Just as you and your home are unique, so is every Life Estate transaction. No precise or exact metric exists to determine this in advance.
We are able to provide (at no cost) guidance on how much equity we believe could be unlocked from your home.
The key factors that influence how much investors will offer are:
The market value of your home
Whether it is a house or an apartment
Your age, and
Your marital status
As a guide, retirees aged 65 can typically expect to receive offers of 40-60% of the market value of their home. Those aged 85 can expect offers of 60-80% of the market value of their home.
We will work with you to ensure you get the best possible offer for your property from our pool of accredited investors.
If the equity is released from your own home, all of the same capital gains exemptions you would ordinarily apply for will continue to apply.
Unlike other forms of home equity release, a life estate constitutes the sale of an interest in your home allowing you to take advantage of the downsizer super contribution scheme. This allows eligible individuals (or couples) to contribute up to $300,000 per person from the proceeds of a home sale into super. It is a non-concessional contribution but does not count towards the contribution cap.
To better understand how you can take advantage of this tax benefit we recommend you engage a tax or financial professional.
A life estate results in zero additional expenses.
As the owner of the home for life, you will still have all the usual expenses associated with home ownership such as council rates, utilities, insurance and basic repairs and maintenance.
Life Estate’s have no debts or accruing charges associated with them. They are unique in the sector in this manner.
Competing products in the sector all feature accruing debts and charges such as:
Reverse Mortgages – these accumulate interest charges against borrowed money, to be repaid (typically when your home is sold).
Home Reversion Schemes – these provide you with capital in return for an agreed future % of home sale proceeds. As you draw more money, you accrue a larger future % to be repaid.
When a life estate is established, it can cover the life of an individual (for singles), or the combined life of a couple.
Where the life estate is established to cover the combined life of a couple, the property will remain in the legal possession of your surviving partner for life. Only after you and your partner both pass away will it then transfer to the investor.
An investor acts as a silent partner in your affordable home. While they have a financial interest in the property, it remains your home for life.
As the owner of the property for life, you are responsible for basic maintenance of the property during your life and the normal expenses associated with home ownership such as council rates, water rates and insurance.
You are not allowed to deliberately cause damage to the property which makes the property less valuable (e.g. demolishing part of the home and not reinstating it). If this happens the investor can bring an injunction and pursue damages, or in extreme cases, a court may terminate your life interest in the property early.
Normal wear and tear on the property is expected and not a problem.
You and the investor may agree to other specific items of responsibility as part of the deed of sale.
This depends on how extensively we solicit bids, duration of final negotiation and the settlement terms.
The investor search typically takes a combination of the following paths.
We can make you an immediate offer for your property (typically less than 1 week)
We can have an institutional capital partner make you a direct offer to assist you in your property purchase (typically less than 1 week)
We can undertake a rapid market test and solicit bids from a pool of investors we know to be active in market and or with an interest in properties similar to yours (typically 1-3 weeks)
We can undertake a full market test and solicit bids from as broad a pool of investors as possible (typically 4+ weeks)
Once an investor is found, the release of equity is subject to timing on settlement. Typically this is a 6 week process, however different periods may be agreed between you and your partnered investor.
If you need to move into aged care or the home is otherwise no longer fit for your needs, as the owner you are fully entitled to rent the home out and use the income to help pay for your aged care or rental costs in a more appropriate home.
Should you wish to sell your life estate, whilst this is theoretically possible it is usually not recommended. Most of the value in your home will have already been sold to your partnered investor in the initial transaction.
Where a sale is necessary, the best purchaser is typically your partnered investor who often will be prepared to make an additional payment to take full possession of the property prior to your passing. These proceeds can be used to contribute towards aged care or other accommodation costs. Should this be required, we are happy to assist you with a sale.
Unlike a reverse mortgage or home reversion scheme where your estate will typically need manage the sale process of your home and then settle your debts, none of this will be required.
Your estate will simply need to remove your belongings from the property, notify your partnered investor or the agent acting on their behalf and transfer the keys plus a copy of the relevant death certificates.
If you have another property which is not your primary place of residence and would like to release equity from it we can assist.
This could include, a residential investment property, commercial property, rural / farm property, or other type of property.
A life estate over any of these types of property will function in exactly the same manner as described for your home. In effect, you will release a large amount of equity upfront via payment from your partnered investor and remain the legal owner for life, and be able to continue generating income / rent from the property for life.
