UK's freehold ground rent: Can it be a good investment? October 11, 2012 Home Property News If you have lived in a block of flats and paid your annual ground rent you will probably know that this money has to be paid without any exceptions. Whatever happens you must pay your ground rent or in theory the freeholder can issue proceedings against you to recover monies owed. It's not difficult to see why property investors buy these types of investments known as freehold ground rents. They know that the ground rent will be paid every year pretty much without any problems. They are therefore very low risk investments that generally speaking pay a return of circa 5% - 7% interest per annum. You can see why they are popular. The way that these properties are valued is by a simple multiplication of the total ground rent income by a factor of 15 - 20. so for example a block of flats that is producing £5,000 per annum will be worth circa £75,000 - £100,000 depending on the way the lease is written. This also assumes the leases on the flats are in excess of 90 years. If any of the leases are under 80 years a different calculation is used and the price of the freehold will be dramatically increased. The way your leases is drawn up will have some bearing on the value of a freehold ground rent as there may be things that the landlord can charge for such as carrying out the management and insurance of the block and dealing with major repairs. If the landlord is able to charge fees for this type of work the value of the freehold will be increased. Of course this is only really a snippett of information regarding the valuation of these types of investments. Some properties are very straight forward to value whilst flats with short leases under 80 years will require an internal survey by a qualified professional.