BUYING A FLAT: Things You Need to Consider Before Buying a Flat

Buying a flat is a good investment, especially when you buy one that is comfortable and unique. However, you will have to make sure you purchase a leasehold title, so there will be a landlord and probably a managing agent as well. This article illustrates how long a lease should be when buying a flat, and how it is a good Investment. It further explains buying a flat in London; including options with a short lease and other factors related to it. 

Understanding More on Buying a Flat 

It is a common belief that buying a flat is equivalent to buying a freehold home. Under a leasehold, you only have the right to live in the flat for a set period of time. The lease itself also speaks to the terms under which you occupy the flat.  For example, it may state that you cannot keep pets and that you must pay a service charge to the landlord. This may also apply to the agent for the maintenance of communal areas, such as the staircases, roof, and gardens. Communal areas are not owned by leaseholders, but they should have the right to use them. Again, the lease will tell you what those rights are.

The lease contains the laws on rent and access. However, it does not contain all the information you need if you want to buy the flat. When deciding whether or not to purchase a flat, there are further considerations you will need to be aware of before making a decision.

Things to Consider or Decide Whether or Not to Buy a Flat

The following are basic factors to consider when buying a flat:

• How much is the rent?
• Who collects the rent and the service charge?
• What are the service charges – how much and what does it pay for?
• Check if there is going to be an increase in the service charge?
• Is there a managing agent?
• If there is any management company, do I need to join it?
• Is there a tenants association?
• Who maintains the building and the common parts?
• Also check where the common parts were last active, internally and externally?
• What are the cost implications for residents?
• Is the rent going to increase year on year?

All the answers to the above questions may not be in the lease.  The landlord or the managing agent can confirm the new position by way of a leasehold inquiries stack. The stack should contain all materials relating to the financial responsibilities of getting a flat. The agent has to pay a fee to the landlord for this information.

Note:  landlords or management companies that provide this information are not overseen. So there is no time frame for them to stick to it. As such, waiting for the leasehold inquiries stack can sometimes delay the time taken to buy a flat.

Freehold Flats

If the flat is allowed to be freehold, that means it is flat and there is no leasehold. This could be an issue. A lease determines everyone’s rights and responsibilities, like, who you should deal with and pay for structural problems or the maintenance of common areas.

Without a lease or some other approval, no one knows who should be dealing with this. Most often, mortgage lenders are unlikely to lend money to buy this type of property. However, freehold flats are rare, so carefully read the statements sent to you by your landlord.

Buying a Flat in London

Buying a flat in London which is the most populous metropolitan area in the United Kingdom (UK) is expensive. And living in it comes with a price tag. Unsurprisingly, the most expensive towns in terms of real estate prices are located in the heart of this metropolis.

London is the most expensive place to buy a flat or home in the UK by a considerable distance. The average house price in London in December 2020 was £496,066 – almost double the UK average of £251,500, according to data from the Land Registry. First-time buyers in London put down a hefty average deposit of £130,357 in 2020.

Cost of Buying a Flat in London

In addition to the costs of buying a flat, you’ll need to consider extra expenses such as council tax and commuting. Each town sets its council tax rates, meaning you’ll need to pay significantly more in some areas than others. For example, council tax rates in Wandsworth are less than half of those in Waltham Forest. 

How Long Should A Lease Be When Buying A Flat?

The number you need to have in mind when buying a flat is 80 years. Once a lease drops below 80 years the cost to extend it rises significantly. Ideally, you want a property with at least 83 years left on the lease, this will give you enough time to live in the property for two years if you then wish to extend the lease.

How long a lease should be when buying a flat can vary, commonly, a new lease will start at around 99–125 years but can run for as long as 999 years. You must find out how long the lease is, especially if you’re buying an existing lease that has already begun to run down. A short lease (under 80 years) could affect your ability to get a mortgage, and to extend a lease, you must have lived in the property for two years.

Leasehold Property Advice When Buying a Flat in London

Some leases have clauses that obstruct your use of the property, and some limitations are not always that noticeable. Read your lease carefully, and if you are doubtful of anything, speak to your lawyer immediately. Make sure you have a clear understanding of what you are entering into, like how much you will be expected to pay on an annual basis, and if any cost increases are due.

Buying a Flat With a Short Lease

Flats with short-term leases can seem very interesting to retired people, and those who have no subordinates or families to leave an asset to after they pass away.

If you plan to buy a flat with a short lease, waiting two more years before you can apply to extend it is far from favourable. If the previous owner has lived in the flat for two years or more, you can order that they serve a statutory notice to extend the lease as a matter of law.

Extending a Short Lease

Leaseholders have a statutory privilege to extend their lease by 90 years once they have lived in their Flat for two years. If you plan to buy a flat with a short lease, waiting two more years before you can apply to extend it is far from excellent. This can then be assigned to you as soon as the exchange is done.

