Short Lease Flats Masterclass with Jason Patterson
Last updated: 16 Aug 2024
Meet Jason Patterson
In this episode, we dive deep into the world of short-lease flats with Jason Patterson, an experienced property investor with over two decades of experience. Jason is renowned for his expertise in lease extensions and is fondly referred to as the "Short Lease King" due to his success in this niche area of property investing.
Jason’s career began in 2001 with traditional buy-to-let properties, but he quickly identified the untapped potential in short-lease flats. Today, he owns a multi-million-pound property portfolio, primarily focused on these undervalued gems in North London and Dubai. His approach is centred on buying properties with short leases, extending those leases, and realising significant uplifts in value.
What is a short lease flat and why does it matter?
A short-lease flat is a property with a lease term typically below 80 years. As the lease term decreases, so does the property's value, making it less attractive to buyers and harder to finance. However, Jason explains how this perceived disadvantage can actually be a lucrative opportunity for savvy investors.
"Marriage Value" is a key concept when dealing with short-lease flats. It refers to the potential increase in property value that occurs when a lease is extended. Once the lease drops below 80 years, this marriage value becomes significant, and investors must pay 50% of the uplift to the freeholder. Despite this, the overall increase in property value often outweighs the costs, leading to substantial profits.
"The general concept is you buy a flat with a low lease, you extend the lease, and then after that, it creates an uplift in value."
The process of unlocking value
Jason Patterson shared his systematic approach to maximising profits from short-lease flats, which includes:
Identifying the right property
Jason emphasises the importance of finding flats with lease terms under 80 years, as these are typically priced below market value. The key is to calculate the potential uplift after the lease extension.
Negotiating the lease extension
Once a property is identified, the next step is to negotiate the cost of extending the lease. Jason advises getting an accurate estimate of the purchase price, lease extension cost, and the property's end value after the lease extension. "Buy the right property, negotiate the lease extension wisely, and you’ll unlock significant value that was previously hidden," Jason explains.
Financing and purchasing
There are various ways to finance these deals, including mortgages, bridging finance, cash, or even joint ventures. Jason highlights the importance of understanding the financial aspects and choosing the right method based on the specific deal.
Creating uplift and adding value
After securing the property and extending the lease, the property's value increases significantly. This uplift in value is where the profit lies, as the property can now be sold at a higher price or refinanced to release equity.
Taking advantage of opportunities
Jason advises, "Always be on the lookout for short-lease properties that are undervalued due to their lease length. With the right strategy, these properties can be transformed into highly profitable investments." His approach is a testament to the power of strategic investing, turning perceived drawbacks into profitable opportunities.
Key takeaways from the session
Understanding Marriage Value: Jason emphasised that properties with leases under 80 years present a unique opportunity to generate profit through lease extensions, despite the costs associated with marriage value.
Strategic Financing: Whether you’re using a mortgage, bridging finance, or cash, understanding your financing options and choosing the right one is crucial to maximising profits.
The Importance of Accurate Valuation: Getting the purchase price, lease extension cost, and end value right is essential to ensuring the success of your investment.
Success stories and real-life examples
During the session, Jason shared examples from his portfolio, demonstrating how his approach has yielded significant returns. One notable example involved a flat with a 57-year lease that he purchased at a substantial discount. After extending the lease and making minor refurbishments, Jason was able to sell the property for a significant profit, proving the effectiveness of his strategy.
Final thoughts
Jason Patterson’s approach to short-lease flats is a masterclass in identifying hidden value in the property market. By understanding the intricacies of lease extensions and leveraging them to your advantage, you can transform undervalued properties into high-return investments.
For more details and practical advice, be sure to watch the full episode of Deal Finder’s Corner with Jason Patterson. If you enjoyed this session, let us know in the Property Filter live chat, and we’ll bring more experts like Jason to share their invaluable knowledge.
