Life Tenancies are the hidden gem of the property world. Although they’ve been around for decades, they have many benefits that are still not widely known about. So, we’re here to put a spotlight on Life Tenancies and all the reasons why you should consider making them your next investment.
Firstly, what are Life Tenancies? Basically, they are UK residential properties upon which a Lifetime Lease has been granted to individual(s) over the age of 60. The Lifetime Lease is a full repairing, full insuring residential lease which provides the tenants with a right to reside in the property rent-free for their lifetimes. These types of investment are medium to long-term investments with many factors that drive capital growth.
Unlike many other types of property investment, Life Tenancies have plenty of additional benefits:
Low risk, low effort
Life Tenancies are generally perceived to be a low-risk property asset class, where you’re safe in the knowledge that your property is gaining value with a reliable tenant. While other properties require management by either the owner or a letting agent, a Life Tenant is entirely responsible for maintaining the property, minimising your responsibilities after acquisition.
High standard of tenant
The standard of tenants attracted to Life Tenancies is often much higher and more reliable than typical tenants. Tenants are committed to staying in the property for the rest of their lives, and therefore have a greater incentive to take care of it as their long-term home. In fact, many tenants use the money released through downsizing and leasing for life to make improvements to the property, adding to the value of your investment.
Instant capital gains
A lot of the appeal in Life Tenancies comes from the significant capital gain opportunity. Rather than having rental income like most buy-to-let investments, the return on Life Tenancies comes from the substantial discount against the vacant possession value. These discounts range from 30%-70% and, in nearly all cases, they are exempt from the 3% stamp duty surcharge on second homes, so you are effectively gaining all your rent at once upon purchase.
It’s not just the investor getting a great deal from Life Tenancies, there are plenty of perks to keep the tenants happy and safe too. Life Tenancies provide tenants with the means to move to a better area, in a property of a higher standard that’s more suitable to their needs for as long as they need. It also gives them the freedom to move out of rented or temporary accommodation. The monetary perks are also attractive, as they save on rent or mortgage payments and have the funds from their previous house sale to supplement their retirement income.
There are many reasons why Life Tenancy Investments are a great addition to any property portfolio. Peace of mind, significant exposure to capital gains, reliable and content tenants – it’s a win-win-win scenario! If you’re interested in finding out more, don’t hesitate to get in touch.