There are benefits of buying A flat with a short lease. Properties with a short lease are very attractive to buyers. Therefore to allow investors who can make their investment many times through renting the property for the remaining period of the lease, then simply enable the lease to revert to the freeholder after a few decades.

Risks related to buying a flat with a short-term lease, naturally arise when the owner cannot afford to extend their lease. As such, they are often found in less wealthy areas. In addition, properties with short-term leases are often in less than exact situations and can require large and costly repairs before they are comfortable.

Bear in mind that even if you do not plan to renew the lease on a flat and you are planning to allow it to run down, there are many other costs involved.

The main risk involved with a short lease is that it is much harder to sell. As the lease on a property becomes shorter, its value decreases. A property that is quickly losing quality is not appealing to future buyers or mortgage corporations. As most banks and companies will not give mortgages for properties with a lease offer of more than 70 years, the market is exclusive to cash customers. 

What Happens if a Leasehold Runs Out?

If a leasehold ends, the property will revert to freehold property and be under the possession of the freeholder. This means that you no longer have a tenancy and the freeholder can regain full use of the flat. However, you do not need to leave the building, unless you or your landlord ends the agreement under the lease. You do have the right to extend the lease further. Furthermore, it is important to be aware that it will become increasingly more costly as the lease gets shorter.

Getting a mortgage on a flat with a short lease is extremely difficult to secure. The only loans available are likely to be through consultant lenders and they will charge a far higher rate of interest than average due to the high-risk nature of a short lease property investment.

If possible, you should, therefore, be prepared to pay cash for the flat to make the property a good investment.

Is Buying a Flat a Good Investment

In short, yes! buying a flat in London is a great investment for your money, especially in London. In the 1970s  property investment in London, is a secure way to see your capital grow over the next decade and longer.

With so many opportunities to make money in today’s market, knowing where to invest your money is going to be the most important aspect of getting a great return on investing in buying a flat. Buying a flat in London is a great investment for your money. With house prices continuously increasing in the capital, therefore, it’s an opportunity that shouldn’t be missed. 

Pros and Cons of Buying Retirement Flat

Buying a retirement flat is seen as an investment into your happiness and lifestyle, rather than as a ‘money-making’ investment. Retirement flats allow independent living whilst also taking away the stress of needing help and not being able to get it as help is always on hand.

Pros of Buying Retirement Flat:

The following are notable advantages of buying a retirement flat.

#1. Companionship

When you grow older you spend an increasing amount of time alone. It could be that your children have grown up and moved away, or your neighbours have all moved on, the feeling can be quite different from knowing nobody around you and not having anyone to talk to. One of the biggest benefits of buying a retirement flat is being surrounded by lots of people who truly care. 

#2. Safety & Security

If you reside alone or are less mobile as you get older, all of your retirement developments come fully equipped with safety and security features to ensure you feel protected. Most maintenance and repair devices are covered by the service charge.

#3. Low Maintenance Living

Most people who are making the move to retirement flats are downsizing. Therefore,  this can be a big step for the family that they’ve lived in for several decades. However, these larger homes also need more maintenance. You wouldn’t want to be doing in your retirement by trying to stop the garden from getting overgrown or fixing a leaky pipe. Even something like climbing the stairs every day. This can become a duty, and that’s what makes retirement flats so adorable to older people.

Cons of Buying a Retirement Flat

Many people are ignorant of the cons of buying a retirement flat. Well, worry no more for this section will address that to your satisfaction.

#1. The Possession Price

One of the largest downsides is cost. These properties are often sold at a premium because of the ‘luxury lifestyle’ they offer, which will cost you more than buying a standard property of the same size.

#2. Service Charges and Ground Rent

This covers things like the maintenance of utility laws for communal areas. The services of a house manager or caretaker, cleaning costs, building maintenance, and repairs. These charges can be anything from a couple of hundred pounds per month to around £1,000 depending on the improvement. One of the largest complaints regarding leasehold properties is that service charges are often unclear as well, so they are hard to budget for. Examine how much other residents have paid before you.

 #3. Resale Value

According to research by the Elderly Accommodation Counsel around half of the newly built retirement homes sold during the past 10 years were later resold at a loss.

FAQs

Is it a good idea to purchase a flat?

Yes, buying a flat is a good investment idea that can generate a decent rental yield as the years go by and can serve as a good source of retirement income.

What should I check before buying a flat?

• Property Price: The first step in selecting a house or a flat is to fix a budget.
• Flat’s Carpet Area.
• Legal Check of Property.
• Apartment Possession .

What are features to consider when buying a house.

Location of the house, number of bedrooms, number of bathrooms, the kitchen layout, and the style of home appliances.