This can be a lengthy and expensive process, and it’s well worth getting expert legal advice.

Source: Nerdwallet

The additional costs and charges can be significant, with the terms of some leases seeing ground rent double every couple of years. As a result, what appears at the outset to be an affordable extra charge can end up costing a huge amount.

The service charges can also present a problem. You will be expected to contribute towards work on the upkeep of the building even if you don’t directly benefit from it, and there have long been complaints from leaseholders that the costs of these works are excessive.

Another issue is the length of the lease. As this gets shorter, it can become more difficult to get a mortgage or attract buyers. You can pay to extend the lease but the process can be costly and complicated.

And then there is the restrictive nature of leasehold. The property may not feel like it is truly yours, as you have to get permission to carry out significant work or be prevented from owning pets.

There are no such limitations in place if you buy a property freehold. You can make those changes, and you don’t have to worry about escalating service charges or ground rent. However, you will be the only one responsible for the upkeep ‒ and therefore the cost of repairs ‒ to the structure of the building itself, which can prove expensive.

Another issue to bear in mind is conveyancing costs. Conveyancers are property lawyers, who go through the legal aspects of a purchase and draw up the transaction contracts. Leasehold purchases are inevitably more complicated, and so may result in a larger conveyancing bill than a freehold purchase.

You will have a contract with the freeholder of your property, which sets out precisely what you are responsible for. There are likely to be certain annual costs you will be required to pay, such as ground rent, while you will also be required to contribute towards maintenance and service charges.

Generally, you will need to get permission from the freeholder if you want to carry out any major works to the property, while there may also be limitations on things like keeping pets.

Should the lease expire then the full ownership of the property will revert back to the freeholder?

Leasehold is usually reserved for flats and apartments, however, this is not always the case and many older properties are on leaseholds, but recent years have seen a number of new-build homes sold in this way. The Government has now banned this practice, ensuring that all new build homes are sold as freehold.

As a result, if you want to make any changes to the structure of the property ‒ such as adding an extension ‒ then you are free to do so, as long as you have any necessary planning permission from the local council.

As such the correct choice of property, once on the market, will provide you with an immediate, and monthly, source of income that recoups your initial outlay, offsets any monthly expenses and returns a healthy excess return on your investment.

Typically, the purchase of any property by an overseas investor is required in cash. However, Ellis Church recommends – and will provide advice – on refinancing your property by way of a mortgage.

Securing a mortgage will substantially increase your monthly return on investment and enable you to release your capital to, for example, re-invest in another property.

You may, of course, sell your property at any time; either as an ongoing HMO enterprise or conversion to a private house.

Ellis Church will keep you regularly appraised on your property’s rental performance and sales potential; offering advice on the local and national market and, if required, managing the leasing and/or sale of your development.

Though the rental yields are lower than that of Retail HMOs, a UKGA HMO is especially appealing to investors who are risk averse – as the rent is secured and not dependant on physical occupancy.

Rent is paid on a monthly basis based on the number of bedrooms in the property, regardless of occupancy. Furthermore, all internal repairs and upkeep of the property is undertaken by the UKGA, resulting in a completely ‘hands off’ investment.

UKGA HMOs are a council’s cost-effective solution to help meet local housing requirements and are now renting HMOs directly from private landlords.

This latest development offers a number of benefits to an investor:

• Fixed Rental Income for the duration of the lease
• 5-year fully repairing internal lease. UKGA responsible for all internal repairs
• No void periods. Rental is paid regardless of whether the room is occupied or not

Properties that are not pre-existing HMOs will require a HMO License. These can be applied for once any required renovation work is completed and a site inspection by the local authority is undertaken. The process for securing a HMO license typically takes 4 weeks.

Considerations

• A property is required to fulfil regulatory health and safety standards, namely: Bedroom size minimum of 6 s/m, an additional toilet for HMO’s of 5 bedrooms or more, a window for each bedroom, a communal area for dining/relaxation, fire and safety features
• Not all areas/councils within the UK require UKGA HMOs at any given time
• Choose localities that are already considered popular UKGA and/or Retail HMO communities

Typically such HMOs require a Leasing Agent to source and manage tenants and oversee the upkeep of the property.

The rental yields are significantly higher than that of a UKGA HMO, though the cost of appointing a Leasing Agent must be considered when evaluating a property’s return on investment (ROI). Leasing Agent fees tend to be between 10-15% of rental yield.

The Retail HMO owner is also responsible for the upkeep of the property, its contents and in ensuring it meets with the required fire and safety standards. Utility bills and other incidental costs may be borne by either the property owner or the tenants depending on the leasing terms stipulated in your tenancy agreements.

Properties that are not pre-existing HMOs will require conversion and a HMO License. Licenses can be applied for once any required renovation work is completed and a site inspection by the local authority is undertaken. The process for securing a HMO license typically takes 4 weeks.

Considerations

• Select properties that are within close proximity and/or easy access to town and city centres
• Ensure the immediate area is supported by local amenities, retail facilities, transport channels, education and healthcare services
• Choose localities that are already considered popular rental hubs

The fastest area of growth in the Buy-to-Let market is in the HMO sector.

