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% 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% 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.
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Parmdeep Vadesha is a property investment expert and
founder of the largest community of property entrepreneurs
on the web who buy below market value properties from
distressed homeowners facing repossession, divorce and
bankruptcy. He writes a monthly newsletter for over 70,000
property investors worldwide -
http://www.Property-System.com
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