Life Tenancy Investments - The not so new kid on the block

Any estate agent or property investor will tell you the residential market has toughened significantly in recent times and it has continued into 2019. Reports of the ‘death of Buy to Let’ maybe a little premature but there is no hiding the fact that it is an extremely complicated time to be a landlord.

Just to give you some context as to the decline of arguably the investors favourite residential investment, the Buy to Let: According to figures from the Intermediary Mortgage Lenders Association, Buy to Let’s have seen a drop of around 80% since 2015, a steeper drop than was seen immediately after the credit crunch of 2008. This could be put down to the changes in taxation and tougher lending criteria. Since April 2018, landlords have only been able to offset 50% of their mortgage interest when calculating their tax bill and this figure will continue to drop until it hits zero in 2020. On top of that, according to research by Savills Estate Agency Group, the prospect of a base rate increase could see £1,000 a year added to the average Buy to Let mortgage bill.

Add into the mix the uncertainty of Brexit and you can imagine the difficulties the market might have for even seasoned investors.

However, one residential investment which continues to grow in popularity is the Life Tenancy investment. Even now, it remains a relatively unknown and under-exploited sector in the UK. For over a decade, Wakeley Residential Investments has specialised exclusively in the delivery of these property assets.

Based on sales between 1st January 2017 and 31st December 2018, Wakeley has delivered over £60million worth of prime residential UK property sold to individual investors and funds alike. Life Tenancies offer exposure to the core UK residential market without any of the usual rental risks, entry costs and taxes experienced in the Private Residential Sector.

Below is an example simulation comparing Buy to Lets with Life Tenancies.

To put it simply, Life Tenancies:

  • Cost less to set up
  • Require less work
  • Will likely provide you a better return on reversion

We are not saying that Buy to Let’s cannot work for you or are not worth it. Life Tenancies just provide that alternative to help supplement any portfolio and secure your financial future.

 

More interestingly, many of Wakeley’s clients who have been recently investing in the Life Tenancy investment are past buyers of Regulated Tenancies. There has been a gap left in the market when Regulated Tenancies were discontinued in January 1989, and investors have welcomed the similarity with Life Tenancies and have made the easy transition to buying these investments. Where Regulated Tenancies are now bought significantly over their market value due to their very limited availability, Life Tenancies are more readily accessible and can offer a stronger return on your investor.

So, you’re wondering why Life Tenancies are thriving in an underperforming market? Well these mid to long term investments can be bought, on average, at 47% below the RICS valuation. This in turn provides a good level of protection to any future downturn in the market. To give you an example, the average Life Tenancy would only lose you money after 15 years if house price inflation went down each year by 4%!

Wakeley and the Life Tenancy investment have continued in 2019 to grow into one of the residential investments of choice. Having partnered with ex sporting professionals, Wakeley is now able to bring this investment to a new market. As a mid to long term investment, Life Tenancies are the perfect investment for young professionals who want to consolidate their investments and secure their financial future for when they retire. Being almost hands-free investments means an individual can purchase single or multiple units, forget about them then cash in when they retire.

And Wakeley hasn’t stopped there. With numerous international partners already helping provide these investments in South Africa, America and the Middle East, Wakeley has been able to start bringing these investments to the Asian market.

Residential property in England has, and likely will, always be sought after. For international buyers, they can be dubious of overseas investment. The issue usual arises when it comes to maintenance of the properties as they are not here. However, with no property maintenance costs, these Life Tenancy investments offer that easy and secure introduction the core UK residential market without the worry or need for constant attention and work.

With Life Tenancies on this upward trajectory of popularity, you can imagine that there is some competition and a lot are sold on a first come first serve basis. Wakeley sends out regular updates regarding upcoming and new Life Tenancies so make sure you are on that mailing list by registering here.