We have pioneered this product in the Australian market.
The legal structures we use (a legal life estate) are well tested and proven. These have been a feature of English common law which Australia adopted during the colonial era. The concept of life estates were first formalized in The Law of Property Act 1881 (New South Wales).
A similar solution called ‘En Viager’ (meaning, for life) exists and is very popular in France. It has been part of French law since 876 AD and involves the sale of a property whilst the owner retains exclusive use for life. Estimates indicate that en viager sales could make up as much as 10% of private sales in France.
Just as you and your desired home are unique, so is every Life Estate transaction. No precise or exact metric exists to determine this in advance.
We are able to provide (at no cost) guidance on how much an investor would likely contribute to the cost of purchasing a home. This will help you understand your budgeting constraints in your property search.
The key factors that influence how much investors will contribute are:
The market value of your desired home
Whether it is a house or an apartment
Your age, and
Your marital status
As a rough guide, retirees aged 65 can typically expect investors to pay between 40-60% of the market value of their home with the retiree/s to cover the balance. Those aged 85 can expect investors to pay between 60-80% of the homes purchase cost, with the retiree/s to cover the remainder.
We will work with you and our investors to help ensure your property is as affordable as it can be.
A life estate results in zero additional expenses beyond those typically associated with home ownership. They are unique in the sector in this manner.
As the owner of the home for life, you will be responsible for expenses associated with home ownership such as council rates, utilities, insurance and basic repairs and maintenance.
Competing products in the sector often feature on-going rents and or fees such as:
Landlease Communities – these charge ground rents on your property, many also levy annual fees as part of the community too.
Retirement Villages – These typically charge on-going service fees to you.
Every individual’s/couple’s circumstances are unique so we always encourage you to seek out advice from licensed professionals to ensure you are not negatively impacted.
Many of our clients find the purchase of a life estate positively impacts their pension eligibility.
The family home is not counted towards the assets test, a life estate is no different.
When buying an affordable life estate home, you will be making a meaningful financial contribution towards the purchase cost. This will leave you with fewer assessable financial assets. For many people, this positively impacts their pension eligibility.
When a life estate is established, it can cover the life of an individual (for singles), or the combined life of a couple.
Where the life estate is established to cover the combined life of a couple, the property will remain in the legal possession of your surviving partner for life. Only after you and your partner both pass away will it then transfer to the investor.
An investor acts as a silent partner in your affordable home. While they have a financial interest in the property, it remains your home for life.
As the owner of the property for life, you are responsible for basic maintenance of the property during your life and the normal expenses associated with home ownership such as council rates, water rates and insurance.
You are not allowed to deliberately cause damage to the property which makes the property less valuable (e.g. demolishing part of the home and not reinstating it). If this happens the investor can bring an injunction and pursue damages, or in extreme cases, a court may terminate your life interest in the property early.
Normal wear and tear on the property is expected and not a problem.
You and the investor may agree to other specific items of responsibility as part of the deed of sale.
This depends on how extensively we solicit bids, duration of final negotiation and the settlement terms.
The investor search typically takes a combination of the following paths.
We can make you a direct offer to assist you in your property purchase (typically less than 1 week)
We can have an institutional capital partner make you a direct offer to assist you in your property purchase (typically less than 1 week)
We can undertake a rapid market test and solicit bids from a pool of investors we know to be active in market and or with an interest in properties similar to yours (typically 1-3 weeks)
We can undertake a full market test and solicit bids from as broad a pool of investors as possible (typically 4+ weeks)
Once an investor is found, the time to settle and move into your home is subject to timing on settlement. This is usually a 6-week process, however different periods may be agreed between you, your partnered investor and the vendor of the home.
There will never be surprise expenses in our process, any costs you incur will always be brought to your attention before progressing.
For cost sensitive retirees we may be able to make a direct offer to you where there are no charges applicable should you proceed.
Should you want to test the market more fully, depending how extensive this market test is, different charges will apply. This includes two primary expenses:
A fixed fee negotiated with you to cover the time and cost associated with putting together an information memorandum for investors.
A small percentage of the cash sale proceeds we’ll negotiate with you if we’re able to find a bid you wish to proceed with.
