Part 3: What Asian Investors Should Look Out For In An LTI

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Following up on last week’s Part 2: Benefits of Life Tenancy Investments​, Mark Blackwell, Co-Founder of MacBeale delves into what Asian investors should look out for in such an investment.

WealthUp (WU): With it being a concept that’s growing popularity, what are the common misconceptions on LTI? 

Mark Blackwell (MB): With a product that not many people have heard of, there is an abundance of misconceptions; with the top 3 being:

  • Too good to be true
    I guess property investors are not used to tenants essentially paying 10-15 years of rent upfront. But the reality is, the investors’ name immediately goes on the land registry upon exchange and it’s all conducted as a regular property transaction.
  • Sounds unethical
    It may seem like you’re profiting from someone’s death, but that’s not the case. You are profiting from helping an elderly person/couple secure a final home.
  • Sounds like equity release
    That industry is getting a bad rap in the UK, but the two clear differences between equity release and a life tenancy is that:
    • An LTI is always based on a new property purchase, never on an existing home.
    • You are not lending the tenant money like equity release; you are simply buying a home with a long term tenant.

WU: What trends have contributed to the growing popularity in SEA for such investments?

MB: The UK off-plan buy-to-let market has been heavily promoted to SEA investors for years now. This has certainly laid a foundation for us for the understanding of the UK property market in general.

For LTI specifically, I can only speculate; as we are still growing our presence in Asia. However, I think there has been greater caution from investors over some projects in the UK going bust or ‘guaranteed’ rental yields not being paid. LTIs completely eliminate both of those risks because rent is paid upfront and all properties are existing structures.

WU: On that note, why is an LTI especially favourable for Asian investors?

MB: For Asian investors, Life Tenancy Investing is most suitable due to the lack of risk, the long-term view with Brexit, and avoidance of fees and taxes all associated with being a distant landlord.

One thing I have found specifically with Singaporean investors is that, they like the ethical aspect of helping the elderly secure a home via their investment.

WU: What are some of the common pitfalls to look out for when you’re considering an LTI as an investor?

MB: One thing to look out for would be not getting the balance of tenants’ age with your own age right.

Meaning, if you are a more a mature investor, then it would be more ideal to find an LTI with more mature tenants and vice versa.

WU: Any tips for first time Life Tenancy Investors?

MB: My biggest tip is to avoid emotions when looking at the specific Life Tenancy properties.

We often have investors look at a little two-bedroom ‘boring’ bungalow that is miles away from Chelsea/Kensington  and think it’s very unattractive.

However, it’s really important to remember that you won’t be living there. The tenant has chosen the property because it suits them, and the beauty of LTIs is all in the numbers. It’s worth x-amount but you’re paying half of that.

We encourage first timers to look at properties with older tenants. Although it comes with less discount, but it means the reversion will (based on average life expectancies) be much faster. This gives a very good taste of how powerful LTIs actually are. 

Written by

Cheryl Toh

Last updated on

October 11th 2019, 10:33 am

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