Are ground rents a good investment?

Dec, 05 12 Post by: Ground Rent Sales | No Comments

Freehold ground rents are proving to be a very popular investment in the current economic climate, which doesn’t look like improving any time soon. We normally agree sales on ground rents in a matter of days, sometimes within hours of sending out the instruction to our investors.

We have investors interested in buying ground rents with long leases and short leases (under 80 years). The investors looking to purchase freehold ground rents with long leases are buying a fairly risk free investment as they know how much money is going to come in each year and in most cases the ground rent increases throughout the term of the lease which combats inflation. Also if there are management and insurance rights, the additional income streams are factored in to the bottom line income.

Ground rents with short lease (under 80 years) are sold for a much higher premium than ground rents with long leases. You also receive income from the sources we referred to for the long leases but the main value attached to these ground rents is the fact the lessees at some point will need to extend their lease as it’s difficult to obtain a mortgage on a flat with 80 years or less on their lease. The freeholder will charge a premium, how much they charge, will depend on how short the lease is. So there is more risk attached to this type of ground rent investment, as there is no guarantee the lessees will extend their lease. However the shorter the lease, the more valuable the freehold becomes.

If you have a ground rent you are wanting to sell, we would be very happy to give you an indication of the value you might expect to achieve.

If you are looking to invest, we have a number of ground rents availble to purchase.

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