remember shaving foam when freehold title splitting

Freehold to Leasehold Title SplittingThe Shaving Foam Technique

[web]

by

Bernie WalesFIoD, FIRPM, AssocRICS

T. 02380 847 111www.BernieWales.co.uk

Freehold to Leasehold Title SplittingThe sum of the parts is greater than the whole.

How much profit?Buying the multipack shaving foam wholesale and selling the individual cans

retail, is like buying a large property and splitting it into leasehold flats.Excluding costs, how much profit do you make in this example?

• Shaving foam multipack £400,000• Shaving foam cans £100,000 x6• Total profit excluding costs £ ???,000


How much profit?If you said £200,000 you’re not alone – but you’re wrong.

You forgot the cardboard container.And in freehold to leasehold projects, that is worth money!

• Shaving foam multipack £400,000• Shaving foam cans £100,000 x6• Cardboard container £ ??,000• Total profit excluding costs £ ???,000


So, What Makes Freehold Value?In short, five main areas:

• Ground rent rental income

• Buildings insurance commission on annual premium

• Management fees for managing the property

• Hope value future development potential

• Possession at the end of the lease term


So, let’s ask again.How much profit in this example?

• Shaving foam multipack £400,000• Shaving foam cans £100,000 x6

• ground rent £250 per flat per annum

• Cardboard container £ ??,000• freehold valued at between 15x and 20x the annual ground rent

• Total profit excluding costs £ ???,000


In this example,the freehold is worth … £22,500 to £30,000

That’s worth having!

• Shaving foam multipack £400,000• Shaving foam cans £100,000 x6

• ground rent £250 per flat per annum

• Cardboard container £ 22,500 to £ 30,000• freehold valued at between 15x and 20x annual ground rent

• Total profit excluding costs £222,500 to £230,000


An example of an ideal house to split

This 4 flat building was still one freehold with no long leases created. No conversion needed.

Make sure your conversion blends in with the street scene

What is the right type of property?

• Big square footage – high ceilings• Run down – perhaps not mortgageable• Street scene• NOT higgledy piggledy• NOT very old or listed (you have better things to do!)


Where do you find them?

• Auctions; ei group www.eigroup.co.uk

• Agents; commercial www.estatesgazette.com/propertylink

• Agents; residential• Agents; lettings• Use your eyes!


Your Power Team

• Architect or Architectural Draughtsman• They’ll show you to best use the space• They’ll know the local planning rules and wishes

• Property Lawyer• He/she will split the freehold title at H M Land Registry• But they probably won’t know how to create the

additional freehold value; ground rent, etc (see earlier)• Builder


What can Bernie do for you?

• Shaving Foam Consultancy Services• Advice and guidance on your Title Splitting project• Tweak your lawyer’s lease to ensure:

• excellent property management and service charge clauses• enhanced residual freehold value

• Find a freehold buyer … and manage the sale process• Joint Venture with you … if the numbers are right


Find Bernie at:

www.BernieWales.co.uk

https://uk.linkedin.com/in/berniewales


http://www.berniewales.co.uk/



remember shaving foam when freehold title splitting

Real Estate