value of a freehold building with 3 flats?

[frazzzled]

As per title, how would I find out the value of a freehold building that has 3 flats? I'm in london
thanks

sorry are you asking about the value of the freehold, or the value of the freehold plus the flats itself?

sorry, i meant the value of the freehold, our landlord is selling the freehold by public auction, we get first refusal of the winning auction bid and would like to know a ball park figure of how much the freehold is worth?

we have 118 years of the lease left, not sure if its worth the extra investment? its a small one bed i owned pre family, currently let out and paying for itself.

thanks so much

So you would own whole building? If you have inadequate retirement pension it would be good as you could live in one and rent out others. The freehold just means you own the land. Confused here.Do you mean you are lessees or there are lesseesand you want to buy the freehold? I believe if you are existing lease holders you may havemore rights to buy freehold

But doesn't selling at auction mean that contracts are exchanged as the hammer falls so how could you then match that bid?

Do the other leaseholders want to buy? Why not just get together and make f/her a pre-auction offer? If you all have long leases and ground rent is a minimum, then the freehold should be a fairly token amount (at a guess - and it would be a guess - #2-3k each plus f/her's expenses). Alternatively, go to some auction websites and look up prices fetched for similar lots - they sell them a lot.

Find out what the annual ground rent per flat is (usually £100 to £200 pa) and then multply by the number of flats and a multiplier which is usually 10 -14 (depends on area, attrativeness of building etc, if this is a conversion with only 3 flats then lower end of the scale)

eg 3 flats x £100 x 10 = £3,000

Your best bet would be to speak to a local valuer for advice.

And your landlord and you MUST follow the Landlord and Tenant Act notice procedure very carefully observing the time limits and notice requirements. Check it out online leashold advisory service is usually pretty sound. The procedure is different for auctions but if you want to buy you need to follow the rules.

celibin i would only own a share of the freehold as there are 2 other flats in the building.

lala it appears totally legal that once we register interest at the auction the highest bidder has to give us first refusal to purchase at that price, of course we don't have to accept, but looking at the paperwork if we register interest we could be liable to charges if we don't purchase and if we do we are liable to pay all the freeholders costs! we were offered (the original 2 leaseholders have moved out since) the freehold for £30k about 6 years ago... £2-3k each... if only! i'll see if i can google auction websites!

thanks

thanks battery our ground rent is £250 (x 3 x 10 = £7500) which would be a no brainer but sadly i don't think it will be that low!

I've spoken to the leasehold advisory service (yes really good info there) so understand basics of what's involved, it seems that at auction it can go for whatever someone is willing to pay and nothing stopping the freeholder getting a friend to bid up the price!! my friend spend £17k a couple of years ago for share of freehold for her flat!!

I am acting for a client selling a number of small freehold ground rents and the guide prices for 2 and 3 flat conversions are 3-5,000.

I have recently sold a 24 flat freehold (with £350pa rents) for less than £70k so I do not think it will get anywhere near £30k.

I don't think the rules require you to pay all the freeholder's costs either unless you assert your right of pre emption and subsequently withdraw (and that works both ways).

thanks again battery sounds reassuring, do you know where I can find info on freehold auctions? when i do a google i'm only getting freehold properties?

on the landlords solicitors letter it does state we are required to pay all their costs!

Why not just let whoever buy it at auction, if it is more than you want to pay, don't put in an offer. Then you can take advice on its true value in your own time and you and your neighbours can collectively use your right to buy at a rate set by a valuations surveyor at a later date.

hi lala once it goes to auction it will be sold to the highest bidder if we don't exercise our first refusal. i am meeting with the other leaseholders soon, as you say maybe we can approach the landlord directly using our right to buy rather than go to auction!

But does it matter if it sells as you will still have the right to buy the f/h anyway provided that you and at least one other leaseholder have owned the flats for two years or more? My understanding (limited admittedly) is that you can force a f/her to sell you the f/h and the price can be settled by the Leasehold Valuation Tribunal - it doesn't matter if the f/her has owned it for five years or five minutes, you still have the right to buy and it's probably not that relevant what they paid for it as the LVT and other valuation surveyors will look at lots of comparables to reach their decision.

If you are in London, go to the websites for Savills, Andrews & Robertson, Allsop and Barnard Marcus and look at past auctions to get some prices for freeholds. They are usually describes as "Ground Rent Investments" in the description and often have a postcode so you will know if it is in a comparable area or not.

ah great thanks lala very useful info.

