Life Tenancy Investments

Life Tenancy Investments

For many individuals purchasing a traditional buy-to-let property has been the investment of choice but for years some of the largest financial institutions and listed property companies have been choosing a different yet equally simple, straightforward and high yielding investment path – Life Tenancy Investments.

What are Life Tenancies?

Life Tenancies are medium to long term, low maintenance residential investments based predominantly in the south of England. They enable you to purchase the property significantly below the Royal Institute of Chartered Surveyors (RICS) vacant possession valuation. The reason they’re available with a discount is that each property has a Lifetime Owner in residence: a person aged over sixty who has bought the right to live in that property rent free for their lifetime.

How does it work?

  1. You purchase your Life Tenancy. You can select any investment to add to your portfolio as there are available Life Tenancies throughout the country
  2. The Lifetime Owner continues to live in the property for their lifetime. Although the Lifetime Owner pays no rent, they are responsible for the maintenance of the property and all associated costs.
  3. When the Lifetime Owner permanently vacates the property, you are free to sell the property, rent to create a yield or gift to a family member. The choice is yours.

Why are investors buying Life Tenancies?

Life Tenancies provide the perfect investment for any portfolio. Whether it be a top up for a pension pot, a gift for a child or a future Buy to Let, more and more investors are seeing this as an increasingly profitable investment over more traditional property investments. Below are just a few bits of information on Life Tenancies and why they are attracting investors in their droves.

  • Life Tenancies are available, on average, at 47% below the RICS valuation.
  • Unlike other property investments, Life Tenancies are exempt from the increased 3% Stamp Duty. You will only pay the standard rate of Stamp Duty if your investment is in excess of £125,000.
  • The property will benefit from exposure to House Price Inflation on the full value of the property despite having been purchased at a discount. Whilst a Life Tenancy investment provides disproportionate exposure to the potential benefits of House Price Inflation, it also provides protection from the potential impact of sharp or long-term deflation.
  • The example below is based on a £250,000 RICS vacant possession valuation and an assumed 4% annual House Price Inflation:
    Investment price £132,500
    Discount £117,500 (47%)
    Property’s market value in 10 years £370,061
    Property’s market value in 20 years £547,780

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