Life tenant investment properties - leasehold questions etc

Happyclappy

Hi all,

I'm wondering if anyone has any experience or words of wisdom to offer regarding this?

I've been thinking for a while that I'd like to get my savings out of the banks and into something more solid, like property. Actually, I love property and feel really drawn to investing in it. I've worked as a lettings property manager in the past so am not entirely new to the buy to let thing though also, a bit put off by all the possible pit-falls. Then I found out recently about an alternative to B2L: buying property at a reduced price, where there is a life-time tenant in place. If I've understood things correctly, it seems relatively easy. The tt is responsible for all the maintenance and management fees and stays there until they die or go into full-time care. The owner doesn't get any rent but buys the property at a reduced price and waits as (hopefully) property prices go up.

So, what are the pitfalls? (I'm hoping that people here might be able to help me with this...)

- Well, the tt could end up living there for 20-30 years. (They're usually 65-73 from what I've seen so far.) So, there can be quite a long wait before you can have the property for yourself to rent, sell or live in. I'm not too worried about this - it seems like a pension plan to me. (Should I be concerned about this though?? I don't know.)
- The tt might not maintain the property to your standard (you can visit every 3 years to check.) What happens if they're not maintaining it properly?
- There's no rent (but no management/maintenance fees either.)
- Insurance? I haven't found out about this yet. (Anyone??)
- Could the owner be liable for dangerous gas leaks/electrical faults etc? (I would assume not...??)
- Leasehold issues?? I've seen one property online which has about 100 years left of a 125 year lease. Should I be concerned about this? I think the tt is about 65.
- Anything complicated?? Would I need to set up a company in order to do this? Would I have to include it on my tax return in any way? (There would be no income whilst the tt is living there.)

Overall, it seems much simpler than B2L. But, how does it compare financially with B2L or other property investments in the long-term?

Many thanks to anyone for any input on this.

Best wishes all!

vectistim

I believe some of these things can be extended by marriage or by children, which can cause an issue.

Eventually there will be capital gains to deal with once you can get in and sort the places out.

It's the sort of market I'd only go into direct if I'd had experience of managing the things. If I were looking to invest in that sort of market I'd probably just by shares in Grainger.

Yorkie1

Not heard of this particular arrangement - the sitting tenant who pays a low rent is more familiar. Are you sure you are fully au fait with the facts?

latecomer

One of my folks neighbours has made a fortune doing exactly this during the boom years. Not sure its as viable now as it was then but provided your tenant doesn't live forever then its probably feasible.

Jonbvn

I doubt any lender would be interested in offering a mortgage on such properties..

jimjames

If you want a better return than money in the bank why not use the stock market?

Much less hassle than dealing with tenants and can be held inside an ISA tax free unlike a house.

vectistim

Easiest (and safest) way to do this is to buy shares in the specialist companies (I think some are set up as REITs) that do this sort of thing.

kidmugsy

Happyclappy wrote: »

I found out recently about an alternative to B2L: buying property at a reduced price, where there is a life-time tenant in place.

The classic technique is then to send round some heavies and "persuade" the old biddy to leave.

I'd have guessed that, except in the case of your planning to use coercion, your only defence against the risks you list is to buy many such properties so that the probabilities can even out. That would leave you very exposed to the political risk of someone in government retrospectively changing the law against your interest.

MissyD_2

@ HappyClappy

Nice post:)

I was just wondering if you proceeded with the life tenant investment? How your finding it?

Or if not, would you care to share your thoughts/reasons?

I'm currently considering this for a pension.

Hope to hear back from you soon

jimjames

Happyclappy wrote: »

- The tt might not maintain the property to your standard (you can visit every 3 years to check.) What happens if they're not maintaining it properly?
- There's no rent (but no management/maintenance fees either.)
- Insurance? I haven't found out about this yet. (Anyone??)
- Could the owner be liable for dangerous gas leaks/electrical faults etc? (I would assume not...??)
- Leasehold issues?? I've seen one property online which has about 100 years left of a 125 year lease. Should I be concerned about this? I think the tt is about 65.
- Anything complicated?? Would I need to set up a company in order to do this? Would I have to include it on my tax return in any way? (There would be no income whilst the tt is living there.)

Overall, it seems much simpler than B2L. But, how does it compare financially with B2L or other property investments in the long-term?

Many thanks to anyone for any input on this.

Best wishes all!

Sounds like all current costs and waiting for future possible gain to me. Not my idea of a good investment.

1) No rent so no income, you have to pay mortgage
2) You own property so have to insure it every year
3) You're responsible for annual gas safety check
4) You're responsible for all repairs

Simpler than BTL? Maybe but all costs and no income doesn't appeal to me.

If you want property why not just do a standard BTL?

Peteronthesouthcoast

These are only suitable for people with no foreseeable need of the money, and fairly deep pockets

As a professional landlord with both a commercial portfolio and BTL's, these have a place.

I would argue that it is the kind of investment that is most suitable for grandchildren.

There are no obligations under these investments and no income.

If you take the view, that over a long period of time, property values will go up and keep pace with inflation, then the figures do stack up with the type of discounts available.

Tax wise if you give this as a gift to grandchildren in the right way the money you spend on this drops out of your estate thus not incurring IHT. Against this the recipients will have to pay CGT.

If the worst comes to the worst, it is possible to resell the investment (if you have not given it away). It is very likely to go for substantially more after say 10 years because house prices are probably going to be higher but more importantly the life tenants will be 10 years older.

Peter