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Reversionary Property Investments

What are reversionary property investments?

This is one style of investing that I have not done yet! Probably because I am not very good at long term plans. I am getting better though.

Reversionary property investing is where an investor buys the reversionary interest in someone else's property, usually their home. This means they are buying the rights to own the property when the owner dies or leaves. This means the property reverts to the person that buys it.

All property has some value. By unlocking the value in their home in this way, they convert from owner to tenant. The tenant can stay in the property, possibly gaining a monthly income or cash lump sum. The current owner is granted a lease that lasts the rest of their life.

When an investor buys a property in this way, they are usually getting it at a discount of around 50% or more. This discount is in effect a single lump sum payment for the whole time it is anticipated the tenant will live in the property.

The tenants continue to live in the home as if it was their own. It is the responsibility of the tenant to maintain it.

One of the advantages of being an investor in this way is that the tenants are totally liable for all outgoings, maintenance and insurance. Whereas with buy to let property the landlord has lots more responsibility.

As soon as the property is vacated possession reverts to the investor.

Reversionary property investment should be viewed as a medium to long term investment.

The legal dictionary definition is: A reversion occurs when a property owner makes an effective transfer of property to another but retains some future right to the property. For example, if Sara transfers a piece of property to Shane for life, Shane has the use of the property for the rest of his life. Upon his death, the property reverts, or goes back, to Sara, or if Sara has died, it goes to her heirs. Shane's interest in the property, in this example, is a life estate. Sara's ownership interest during Shane's life, and her right or the right of her heirs to take back the property upon Shane's death, are called reversionary interests. A reversion differs from a remainder because a reversion arises through the operation of law rather than by act of the parties. A remainder is a future interest that is created in some person other than the grantor or transferor, whereas a reversion creates a future interest in the grantor or his or her heirs. If Sara's transfer had been "to Shane for life, then to Lily," Lily's interest would be a remainder.

How can I do reversionary property investing?

If you are interested in French reversionary property have a read of this page

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