I happened upon a deal today from a listing realtor who is about to put a property on the market… It’s a 1.5 acre lot and home tax appraised about 140K, they are selling it for $32K. That’s right, 32K. Sounds like a no brainer right? Here’s the kicker… an 82 year old man lives there and has been granted a lifetime residency of some sort, so you can’t collect rent or kick him out. I have never heard of a lifetime residency deal like this but I believe it is real. I see it as an issue of taxes… the property taxes are about 4K per year. I’d have to pay 4K per year in property tax. Do you just estimate what it might cost over the assumed “life” of tenant?
Say he lives until 95? That’s 4K times 13 years, at 52K, plus the 32K for the purchase so I’d have 84K into a house thats worth 140K? Still sounds pretty good… Maybe I buy it and take a second mortgage that will pay for mortgages and taxes until the resident is gone? How might you all work this? Thanks…
So… I dug up a bit more info on this… apparently the ‘son’ of the resident owns the property, and is in some sort of a financial situation where the court is requiring him to come up with some money by liquidating. He is being forced to sell this property, but doesn’t want to. The court has figured that the property is only worth about 30K because of this lifetime residency deal… which I assume is legit because the court based the value of the property on it. My contact thinks the son is really just trying to force another relative to step up and help him out buy purchasing the property. I’m hoping to get it under contract and then double close it back to one of the other relatives… I tried to figure out how to close this before it goes to the MLS but the realtor knows they don’t want to sell it so he feels bad trying to work a deal to make it sell.
To cover contigencies though… what If I’m stuck with the property and have to close it. I don’t have the cash so I’d have to get a mortgage for it, do you think a lender would have problems with the lifetime residency deal in place? Also, I wonder who would be responsible for maintaining the property? I mean, if the AC went out, I don’t really have any incentive to go out there and fix it… and the tenant has no incentive to take care of the property either…
Good luck with this. Sounds like you’re better off looking for another deal, this is on par with speculation on price apprecation, but this time you’re betting on the life of the current resident.
As for the property, sounds like he has some sort of life tenancy which is legit, I forget exactly what it’s called.
As the owner you’d be responsible for repairs. I suppose he could sue you if you didn’t go through with the repairs.
As for his life expectancy, an 82 year old can be expected to live to about 89. Of course each year you’re alive, it pushes out the expected year of death a little bit more so that once he hits 89, he’s expected to live til 93.
I don’t really see how you can make much money on this deal, it’s too strange, find something a bit more normal. Would you also be expected to pay for things like the water bill?
I guess the key question is what the appraiser will appraise the property at. With that deed restriction in place, maybe they only come back with a 32k number and that makes this whole exercise moot.
This is called a Life Estate and in this case grants “tenancy” of the property to the man for the duration of his life. It is a legitimate legal structure.
I agree with Henry. I wouldn’t touch that “deal” with a 10 foot pole, unless you have some evidence that this guy is about to bite the dust. You are gambling on his life span and that may not be a good bet. People are living longer all the time and he sould easily live to 100 or more. More importantly, since you wouldn’t really own and control the property until after his death, what are you going to do if he doesn’t do maintenance to the property for the next 15 years? Are you going to maintain the house for the next 15, 20, 25 years? Are you legally obligated to? Who is legally obligated to carry insurance on the property? If you have get a mortgage, I’d say you! Who must pay the taxes? If it’s him, what recourse do you have if he doesn’t pay them? How about utilities? Are you required by law to provide uitilities for him? I don’t know the answer because I’m not sure how this Life Estate is structured and I don’t know how the laws have been interpreted in your state. Are you?
Nope, I wouldn’t touch this with a 10 foot pole!
My philosophy of making sure I can control the aspects of the deal means that if I bought the house I would know pretty close to the day when this old guy was going to die. I do know some people that could guarantee when he would die, but we won’t go there.
I would want to see his health records before considering it, fat chance on getting them though.
I saw one of these once in the newspaper, but it was in France. The guy bought the place with the tenant in but the tenant was in his 80s. Thinking, as you are, this is a ‘no-brainer’ (after all, how long can the old codger live?), the guy bought the property. the old guy lived to be like 112, out-living the owner by several years…ya never know!
Maybe slip some poisen in his Oatmeal and he go sooner
The only time I’ve seen this situation, the owner gave the resident another home so they could sell the land to a developer.
If you can’t find another place for him to live then you’ll have to wait.
If this guy doesn’t have anything terminal run away! LOL :biggrin