If you are an active property investor reviewing the alternative investment vehicles available in the property and real estate investment arena then you may have already come across ground rent investment opportunities. If you are searching for more solid, steady returns and an opportunity to diversify your property portfolio then investing in ground rents could certainly be worthy of further investigation and cash house buyers are commonly the best way to get that excellent ROI.
Investing in any form of property or land requires lots of drive, determination and personal courage. It’s a risky business and often requires serious financial outlay and plenty of hard work for you to be successful.
The main types of direct property investment are generally commercial property, residential property and land, but there are also other opportunities open to investors that include investing in ground rents.
Investing in ground rents is, however, something many people don’t consider. So, what is it and what does it involve?
What Is A Ground Rent?
A ground rent describes the full ownership of a portion of land where a second party, normally a leaseholder, owns a long-leasehold agreement on the said land. The leaseholder is typically the owner of any buildings or structures on the land and will be responsible for any rents relating to the building or buildings.
For the buildings to remain on the land, the leaseholder pays an agreed ground rent to the freeholder. Therefore in simple terms, the freeholder receives a ground rent from the leaseholder who has buildings on that land.
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How Long Do Ground Rents Last?
There will normally be a lease in place usually for a term of between 20 and 999 years, although in the UK a period of 99 years is probably the most common.
How To Make Money From Ground Rents.
A ground rent investment is a good opportunity for certain property investors, with specific investment objectives and under the right circumstances.
From an investment perspective, experience shows that it is possible to generate a return of around 5-10 per cent per annum on a ground rent.
Of course, returns at this level aren’t going to make you super rich in an instant, but what avenue of property investment does without significant risk?
Instead, investing in ground rents can be used as a lower risk way to diversify a property portfolio, which is particular important when it comes to the management risk in investment circles, especially if you want to be successful for the long term.
Investing In Ground Rents For Income & Capital Growth
A ground rent investment can involve both commercial and residential property and is often one of the easiest property investment vehicles to be involved in, as a lot of the hard work is taken off your hands by the leaseholder.
With regards to success, many investors have found the ground rent investment path to be very fruitful for them. However, it has to be said that the options for generating greater financial returns in the long term and making increased profits year on year are not going to be as great.
The reason for this is simple: other forms of direct property investment allow you to make strategic changes to the buildings or the leasing profile of a property to increase either its income or capital value, but with ground rents you will own only the land which limits your ability to add significant value.
The buildings occupying the land belong to the leaseholder, so there is usually no scope for improvement by you and consequently no scope for future financial gains during the term of the lease. Many investors look to add value to their property investments by carrying out building improvements, refurbishments, extensions, redevelopments and possibly improving the tenant mix and the strength of any lease.
As this is not possible with ground rents they are probably not the best option to take if you want to see strong income or capital growth from your investment. Instead, ground rents are ideal for property investors who want a relatively safe but steady income stream. These benefits make ground rent investments an attractive asset class particularly for larger portfolio owners.
What Is The Best Way Of Selling A Ground Rent Investment?
Freeholds and ground rent investments are often bought by specialised buyers. Because Ground Rent Investments are much less common than commercial and residential property, it can be harder to find a buyer for them and as such you will rarely see them listed with estate agents. One of the best ways to sell a ground rent investment is to a cash property buyer. We, at Gaffsy, have bought a number ground rent investments and when you sell to us you benefit from our experience guaranteeing you the easiest, fastest and most stress free way of selling your ground rents, whilst saving money on estate agents & solicitors. We purchase your ground rents fast- Compared to the open market, Gaffsy move quicker than estate agents to help get you moving.
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* Gaffsy is the cheapest way to sell your property, avoiding costs such as agents’ fees, estate agents’ charges, solicitors’ fees, clearance costs, utility charges, mortgage payments and cosmetic repair costs.
* Selling to Gaffsy is rapid, compared to estate agents, we won’t have you waiting for a house move.
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