Property Investment Articles & Resources: Finding a New Option in Reversionary Property Investment

Finding a New Option in Reversionary Property Investment
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Parmdeep Vadesha on 27 August, 2008 12:54:00
 
One of the best medium to long term property investments available for property
portfolio builders is reversionary property. This investment scheme involves a
buyer purchasing the reversionary rights of an elderly homeowner’s property.
The investor gets the right to own the property upon the death of the owner or
when the owner voluntarily vacates.
A property up for reversionary investment can be either a freehold or long
leasehold. Most of the time, it is a residence owned and occupied by people aged
70 and above. A reversionary property is often priced well below market value,
usually 50% of its vacant possession worth. By opting for this investment, the
buyer gets a premium property at a bargain price while the original homeowner
continues to occupy his home, rent-free until the remainder of his life.
Reversionary investment is fast becoming a popular alternative in the United
Kingdom and more so overseas. France is also a major reversionary market, even
offering significant tax breaks to investors.
For the most part, reversionary property investment is a win-win situation for
both the elderly homeowner and the property investor. On one hand, the buyer
purchases a property at a huge discount – usually up to 50% below market
value. Furthermore, he is assured of an adequately-maintained property by the
time ownership is reverted. This is because the original homeowner has the
responsibility for the upkeep of the house. This is indeed a major advantage for
property investors, as they do not have to worry about insurance, maintenance
and general costs in preservation. Although reversionary property investment is
not ideal for first-time homeowners as they cannot move in right away, this
investment scheme is great for seasoned property investors looking to add to
their portfolio or start-up buyers who want to get their foot on the property
ladder.
As for the homeowner, he continues to live in his home, albeit as a tenant and
no longer an owner, until his death. Furthermore, the homeowner gets peace of
mind and financial security as he is assured of a cash lump sum upon
finalization of the deal and monthly instalment payments for the remainder of
the balance. In effect, the homeowner is guaranteed that he will be receiving a
sum every month for the remainder of his life. The biggest benefit for the
elderly homeowner is the fact that he continues to live in his property,
although this means that he will be responsible for general expenses such as
Council Tax, utility bills, maintenance expenses and insurance premiums.
Reversionary property is indeed a new and exciting avenue for the property
investor, offering lucrative profits and great financial rewards. Though they
are non-income producing investments, the hefty profits lie in superior capital
appreciation, as it is highly unlikely that property prices could fall to over
50% of their present value in the near future. Thus, it is wise to consider
reversionary property investment and reap the benefits in the long run.