The UK Government defines an HMO as one whereby:

• At least three (3) tenants live in the property, forming more than 1 household
• Tenants share toilet, bathroom and/or kitchen facilities with the other tenants
• Each tenant has their own secure bedroom

HMO properties are extremely popular with both landlords and tenants.

The landlord can increase the income generated from the property by renting it by room rather than as a whole. The tenant is able to live in a property or area that they could not normally afford, by sharing the amenities and running costs with the other tenants.

A trusted way of working
Ellis Church delivers total transparency. No hidden costs, exaggerated ROI claims, or aggressive marketing. We charge a pre-determined fee. You remain in complete control.

A personalised approach
Long-term relationships, we realise, are built upon ensuring we consistently deliver the highest level of service and returns for our clients. Your success, after all, is ours too.

Step 1. Determine your requirements

In order for us to fulfill your goals, we first need to understand your objectives and investment criteria.

For example:

• What level of risk and reward are you comfortable with?
• What is your budget?

Many other factors require careful consideration when determining and proposing properties that may be suited to you.

This process enables EC to offer advice and recommendations as to what the most effective investment route would be for you.

Investment Types

A number of property investment models can be considered

• Retail HMOs
• UKGA HMOs
• Residential
• Commercial
• Land Developments

UK Buy to Let (BTL) properties are increasingly popular. As property prices continue to rise and affordable homes grow scarcer, rental demand intensifies.

‘Houses in Multiple Occupation’ (HMOs) are investment routes that cater to this growing, sustainable market sector

Getting to know you (KYC)

We like to plan, and prepare, ahead of time.

All property sellers, and their agents, require verification of your identity, address and proof of funds – in order to accept any offer.

In an environment where the best properties are highly sought after – having such information on hand often proves the difference between success and failure.

Step 2. Appoint Ellis Church

Once both parties are happy to move forward EC will prepare a formal agreement in order to begin working on your behalf.

This agreement will itemise the services we will provide and the properties we will seek, specific to your needs. The agreement will also present our cost schedules.

Upon confirmation, EC will immediately undertake a process of identifying and presenting potential properties for your review.

Step 3. Property Searches

EC identify potential properties through various channels; Estate agencies and online searches, property aggregators, Auction Houses, local authorities, UKGOV-appointed providers, direct approaches to owners.

Identifying a suitable property requires evaluating a whole range of market factors. Success or failure can even depend upon which street a property is located.

EC are able to provide essential on-the-ground knowledge, expertise and the connectivities needed in finding the right investment(s) for you.

Due Diligence & Presentation

Each property found requires physical site inspection, research of the immediate vicinity and surrounding areas, assessment as to its potential/feasibility, the costs associated with its acquisition and conversion.

EC presents its findings; detailing the property, site imagery, floor plans and overviews of the area.

Using its own proprietary property calculator, EC also presents a detailed financial ROI analyses – for both cash and mortgage models.

Step 4. Property Bidding

Should a particular property meet your investment criteria, EC will act on your behalf to secure a ‘purchasein-principle’ at the lowest possible price.

It’s important to note that any offers accepted by the seller carry no legal obligations on your part. Nor do they exclude the seller from accepting better offers elsewhere.

Properties acquired through Auction are considered final and require a 10% deposit with the balance typically payable within a 30 day period of a successful bid.

Step 5. Appoint Lawyers and Surveyors

Following a seller’s agreement to your offer, you are required to appoint a lawyer and surveyor to work on your behalf.

EC are happy to assist in sourcing such professional services if required.

EC will also use this ‘grace period’ to undertake a deeper study of the property, including seeking costs and schedules for any renovation work that may be required.

Step 6. Exchange Contracts

Assuming a property satisfies your, your lawyer’s and EC’s, requirements, both the seller and buyer will prepare and exchange contracts for review.

Typically a 10% non-refundable deposit will be required by the seller’s agent upon the exchange of these contracts.

You are, at this stage, advised to secure a building insurance policy.

At this point, you are committed to buying the property and the seller; legally obliged to sell the property.

Step 7. Contract completion

Upon formal signing of the contracts by both parties, the balance payment is typically required within 30 working days,

You now legally own the property

You will also be at liberty to formally appoint contractors for renovation work and appoint a leasing agent (if considered necessary for retail HMO properties). EC will act on your behalf to assist in all the above.

Step 8. Property Management

EC will continue to oversee and monitor the condition and performance of your property and, alert you to any remedial work that may be required.

Quarterly reports will be provided for your review.

EC can also assist in providing mortgage advice – a strategy we highly recommend in maximising your return on investment and releasing capital to, for example, further expand your property portfolio.

Capital Realisation

EC will also continue to keep you updated on any news, forecasts and opportunities specific to your property, its area and the UK market in general.

Should you wish to sell the property in future EC can provide you with the advice and services necessary in selling your property to its maximum potential.

Homeownership comes in two main forms in the UK: freehold and leasehold. Understanding the difference between the two is really important before you go ahead with a home purchase, as they come with very different costs and responsibilities.