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I was delighted to be joined by Bernie Wales on this week’s podcast. Bernie is well-known on the UK property circuit as the leasehold expert, and he’s no doubt helped many of you to create value through title-splitting freehold properties.
But how much do you actually know about how he became an expert?
Bernie’s been involved in property management since the 1970s, ultimately growing a property management business with 10,000 units, before selling that business to 4 of his employees.
He’s also been growing his own portfolio for much of that time, predominantly by following his own advice, and buying freehold blocks of flats and splitting them into individual units.
During this podcast, Bernie told us what he looks out for when buying a freehold, and why being persistent has served him well.
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Turning Freeholds into Leaseholds
Bernie’s ongoing success is down to being involved at every level of his business. Although many developers purchase large buildings and convert them into flats, Bernie’s area of expertise is in lease creation, which has set him apart from the crowd.
The lease can make a substantial difference to the value of a freehold, and even though there’s profit to be made from each flat sale, there’s also a substantial return to be had from selling the freehold at the end of the process, too.
Determining the Value of a Freehold
Thanks to his early background with leasehold property, Bernie understands the importance of the wording of a lease, and the ways in which that wording can generate income in the long-term. Although solicitors will have their own preferred leases, they’re often not the best ones from an investment point of view.
Bernie has made his mark in the industry by determining a freehold’s value based on the ground rent, and the ways in which it’s reviewed over the term of the lease. If, as an investor, you’re able to enhance the wording of the lease so that the ground rent continues to add value over the years, then you could have a strong investment on your hands.
Mistakes to Avoid
Bernie’s keen eye for the details means he’s hyper-aware of the importance of getting the numbers right, but that doesn’t mean he hasn’t had any slip-ups himself. Early on in his career, he attended an auction in the hope of to buying a shop with 3 flats above it. Unfortunately, thanks to a miscommunication during bidding, he bought lot 65 instead of 66, and ended up with a nightmare leaseholder as a result.
It just goes to show, that even experts aren’t immune from mistakes! But having a clear set of goals and being persistent have been the guiding principles of Bernie’s career to date, which is why, today, his knowledge of leaseholds in the UK is second-to-none.
What’s Your Favourite Book?
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Bernie Wales’ Links & Resources
To contact Bernie for help and advice, you can visit his website at BernieWales.co.uk, where there are a number of informative videos.
If you would like to ask specific questions, you can also book a 15 minute slot with him to review your project, or go directly to the advice section of his website here: BernieWales.co.uk/leasehold-advice
It was really nice listening to you and thank you for some good tips on the talk.
I have a question however if I may please: You mention briefly about “Commercial HMOs” wherein smaller spaces for commercial tenants instead of residential – if I got that right? Would it be possible to know a bit more about this please? What type of tenants are they – office occupiers/light warehouses etc. what? Please could you shed some more light?
Thanks in advance.
Residential HMOs, as you know, are where you take a large residential property and you rent out the rooms individually. The combined rent for all the room sis more than you’d get for a single tenancy on the same building/property.
Commercial HMOs are the same idea – but you take a large commercial property (e.g. office block) and you rent rooms individually to small businesses … or desk spaces rather than whole rooms.
I hope that helps. BernieWales
Thanks Bernie. It indeed does.
So the idea remains the same – smaller spaces achieve greater yield as long as there is an ample demand/shortage for such spaces in the given location?
Also, I presume it would only be applicable to offices and light warehouses commercial uses that you can subdivide and not any other commercial uses like retail etc.?
Retail might need a planning change of use (retail to offices) for the HMO end product.
Retail is good for title splitting too, as there are possibilities under Permitted Development.
Yes, that would indeed be correct thinking about this as long the property has wide enough front to divide them into still reasonably fronted shops.
However, I would like to think the “Commercial HMOs” probably need a lot more maturity and understanding of the local commercial market unlike the Resi HMOs that are nearly certain to be tenanted as long as location is right and there are enough students or young professional in the town.
Thank you anyway again for answering my question – this was useful to know.
Just out of interest – have you got a case study for this on your website or elsewhere that I can refer to please?
Unfortunately not. I don’t tend to put case studies on my website – I use them in my presentations. Best wishes.
Many thanks again Bernie. Take Care.