June 20, 2024


Mad about real estate

Reversionary Property: Risk-free and 50{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} Off

Copyright (c) 2008 Parmdeep Vadesha

Reversionary property is a good medium to long term investment. Though non-income generating, reversions are superior when it comes to capital appreciation. Easy and virtually risk-free, reversionary property investments also offer potentially high returns. And since it is almost impossible for property prices to fall 50{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} below their present value, it makes good business sense to invest in reversionary property.

In reversionary property investment, you simply purchase a residential property from a homeowner at a highly discounted price. A reversionary property can be bought for around 50{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} of its value, depending on the age of the vendor and the location and characteristics of the property. Payment is either in a cash lump sum or in monthly installments. The homeowner continues to live in the property as a tenant rent-free and with full legal rights to remain in occupation until his death or until they voluntarily vacate. Then the ownership of the property reverts to the buyer.

Since the homeowner continues to live in the home as if it were his own, he is still responsible for the general upkeep and maintenance of the property such as utility bills, building insurance premiums and capital tax while he continues to occupy the house.

Reversion investments are basically a bet on the life expectancy of the homeowner. The buyer pays the monthly reversionary annuities until the homeowner dies.

Reversionary properties are of two kinds: tenanted, which means that the homeowner lives in the premises, and untenanted, whereby the vendor does not live in the property. In this case, the buyer can use the property or rent it out. Payment can either be in a lump sum, in monthly annuities or a combination of both. Usually, institutional investors, affluent individuals and those looking for a holiday home in the future would greatly benefit from reversionary property.

Investment in reversionary property is beneficial to both the homeowner (vendor) and the buyer. For the vendor, it is as if he is granted a lease that will last until the end of his life. He is released from the responsibility of big-ticket payments on his property such as major works and land tax. He also receives additional income in the form of the cash lump sum or monthly annuities, which could greatly supplement an elderly person’s pension. More importantly, he does not have to sell his own home or move out, thus increasing his stability and peace of mind.

For the buyer, investment in reversionary property is an excellent opportunity. Not only is the property available at a huge discount, most of them are studio flats, apartments, villas and commercial establishments located in prime areas. Since most of these properties were initially purchased as a retirement house, they are often located in a major city or in the quiet countryside.

Reversionary property is definitely one of the least troublesome and safest way of investing in property. It is best for those who would like to have a holiday home when they retire. For sure, the property is well-maintained by the homeowner, since he still considers it his home despite the fact that ownership has been transferred. By investing in reversionary property, one is sure to acquire a well-maintained, valuable home in the near future.