 2 x lift replacement coupled with a meagre sinking fund due to mismanagement. On another I pay only £60 Ground Rent per year; I had a Standing Order setup... silly me (no one else's fault) but it ended because I must have not set it perpetually but, instead, for a specific number of years thinking I'd never forget to come back to it... and one year it was late / missed... the next thing I know I have some legal beagle firm on my back wanting £1,500 for the one-time £60 missed (I would call it late through a lack of awareness) payment. I ended up paying £300, IIRC, to settle it amicably(?) To me Leasehold offers no value or benefit at all and only comes with, and introduces, hassle. Everyone at the "other side" only has a purpose of using technicalities to effectively extort money. I consider the whole idea as a big con-trick. I cannot wait for Leasehold Reform to be an actual thing. The fact that it's even in the works just solidifies my thoughts.

Freehold 4 Eva!!!

That sounds just as nightmarish, if not more so, than the few people I know who've lived in LH properties. I'm sorry you had to deal with that and hope you can offload your 2 LH properties.

100% agree, bring on the Leasehold Reform. Long overdue.

Quote from: heavykarma on June 28, 2023, 10:09:29 AM
I agree with Hippogriff about leasehold.My first 3 were flats,and I did not grasp the implications.Then the time left went down to 60 or so years,and there was no choice but to form a company to buy the freehold.I won't weary you by going into details,but between Companies House and the other leaseholders a new world of pain opened up to me.Never again.In your case this is not the same,for one thing the remaining lease is much longer,and changes to the law will make it easier and cheaper than the £35k I had to fork out if you decide to get the freehold.

I fully understand the temptation.I have 2 properties with charities who house vulnerable adults.The rents are reliable,but only the average for the area.The terms and types of residents are very different to what you could end up with.

There are 3 properties near me who have been taken on by the council.They have all caused a great deal of misery to the neighbours,police and local shopkeepers.The woman who bought my own previous home is now next door to a council HMO.She is in tears every time I bump into  her.She loves her home,but she could not even sell if she wanted to.She is currently seeing a solicitor to see if she can sue the owner.Another house has been given to a lady with several children.The neighbours have been sworn at and scared by her many male visitors,and they have had her kids seeking shelter. Some of the neighbours have found out where the owner lives (it used to be her own home) and they have paid her a visit.She has promised to take action,but the are also getting legal advice.The third place has piles of sofas and old mattresses on the front lawn,and police cars often outside.
         
I am not judging you for thinking of doing this,but it would not suit me.I like money,but I am lacking the hardness and emotional detachment required.Two of my favourite sayings are "Hell is other people" (Jean Paul Sartre) and "No good turn goes unpunished" (Oscar Wilde)

Thank you for your reply, it's really insightful.

I'm sorry for your experiences with LH, that sounds hellish and is exactly why I'm hesitant to ever buy LH. I would never have considered it normally.

That £35k you paid to get the FH when you had 60 years remaining on the lease - do you mind me asking what the process was like for that? Was it a major hassle? And how much did you buy it for originally and when? Just to get an idea of what the cost could be with this.

Do you also mind me asking what the process was for getting your property registered with the charity for vulnerable adult tenants? We're struggling to find any information on who to approach for this and costs involved, as we're considering buying a standard market value property instead and getting it signed up for social housing/vulnerable adults ourselves instead.

And how are the tenants of your 2 properties with the charity?

That's absolutely awful about the properties managed by the council near you. Truly unacceptable. I know there's a stereotype with housing benefit/social housing tenants, but private tenants can also be completely reckless, so we are trying not to be biased or prejudice against anyone with the property investment strategy we choose.

We really thought that this deal we found would be doing some 'good' for someone/s by giving them a stable home, but perhaps not. I mean I think there are better ways of doing good and better ways of resolving this housing crisis, but I'll refrain from getting political. It seemed as 'good' as investing money could be, but maybe not after all.

(Love the quotes by the way)

The process of buying the freehold was very protracted,took around 6 years including  Covid.I did not agree with the choice of solicitors,but was outvoted by the other 5 owners.Even with good lawyers it can take a long time.You have every reason to leave that idea for now, change is in he pipeline.
These flats are near where I live in Kenilworth, they are not the ones placed with the charity.You don't get the kind of capital appreciation from flats as you get with houses in my experience,but they have rarely been vacant for all that time.I only accept working people.

The 2 charity houses are in Rugby.They approached me when one came vacant.I have just checked and they only cover Warwickshire and parts of Northampton and Oxford. They are called Advanced Housing and Support.
My current tenants are only the second ones in around 12 years.One is a lady in her 50's,very quiet,used to live with her elderly Dad.The other is a pair of men sharing who seem to be behaving very well.I have never had a complaint from neighbours,and the carers who visit report any repairs that arise. These are people who through no fault of their own do not have the mental capacity to hold down a job,but they are able to look after their own daily needs, do housework etc. 

My son lives in Bradford,and there are some very cute houses at good prices I believe.I would be inclined to think along those lines.Providing safe reasonably priced rentals to decent working people is another way of doing good in my opinion.I don't see it as my karma to help those who bring nothing but chaos and misery into the world.