What Are Freehold Ground Rents?
Well, most people that have owned a flat will have paid an annual ground rent to their landlords or their agents.
When you purchase a leasehold flat you are buying a lease and do not own the land that the flat is built on.
You are simply leasing that part of the building for a term of say 99 years.
Once that leases expires the flat will revert back to the freeholder of the block.
There are large property management companies that have been set up purely for the purposes of purchasing freehold ground rents.
The management companies buy them for two reasons.
The first being that they can get a return of the annual ground rent paid by the lessees and the second reason is so that they can charge the lessees for the management of the building.
Generally speaking most lessees will have to pay upwards of £250.
00 per year just for the management company to deal with the day-to-day running of the building.
The management company in most cases will also be able to charge fees in relation to any major works that need to be carried out.
For example if the roof or windows need to be replaced they will be entitled to charge a fee for dealing with contractors etc.
They will also insure the building and generally speaking will earn commission for the insurance company that carries this out.
So you can already see why freehold ground rents are popular with management companies.
There are also private individuals that buy them for the ground rent income.
These individuals will not always want to deal with the day-to-day management of the building and so will employ the services of an outside agent to deal with this on their behalf.
These properties can be purchased for so that they are returning an annual yield of around 6% which is not bad when you consider what is going on in our financial markets.
Of course if you fancy doing the management of the building yourself then there is nothing to stop you from doing that but be prepared to have to deal with the day-to-day running of the building and any problems that may arise.
There are a couple of ground rent brokers that deal with the sale of this type of investment.
You can buy different types of ground rents with long leases and short leases that are under 80 years.
The leases that are under 80 years will be more expensive as they will have a reversion value.
When you purchase a leasehold flat you are buying a lease and do not own the land that the flat is built on.
You are simply leasing that part of the building for a term of say 99 years.
Once that leases expires the flat will revert back to the freeholder of the block.
There are large property management companies that have been set up purely for the purposes of purchasing freehold ground rents.
The management companies buy them for two reasons.
The first being that they can get a return of the annual ground rent paid by the lessees and the second reason is so that they can charge the lessees for the management of the building.
Generally speaking most lessees will have to pay upwards of £250.
00 per year just for the management company to deal with the day-to-day running of the building.
The management company in most cases will also be able to charge fees in relation to any major works that need to be carried out.
For example if the roof or windows need to be replaced they will be entitled to charge a fee for dealing with contractors etc.
They will also insure the building and generally speaking will earn commission for the insurance company that carries this out.
So you can already see why freehold ground rents are popular with management companies.
There are also private individuals that buy them for the ground rent income.
These individuals will not always want to deal with the day-to-day management of the building and so will employ the services of an outside agent to deal with this on their behalf.
These properties can be purchased for so that they are returning an annual yield of around 6% which is not bad when you consider what is going on in our financial markets.
Of course if you fancy doing the management of the building yourself then there is nothing to stop you from doing that but be prepared to have to deal with the day-to-day running of the building and any problems that may arise.
There are a couple of ground rent brokers that deal with the sale of this type of investment.
You can buy different types of ground rents with long leases and short leases that are under 80 years.
The leases that are under 80 years will be more expensive as they will have a reversion value.
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