Talk to most people about Ground Rents and they’ll look at you blankly. But for those property professionals in the know, Ground Rents are a lucrative and low hassle way to be a landlord and make money.
‘It’s a niche sector, but it’s highly regarded by those who understand it, and once people understand it, they can’t believe they’ve never done it before!’ says Toby Limbrick, auctioneer and director of Ground Rent Auctions, a specialist division from Network Auctions.
‘We’ve been thinking about setting up a specialised Ground Rent auction service for a while, and given the success of being online since the pandemic, we decided now was the right time to launch.’ Ground Rent Auctions will host its first online auction on 24th February 2022.
In England and Wales there are two forms of property ownership: Freehold and Leasehold. Leasehold properties are governed by the regulations in the lease, which are owned by the Freeholder. The Freeholder may not own the building, but they own the land on which the building is sited, and in many cases, collect a Ground Rent annually for the right of the building to be on their land. ‘The value and the opportunity are in the Freehold rights to the land,’ says Limbrick. ‘And what many people forget when they’re buying leasehold, is that mortgage lenders require you to have 80+ years left on a lease, else you’ll have to pay ‘marriage value’ to the Freeholder.’ Marriage value is the fee payable to the Freeholder when the lease is extended, this fee is enshrined in law at 50% of the value of the uplift.
‘Ground Rents are a niche sector and it requires expertise to fully understand the opportunities, but they are attractive, fixed income investments secured by a lease,’ says Limbrick. ‘There are many ways to unlock the value of a lease including varying terms (where a premium will likely become payable). This is particularly relevant to leasehold houses where extensions and loft conversions may require a Deed of Variation. There are also income opportunities when it comes to management and insurance arrangements.’
‘Increasingly we are seeing Freeholders maximise their investments by carrying out building improvements, refurbishments or extensions. With some Freeholds there may be potential to develop grounds with additional dwellings, garages and parking bays, while changes to the planning environment have seen additional floors being added to existing blocks.’
‘We have a number of exciting opportunities across the country in our first auction on 24th February with guides as low as £4,500. There are lots with potential to develop by adding additional storeys and others where amenity land could be used for future development. For those who prefer the quieter life, we have plenty of Ground Rents which can offer a solid and steady return and are a great opportunity for investors to diversify their property investments.’
‘We really believe when people understand the wonders of Ground Rents, they’ll be kicking themselves why they didn’t invest before!’
Ground Rent Auctions will host its first online auction on 24th February 2022.
For more information: https://groundrentauctions.co.uk/
