Buy now, occupy later???

S

silverghost

If I am 65 years old and my pension, super etc just ain't enough, is there someone / a company out there that would like to buy my home AT TODAY'S MARKET VALUE, and let me and the Mrs stay living in it rent free until we fall off our perches in about 20 years time??? (by which time it should AT LEAST have doubled in value twice over, i.e. it's worth a million today and in 20 years time it will be worth at least four mil.)

If yes, under what terms and conditions?

And if not, why not?

Learned comments and opinions gratefully received.
 
Hi silverghost,

This is an interesting question.

The immediately apparent risk to the buyer is ... how do I put this this tactfully... that you have a long and happy retirement :)
You may live too long!

This reminds me of viatticals (sp?).
A few years back, people with HIV were selling their life insurance policies at a discount, to the benefit of both parties.
The "investor/speculator" gets a big payout on death, and the sick person gets to live it up in their last few years before they got AIDS.
Problem was that improved medical treatment meant you could live for a very long time with HIV. Speculators got burnt.

In your case, if the investor could cover the lack of rent for some time then you may attract some interest, particularly if the property is desirable.

You might need to show the investor your medical files though :D

Good luck.

cheers, Tony
 
Hi silverghost,

Good luck but I think you will be unlikely to find anyone to go along with your scenario. The problem is, one could buy the house next door (assuming similar to yours), still have it jump from 1 to $4 million in 20 years, but also get 20 years worth of rental income as well.

I believe there are quite a few people around in a similar situation - that is, asset rich but cash poor. There is an article in this months 'Money' magazine that may interest you (January 2003 issue, pg 87). It is about reverse mortgages. Apparantly St George bank has just launched such a product (St George Seniors Access Home Loan). They lend you money against your home (up to 20% of value), which is paid back when the home is sold after you die. The disadvantages: interest is charged and accumulates over time. So $10,000 borrowed now, could cost you $40,000+ in 20 years time. Also, diminished value left for beneficiaries (if that is important to you).

Hope you find a way to improve your situation.
Regards
Lily
 
Henry Kaye (I think) was promoting the idea of using capital growth to fund your lifestyle. Basically it works like this:

1. You establish a LOC (Line of Credit) against the value of your home, usually up to 80% of its value. So, a $300K home gets a $240K LOC.

2. The $240K LOC becomes your tax-free money for living expenses. The interest must be capitalised.

3. In X years time assuming further capital growth on the property you refinance the LOC back to 80% of the new value and keep on going.

4. In theory when you "fall off your perch" the property is still valued above the balance of the LOC, is sold, pays off the balance and voila.

But I have yet to hear of anyone actually doing this - I consider it risky. Consider that if no growth occurs you could get X years down the track and owe $240K on a $300K property and have no more equity to increase the LOC, therefore no more living money, *plus* you've got an interest bill of $1300 to cope with (at 6.5% interest).

On the other hand, if you just need a small amount of *extra* money to supplement pension/super etc it could be a more realistic proposition.
 
Just another thought.

Maybe if you offered your home at significantly below market value, in exchange for living the rest of your lives rent free, you may be more likely to find a suitable buyer.

Lily
 
YES!

and St George bank, from what I remember when I used to work there, had a product for that very scenario...you just need to find the buyer!

good luck
 
Silverghost,

I agree with Lily House - I would rather buy the house next door and get the 20 years rent. You are seeking a "win" for yourself; you also need to create a "win" for the buyer - what you were proposing does not do that!!!

Hopefully, something will work out for you. Good luck anyway.

Out of interest, where is the house??

KieranK
 
Originally posted by silverghost
If I am 65 years old and my pension, super etc just ain't enough, is there someone / a company out there that would like to buy my home AT TODAY'S MARKET VALUE, and let me and the Mrs stay living in it rent free until we fall off our perches in about 20 years time??? (by which time it should AT LEAST have doubled in value twice over, i.e. it's worth a million today and in 20 years time it will be worth at least four mil.)

If yes, under what terms and conditions?
Click to expand...

Yep, I'll buy it...

I'll contract on it today, at today's price, with settlement, um, when you vacate :)

In the meantime I'll pay all the outgoings, rates, and maintenance, so you don't have to...


The other option is, I'll buy it for half it's current value and you can live there until you, um, don't... rent free... :)
(Don't forget I have to make the repayments on a 500k loan with no rental income...)

And no, I'm not being facetious, I would actually look at the deal.

asy :D
 
Hi

I seem to recall that there was something around a few years which was very similar to your proposal, Silverghost. I was thinking of "homestay" but, I could be wrong . . . a book was written by a person from NSW and it might be worth trying to get a hold of that book to see what offers were typically placed in front of investors.

I'm sorry I cannot be more specific and good luck with the idea.

Dale
 
Silverghost,

I am seriously serious...

AND don't forget you will be eligible for rental assistance on top of your pension.....

asy :D
 
Of course, there was the story of a man in France who bought an option like tr\his. The lady was very old (80+?).

The man who bought the option dieed many years before she did. She was, I believe, the oldest person alive for a while.
 
Gday

Geoffw is correct. It was the oldest person in the world Jeanne Calment and a bloke took a similar option on her property when she was 90, she died in 1997 aged 122. He was paying her $500 a month for 30 years, then he ended up dying before she did in 1995 so he never inherited it even though he had paid her triple the value of it over the past 30 years. Caveat emptor.

Pele.
 
Many thanks for all the interesting and helpful responses. I need to make a few calls etc but I will get back to the interested parties within the next few days.

Anybody got any more info about Dale's 'homestay' book? - sounds interesting.

(FYI - It is a 3 bed unit in Neutral Bay with balconies, harbour & bridge views, valued at about $980K owned by good friends of mine aged 70-ish - both in good health.......)

I'll be back.

SG
 
Hi

Ok, I have tracked down the book and it is called "Sell and Stay" by a Mr Kevin Shiels. It might be hard to find though as I believe the author has passed away and it is now out of print. Sorry.

I'll see if I can find anything else out . . .

Dale
 
Originally posted by silverghost
Many thanks for all the interesting and helpful responses. I need to make a few calls etc but I will get back to the interested parties within the next few days.

Anybody got any more info about Dale's 'homestay' book? - sounds interesting.

SG
Click to expand...

If it's the one I'm thinking of I think it's called "Sell and Stay" or something like that. I'm fairly sure I saw it one time whilst skulking around dymocks...

Good luck.

Cheers
 
silverghost

Check out Centrelink's Pension Loans Scheme (PLS)

(Here a copy and paste about it)

Retired people of Age Pension age (or their partners) who can’t get pension because of their income or assets (but not both), or those who only receive a part pension, can apply for some pension under the Pension Loans Scheme (PLS).

The Pension Loans Scheme is a voluntary arrangement which provides income support in the form of a loan, for a short time or for an indefinite period. It is paid in regular fortnightly pension payments to supplement or ‘top-up’ a pension entitlement.

Security for the loan
The types of assets that can be offered as security for a Pension Loans Scheme debt are limited to real estate owned in Australia. Any real estate, including the customer’s principal home, may be used as security.

Do I pay tax on these payments?
The loan payments you receive are not taxable.

Download the infomation handout (FIS018.0207) from the Centrelink website.

Danny D.
 
Silverghost,

I'd talk to Steve Navra before you start signing your house away. You may be able to live well, buy a couple of investment properties and have a much bigger asset base working hard for you and your heirs.

Donna
 
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