A vendor in consultation with their financial adviser decides that a Home Reversion is right for them. Their financial adviser sends us the fact find and proposal we issue a Key Facts document which states the offer that would be made subject to valuation and underwriting.
The vendor the pays for their legal work and valuation to be carried they do this with the assistance of their IFA and solicitor. Once a vendor is ready and the IFA & solicitor has completed the necessary work the conveyance process beings between the vendor and investor.
Under a Full reversion or Partial reversion, the investor owns the property outright and has complete control of the property.
What are the benefits of home reversion plans for Investors?
- Investor’s get an immediate substantial capital gain in some instances 100% capital gain upon purchase ie the investor buys the property for £125,000 and now holds a £250,000 asset. A £125,000 instant gain.
- The investor has no costs relating to maintaining the property, no cost of insurance, no regulatory costs of gas certificates or electrical certificates.
- The management fees are much smaller than a standard buy to let.
- There are no void periods so no costs such as empty house council tax, or expensive empty property insurance and agent fees for re letting the property.
- There is no risk associated with fluctuating rents or no payment or rent and problems evicting tenants.
- These tenants carry on regarding the property as their own home and continue to maintain and look after the property well. Even adding value through refurbishments especially under partial reversion schemes.
- Taxation benefits are significant – no rental income to pay tax on annually.
- The stamp duty tax on the purchase is based on the lowest rate not the standard Buy to Let rate ie £3750 compared to £8750
- When the vendor moves out the property can be refurbished / extended / redeveloped and / or refinanced further adding to the capital gain.
Management and Exit Strategies of Home Reversion Investments?
The first thought of new investors in Home Reversion schemes is the fear that they will be investing for an unknown length of time or not able to sell their investment.
All property investment as opposed to property trading should be viewed as a long-term investment. However, we should dispel some myths of lifetime tenancies. More than 50% of lifetime tenants do move from the property before they die or go into care, many decide to downsize after a just few years. This is especially common when the tenant has retained a profit share in the property as they often seek to cash that in by moving and allowing the investor to sell the property.
As the value of the investment is linked to the age of the tenant every year the value of the investment increases as the tenant gets older, therefore we regularly sell these investments for our clients to other investors. Either because the initial investor has achieved their investment goals, or another project has come along, and they wish to release their capital. If you currently hold any of these investments and are looking to realise your capital, please let us know.
Home Reversion Investments as part of your portfolio?
Home reversion investments are only available through our network of IFA’s and are not seen by most property investors they are usually reserved for Pension funds, Family Offices as they are a superior exceptionally low risk store of wealth. You can invest in Home reversion’s for much less capital than you would imagine, and we are delighted to be bringing these to property investors like you.
Diversification is the key stone of all investment strategies, we have all heard & felt the impact of Corona virus on parts of the property sector especially serviced accommodation, tenants unable to afford rent payments and the courts preventing any evictions. Office & retail space seeing a significant reduction in demand. However, due to the demographic of the tenants who take out home reversion plans this sector not been impacted negatively.
Even in normal times as an investor with high yielding properties either through strategies such as serviced accommodation, HMO’s or just a variety of commercial and residential lets. Home reversions act as a great form of diversification due to their unique characteristics.