Exercising right to buy will cost you FAR more in costs etc than the pre emption procedure. I would follow the 1987 Act procedure and reserve your position. As you know you have a limited time in which to reply. You don't have to match the auction price this just gives you the right to match it if you want to.

The auctioneer I am dealing with at the mo is Clive Emson who sell a few of these types of properties (nice people so might be worth a call for some advice). Look for auctions of ground rents on Google rather than freeholds as it is actually the right to receive the income from the ground rent that is of value to the investor rather than the bricks and mortar (which effectively belong to the flat owners).

just did a quick search and from what i've seen it looks like london freeholds are selling double at the calculations given by battery!

frazzzled there is a co called leasehold doctors leaseholddoctors.co.uk that will tell you the approximate value for free if you call them, but the calculation is made based on the normal market values of the flats (ie if you sold your flat today) and the length of their leases, so get this info together before you speak to them. There is lots of other useful info on the website and they are very helpful and friendly if you call them. I think lala is right about your right to buy but they would confirm this. Obviously it would be easiest if you could amicably agree a sale with the current freeholder than forcing a new freeholder to sell to you though, it is a long and painful, not to mention expensive, process done that way.

We are in the process of buying our freehold (from unwilling landlord) with other leaseholders in the building. Total property value of all the flats is approx £2.8m and the freehold is worth approx £125,000. Some of the leases have only around 73 years left to run though and this hikes up the value of the freehold considerably, long leases will make it less.

Just to clarify on the values I was talking about, the split of the £130,000 is not equal between the leaseholders (even though we will end up with equal shares in the freehold). The total is split according to value of each property and length of its lease.

thanks sleep great info, i'll call them tomorrow £339 per flat for fees sounds very reasonable.

However, I'm not sure if the other leaseholders will buy does anyone know if i can buy the freehold on my own? i have a fair wack of equity in the flat and could re-mortgage. I don't plan on selling this flat in the foreseeable future.

You can buy on your own but it would be at the f/her's discretion - you can only force a sale if there are 50% or more of leaseholders wanting to buy.

Sorry, had no idea that forcing sale could be potentially very expensive so ignore my, ahem, "advice" on that one. Just out of curiosity, does anyone - Battery perhaps - know why people buy f/h's that have very long leases granted? Paying several thousand pounds for something that will bring in a couple of hundred in ground rent each year on the off-chance that you may be able to evict someone in the medium term seems chancy, especially now there is a right to manage etc so you can't make a killing in dodgy service charges.

We bought f/h for v.little under the 2 flats x no of years right to buy scheme.I think we only paid solicitors fees- itreally was only a nom amount.But sols messed it up and only found out when one wanted to remortgage However still no prob as when one flat sold new sols sorted it.Also af lat is a flat as far as lending cos are concerned . You gain by not paying Ground rent -a platry amount really- and being able to do own maintenance etc Insurance is still high though cos a flat is a flat. Why is freeholder objecting? Some just want shot of it, actually

I think, lala that even though the rtm exists, many leaseholders still don't exercise it, you have to involve and coordinate several leaseholders, it costs money and involves admin that would be nightmarish for large blocks. So landlords still get away with outrageous service charges and practices as our landlord used such as owning the insurance co they used for our buildings insurance that charged 4x market rate . And of course in the very long term, when leases do eventually shorten, it becomes a much more valuable asset.

Investors buy freeholds for the guaranteed return, usually at last 10% pa, and as the leases start to run out for the value of the reversion. Most are not interested in management and prefer blocks with professional management. The market for smaller ground rents (your typical victorian house conversion of 2 or 3 flats) is developing and is the result of very poor returns in other types of investment. Often as a hobby for retired businessmen.

For larger blocks of flats there is money to be made from the commission they can collect on placing the buildings insurance and this attracts larger investment companies.

Yes, it was the smaller Victorian conversions that puzzled me - having owned a couple of f/h's (came with the flats I bought) in the past, it seems a lot of nuisance for very little return. at idea of doing it as a hobby - but there's some very strange people out there.

sleep thanks for the link to leaseholddoctors, he is getting back to me with a rough estimate.

interesting info about smaller conversions and investors battery

thanks everyone for chipping in!