Ground Rent Investment
Residential Ground rent investments are created by the freehold/ leasehold structure in England and Wales. They are considered one of the most secure and low-risk property assets available to potential investors as the yearly ground rent is secured against the flat and the investment is secured against the vacant possession value of the long leasehold interest. Should the leaseholder ever allow the lease term to expire without renewing, the property will revert back to the freeholder.
A ground rent investment consists of the remaining interest held in a property by the freeholder or Superior Leaseholder after leasehold interests have been created. For example, a house conversion which is split into four flats where all of the flats have been sold on individual leases will each include a Ground Rent proportion which the leaseholder (Tenant) will have to pay to the freeholder (Landlord).
Ground rent is the annual consideration of rent paid from the leaseholder to the freeholder over the length of the lease term, for renting the land on which the leasehold property is standing. There has been huge demand and signs of significant growth for purchasing Ground rent investments in recent years as they often offer a great opportunity and an affordable option to gain entry into the property investment industry.
The amount of Ground Rent chargeable can vary from lease to lease. Some are set at fixed amounts for the length of the lease term and others include periodic rent revisions, where the amount can increase at the rate of (RPI) Retail Price Index or in some cases can rise or even double at set stages such as every 10, 20 0r 25 years. These types of investments would be considered the most rewarding. The accumulative Ground Rent income can be very fruitful especially if they include benefits of upward rent reviews.
The most beneficial source of income to freeholders is most certainly achieved when the leaseholder wishes to renew their lease as they are required to pay the freeholder a fee known as the lease extension premium. The number of years granted on lease extensions can vary but are most commonly set at 99 or 125 years. The lease premium fees can increase significantly as the lease term reduces. It is important to be aware that as the lease term drops below 80 years, marriage value is added to the premium therefore the cost will rise significantly. As the lease term becomes lower and lower it will be more difficult to obtain a mortgage to purchase the property and in fact as the term drops to below 60 years you will almost certainly not be able to mortgage the property.
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Sell Your Portfolio
Selling your ground rent portfolio doesn’t have to be a hard process like some purchasers make it. The main thing, when selling your ground rent to Freehold Sale, is that you get a fair price for your ground rent, professional service and no more stress.
So if you have a ground rent portfolio of 1 or 2 properties or a large portfolio then contact us today and start the process.