Driving Capital Growth
Your Life Tenancy property will benefit from exposure to House Price Inflation on the full value of the property despite having been purchased at a discount. Whilst a Life Tenancy investment provides disproportionate exposure to the potential benefits of House Price Inflation, it also provides protection from the potential impact of sharp or long-term deflation.
The example below is based on a £250,000 RICS vacant possession valuation and an assumed 4% annual House Price Inflation:
- Investment price £132,500
- Discount £117,500 (47%)
- Property’s market value in 10 years £370,061
- Property’s market value in 20 years £547,780
Alongside all of the above, as the Lifetime Owners increase in age, the investment increases in value. Simply put, the older the Lifetime Owners are, the higher the likelihood that the property will return to you, the investor, hence the higher investment value. Similarly, any improvements made to the property by the Lifetime Owner, such as changing a kitchen or adding a conservatory, may also contribute to a rise in investment value.
Without allowing for the impact of House Price Inflation or deflation, there’s an opportunity for significant capital growth on the initial investment and the potential to resell the investment at any time.