21:26 PM, 18th March 2015, About 8 years ago 8
I am planning to buy a buy to let property for the first time and need advice. I have found a 1 bed flat at a decent price (£5k less than similar properties). It is a converted flat in an old 1910 built house, which has 7 more flats. All flats are on leasehold and service charges are at £115 pounds per month which is not very high but not too low either in the area. We do know the building is old and will need repair from time to time.
After initial legal checks, my solicitor has found that all the money collected as service charge is being spent (on cleaning, gardening, repairs etc.) and there is absolutely no reserve fund being left annually. Since the building is not very young, I fear more repairs will be required in future, and with no reserve fund, we will be sent a sudden big bill. A £100 increase in service charge will almost kill any monthly profit I will make.
The freeholder has been asked if they are aware of any major repair work that might be required in future and they have refused to comment which is not very useful.
I was wondering if it is a good idea to buy such an old property with already high service charge and no reserve fund, even though it cones at 5k below market price and the area will definitely see property price appreciation of 10% over next 2 years.
Any advise will be helpful.