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Life Reversion properties increasingly popular

publication date: Jun 2, 2010
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Life reversions are homes that have usually been the subject of equity release schemes. The owner will have sold the property for a sum – usually discounted by up to 60-65 per cent of market value – to release the capital. They are likely to be retired and see the opportunities the sum can bring to them while they can enjoy it – travel, home comforts, gifts – and to supplement their pension.

The homeowner retains the right under a ‘life tenancy’ to stay in their own home until it is vacated – either when moving, going into a care home or on death. They also continue to pay all the charges associated with the property.

One buyer at the Network Auctions sale at Hatfield House went along out of curiosity and bought such a property on spec:
“My brother and I weren’t expecting to buy anything – we didn’t even take a cheque book!” said Stuart Gibson. “We bought the flat for £21,000 – and then found out that it is currently worth, with vacant possession, about £70,000 on the open market. It was a good price (guide £17,000- £19,000), we took a gamble.”

The property was a one-bedroom retirement flat in Peterborough, purpose-built by McCarthy and Stone. It was bought in 2000 for £55,000 and subsequently sold to an equity release company. In common with other such companies, life reversion properties are continually traded by them at auctions.

The current occupiers are aged 61 and 62 – an indication that the younger they are, the more attractively priced the property is likely to be.

“Of course, being a retirement flat we can’t live there as we are under 60, but if one of us were to move in when we reach that age we would have no CGT to pay,” continued Stuart Gibson.

“We are looking at putting the property in trust for our children so we definitely see ourselves buying more life reversions. What started as an impulse buy has turned into an exciting investment opportunity for us.”