Blog 10.01.2011: Reversionary Interests
A reversionary interest in a property is simply the freehold interest that remains once long leases have been granted to third party purchasers. Their valuation can be troublesome but it appears that some form of yield based approach has been used on many freehold reversions indicating that around 5% return is currently being demanded by investors.
The yield clearly arises from the ground rents being charged to leaseholders with the lease agreements providing for upward fixed rent reviews every fixed number of years. These reviews appear to be fixed at the outset, for example, £50 per lease for the first 10 years and £100 for the next 10 followed by a doubling every 15 years thereafter.
These reversionary interests can be realised using a broker specialising in the same or by private treaty although if the reversionary value is relatively small this may not be very cost effective.
Gore and Company does not provide valuations of investment or other assets nor is it authorised to provide investment advice of any kind. Professional advice should be obtained before making any decision.
Please contact us for further information.