When people are looking to invest in properties, they often have an array of choices. They may not realize that life tenancies are a possible just are condos, homes, apartments and other living spaces. How exactly can life tenancies work as property investments?
Understanding Life Tenancies
This term is not one of the easiest ones to understand in the world, so let’s first work on that. Basically, a life tenancy means that a person has a right to a particular property until he or she passes away. If a person is renting out a portion of a life tenancy from someone who passes away, then the right to that piece of land or property will then expire.
Investments for Owners
Having a number of properties, if one is available to afford it, is often an excellent way to generate some extra income. Let’s say that you have a life tenancy on a house in a desirable vacation area. You own that home, but you certainly aren’t able to go on vacation every day of the year. When you are away, you’re able to rent out that home or possibly even rooms in the home, with proper permits, to people who want to vacation there. As a result, you are making money from them. Be sure that the amount you charge is greater than the monthly mortgage in order to make a profit.
For Other People
Even if you do not necessarily have a life tenancy on a property, you could still profit from one. Let’s say that you buy a property from a person with life tenancy on it. You could, once again with the proper permits, rent out portions of it to other people, and then you are generating profits from the property. However, you must strongly consider what is going to happen when the person who has life tenancy on it passes away. Speaking with a real estate lawyer is a smart idea in that decision.
You also need to figure out what you are going to do with the property when you pass away. Generally, people will leave the property to their children. It is usually assumed and always hoped that children will live longer than their parents do, so this decision is a wise one to make. Furthermore, you are affording your children the opportunity to live in the home, so they will not have to spend their money on buying one of their own. Additionally, if you use the current property to rent out to people and to make money off of, then your children will one day have the opportunity to do the same.
When it comes to real estate, properties and other similar matters, you cannot just do whatever you feel like. Legal rulings and restrictions will always come into play in one form or another. Therefore, when you are considering a life tenancy on a property and/or using one as a property investment, you absolutely must consult with a professional.
Author Pam Johnson works in the accounting department of a real estate office. She enjoys blogging about real estate and finance and is a contributing writer for Best Accounting Schools