Good morning all,
I stumpled upon an interesting listing on realestate.com the other day and was hoping that with the team online I may be able to learn from it.
I have spoken with the sales agent who appears to know little, so I am trying to join the dots.
It seems that a couple aged early 60's have formed their own style of retirement fund. They are offering their home for sale with a condition of a lifetime tenancy. So the home is valued (for eg) at $350k. They will sell the home for $200k and pay no rent for the term of their life, living in the property.
I have not come across such a proposal before, have you?
So I guess one is solely relying on capital growth. The investor would perhaps achieve some benefit in the reduced interest rate of the lower borrowing but I dont think interest nor losses would be tax deductatable as the home is not available for rent nor income producing.
The investor would be tied to deal being unable to sell until they pass on and unable to gain any income from the property.
I can see how this works (the win) for the seller but am a little perplexed about the win for the investor. Is anyone willing to share their views on who this proposition would suit? Why would one buy under such an arrangement?
basically if you had some spare money and wanted to buy it outright it would be an alright deal, if its tax deductible then thats another option but not sure if it is or not,
so 150k profit plus how ever much the property goes up in value over the next 20-40 years.
BUT its a long term investment unless they are sick or something already…. also who would pay the rates etc?
They want the purchaser to pay the rates.
It seems they also rent out a section of the home for $200pw (second living area?) They would retain that income under the above suggested terms however would offer the home for sale @ $260k if the purchaser wanted the benefit of the $200pw income.
I cant help but think the seller was/is a finance or superannuation advisor. It seems a very creative way to secure the retirement. (no home repayments or debt, never have to move, secured income etc)
I am thinking he could well be a very clever man.. so just what is he thinking in respect to this being a win win deal? What's in it for the investor?… Perhaps the immediate $150k equity, but is that really a big help if there is no income?
This may also create an issue with Stamp Duty payable on the Transfer as the State Revenue Office may interprete the sale price ~$150k less than market value an attemp to avoid duty payable.
Will the purchaser also need to pay maintainence/upkeep for the next 20-30 years ?
While I have not seen any of the formal documentation that has been prepared. The agent suggests that they would maintain the property however with aging tenants one can only presume an ability to mainatain for a certain period.
What I would try if I was buying this is suggesting a payment plan over the twenty years so that they get regular cash flow and possibly a cash down payment to cover their immediate cash requirements.
morning Duckster, in that situation who would own the property? who's name would the title be in?
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