If you need to move into aged care or the home is otherwise no longer fit for your needs, as the owner you are fully entitled to rent the home out and use the income to help pay for your aged care or rental costs in a more appropriate home.
Should you wish to sell your life estate, whilst this is possible it is usually not recommended. As an investor has already made a substantial investment in the property and forgone rent payments for an extended period of time, there will not usually be much residual value in the home to sell.
Where a sale is necessary, the best purchaser is typically your partnered investor who often will be prepared to make an additional payment to take full possession of the property prior to your passing. These proceeds can be used to contribute towards aged care or other accommodation costs.
Life Estates are extremely easy for your estate to manage.
Your estate will simply need to remove your belongings from the property, notify your partnered investor or the agent acting on their behalf and transfer the keys plus a copy of the relevant death certificates.
We have pioneered this product in the Australian market.
The legal structures we use (a legal life estate) are well tested and proven. These have been a feature of English common law which Australia adopted during the colonial era. The concept of life estates were first formalized in The Law of Property Act 1881 (New South Wales).
A similar solution called ‘En Viager’ (meaning, for life) exists and is very popular in France. It has been part of French law since 876 AD and involves the sale of a property whilst the owner retains exclusive use for life. Estimates indicate that en viager sales could make up as much as 10% of private sales in France.
Any investment you make is directly into the home, in your own name (or that of your chosen entity).
When you purchase property and grant a retiree a life estate, the property title is transferred into your ownership providing direct and secure ownership (note: you will incur stamp duty or other relevant transfer taxes).
As part of the transaction, the retiree/s are granted a life estate, this is lodged as a caveat on title and expires upon their death/s leaving the property then unencumbered and 100% in the possession of the title holder.
Life Estate’s are generally considered an illiquid long term real estate investment, with higher rates of return than traditional real estate investment to compensate for this. If you anticipate needing liquidity, we would suggest that this asset class may not be appropriate for you.
If you own a remainder interest in a property and need liquidity we are always happy to assist. Just as we market retiree’s properties to accredited investors, we are more than happy to market your investment to other investors, or where appropriate our institutional capital partners.
As part of this we will charge a fixed fee (to be negotiated with you) to cover the costs associated with putting together an information memorandum and discussing this opportunity with investors. We’ll also negotiate with you a success fee to be charged as a flat percentage of sale proceeds.
As the life interest holder is the owner of the property for life, whilst they are alive they are required to pay the relevant costs associated with the home, such as council rates, water rates and any further costs that are stipulated in the deed (e.g. insurance) and any other costs agreed by the parties during the sale.
After the life interest holder (the retiree) has passed away, the liability for these costs passes to the remainder interest holder (the investor) who takes possession of the property.
When investing into a life estate, we will levy a fee in the form of a small bidder’s premium. This will be an agreed percentage that you must pay in addition to your bid.
For up to date information on the applicable rate, please contact us.
Throughout ownership of the investment there are zero mandatory on-going fees. We do however have some services that many investors opt into (at a cost) such as:
Periodic property reviews – A non-intrusive periodic review to ensure that no significant or deliberate damage has been caused by the life interest holder.
Confirmation of any contractual obligations the life interest holder adopts, such as reviewing and ensuring that an appropriate insurance policy remains in place on the property.
Periodic reviews of appropriate registries to notify when the life interest holder/s pass away in the event their estate does not notify you.
Assistance with taking possession, e.g. coordinating the relevant legal professionals to lodge a notice of death and withdrawal of caveats with the relevant land titles office.
Where a life estate holder (retiree/s) significantly and willfully damage your investment, you may seek a legal injunction and damages to compensate you for it.
Alternatively, where a significant breach of responsibilities has occurred a court may terminate the life estate early, granting you immediate ownership of the property.
Please note, these courses of action are intended in exceptional circumstances only. The life estate holder is not required to invest in improving the property and normal wear and tear is expected and not required to be fixed.
The life estate holder’s estate is required to notify you of their passing and provide you with a copy of the death certificate and transfer the keys / access at an appropriate time.
The estate is provided reasonable time to remove their possessions from the property.
You (or a solicitor acting on your behalf) are required to notify the relevant land titles office of their passing and lodge the relevant Notice of Death and Withdrawal of Caveat forms.
Understanding this is a challenging time for their family, we always ask investors to act in good faith and work with the estate’s executor to ensure a smooth transfer.
