Ex-shared ownership as a buy to let investment

Ex-shared ownership as a buy to let investment

10:21 AM, 10th April 2013, About 9 years ago 6

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Ex-shared ownership as a buy to let investmentI’m thinking of buying a 2 bed flat.

The only thing that worries me is that the flats in the block were all sold from new (about 5 years ago) to key workers & are owned with shared ownership with a local housing trust.

The one I’m thinking of buying has been advertised to key workers on their internal websites but had no takers. It has now entered the “actual” market at a realistic asking price.

I would be purchasing this with a view to rent out but I would be a first time landlord. I would be looking to sell again in the next 10 years.

Is there any stigma to a property that was once a shared ownership and indeed could still be neighboured by shared ownership properties that would ultimately effect the selling price at a later date?

I would be grateful for any advice.

Mark Legge



Comments

by Freda Blogs

14:43 PM, 12th April 2013, About 9 years ago

Hi Mark

May I start by asking a few basic questions to see whether are any pitfalls in this opportunity?

Is it the price that is attracting you to this property?

Would you be buying this property as a potential investment if it were not for the price?

Is it in a location known for a high crime rates or trouble? Would you be querying the location if the ownership were not a Housing Trust?

Will you be buying 100% of the property or is it still part owned by the Housing Trust – in other words is there still a rent to pay on it and does the combination of rent, service charge and your mortgage payments still make it a viable letting proposition?

There may well be a lease in place or if not, some sort of management ageement which will govern the service charge provisions and may also venture into behaviours by tenants.

Do you know whether or not you will be able to buy and let the property? Often on shared ownership, there are covenants in place to limit the type of occupiers, because under the terms of funding (usually government grants) is for certain types of occupiers, eg for key workers as you have mentioned. Also, in some schemes, the land will be provided at nil or minimum cost by the local authority and they may have imposed terms on the deal too.

Is there a reason why key workers do not want to live there? I can appreciate that you would not necessarily know the answer to this, but do you think it is property, occupier or location related?

I'm assuming that the property is well maintained if the Housing Trust is looking after it, but what is the level of the service charge and are other occupiers taking care of the property? This is particularly relevant in a block of flats where common parts can often be left very messy, and inconsiderate actions of the few spoil it for the many, which could deter your potential tenants.

It would be as well try and establish some of this information sooner rather than later and certainly before you have expended valuation fees and significant legal fees.

As a first time investor, this might be a more complicated purchase than many!

by Alistair Gibbins

16:12 PM, 12th April 2013, About 9 years ago

You must ask your lawyer to thoroughly check the lease, as there may be provisions in it restricting the sale to only key workers or some others. This means you, as a private investor, would not be acceptable to them as a tenant and you could not buy it anyway. There may also be provision in the lease stopping you subletting.
best ask these question from the Estate Agents now before spending any money, they can check with the seller's legal rep.
There may be limitations in the original planning permissions too.
Alistair Gibbins Licensed Conveyancer.

by r01

17:15 PM, 12th April 2013, About 9 years ago

Honest advice is often not what we want to hear and I want to be brutally honest as you say this would be your first BTL. I personally think the fact they couldn't sell it to a key worker is shouting something very loud.

What would I do? Walk away and spend my time looking for something fully owned in an area of fully owned properties. But of course you know your own appetite for risk & must decide for yourself.

R

by

17:33 PM, 12th April 2013, About 9 years ago

Find a good local letting agent- they are some bandits around, and go and ask what they think of it! They are, without a doubt, the best placed people to advise you as to whether it is a good buy to let. I cannot stress how important it is to find a good letting agent, as I have, after being stung by two others, here in Newark on Trent. My present agent deals completely and totally with my property, as I am disabled, and therefore cannot 'look after' the premises. They find the tenants and do all the repairs, and above all, are honest and trustworthy.

by

9:33 AM, 14th April 2013, About 9 years ago

I would check the legal pack as I know someone who lived in shareownership that in the terms and conditions they were not allow to rent the property.

by Marie Smyth

17:03 PM, 19th April 2013, About 9 years ago

I think you will find that generally there will be clause on the lease restricting the letting of Key Worker or Shared Ownership types of properties even when being sold on the open market. Personally I would not purchase the property on that basis alone. Even if you are allowed to let the unit please be aware that ground rents and service charges for maintenance seem to be higher for these units. Nest of luck in your enterprise.


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