Aged mid 70’s what should they buy? Or should they rent?

by Readers Question

21:36 PM, 25th November 2012
About 6 years ago

Aged mid 70’s what should they buy? Or should they rent?

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Aged mid 70’s what should they buy? Or should they rent?

Readers QuestionsMike Davey sent me the email below which has really got me thinking. Please have a read and share your thoughts in the comments section below the article.

Hi Mark,

I’m not sure if this is right for you or your forum, but here goes…..

I would like to ask for some advice from you and or fellow landlords who may have more experience in this area than myself.

We have friends that have been forced through financial reasons to sell up and return to the UK. They are elderly gentlemen aged 73 and 79 respectively. They have £150K in equity and wish to somehow purchase a two bed house/flat with a small garden in the south east, Brighton, Hove, Horsham etc. They are currently staying in a low cost hotel in order to gather their thoughts, but obviously due to their finances they will need to do something soon rather than later. They will have some money left over to pay bills and have state pensions to “live” on. They have no dependants and therefore do not need to will anything regarding the money mentioned above.

My question is this.  I have heard of the “home for life” scheme and shared equity schemes, but do not know whether these are a good thing for them, as I have only really heard bad things, but to be fair I have not had direct dealings, so maybe this is unfair. They may of course due to their age not even be eligible for such schemes.

On a similar note, the two gentleman concerned are fully aware that they are in their twilight years and accept that maybe buying a flat with say a 20 year lease would be a better solution and would be more than sufficient to outlast them

With regard to myself, I am a landlord, but only deal with freehold houses, so know very little about leases/maintenance etc, let alone short leases……….These two kindly gentlemen have come to me for help and advice and I would very much like to help them, hence I would  appreciate good sound advice from you and your contributors that would not put them in any more financial difficulty than which they already find themselves in.

Kind regards

Mike Davey



Comments

Mark Alexander

21:52 PM, 25th November 2012
About 6 years ago

Hi Mike

I have to admit to being slightly stumped by this scenario.

There are complications if these gentlemen do decide to buy. What happens when one of them dies? That might be simple if they are life long friends and decide to leave everything to the other but what if one of them is taken into long term care?

Lifetime mortgages may enable them to buy something for more money than the £150,000 cash or indeed keep some of the cash and still buy. Interest rolls up until the property is sold, there are no repayments and no maximum term on these types of mortgages. Generally the older people are the more they can borrow. This is a highly regulated area of financial advice so I strongly recommend talking to a qualified person. Would you like me to introduce somebody I know and trust?

The other alternative is of course to rent and supplement lifestyle with cash. Life Assurance bonds are, to my knowledge, ring fenced from liability to fund long term care. This is a quirky and I believe unique status but is also a highly regulated area. Once to look into though, same offer stands of an introduction.

Two other options which spring to mind are Park Homes (search Google for Tingdene who are the largest operators in Europe I believe) and also look into over 55's flats which can be found offered for sale on all the major property portals.

I'm very interested to hear what suggestions other readers have on this.

Regards

Mark

Mark Alexander

22:12 PM, 25th November 2012
About 6 years ago

PS - It has just occurred to me that these elderly gentlemen could be "partners in life". If that's not the case I mean no disrespect. However, if they are, they should seriously consider a Civil Partnership as this will help to avoid complications if they do decide to buy and one of them ends up in long term care. They should also take professional estate planning advice regardless of the basis of their relationship.

18:50 PM, 26th November 2012
About 6 years ago

Alternatively - a 2-bed flat in that area could be rented for approx. £10,000 per annum so their savings would last 15 years, give or take inflation but adding in interest earned on their savings (which they wouldn't have if they bought). By that time they will be respectively 88 years and 94 years of age and may be receiving additional help in the home from social services or even friends and family if they are fortunate, but without the complication of ownership of a major asset. It is quite likely that before their funds begin to dwindle they will be assisted by social services in some shape or form, therefore making the transition to full out assistance if their funds go completely in their lifetime. Meantime they will not have the aggrevation of house repairs and redecoration in a rented property, thereby avoiding the difficult problem of certain tradespeople who prey on the elderly and charge them a bomb for these tasks. In addition, if they rent, but find they do not like where they are living, they can easily move but cannot do this if they have bought. I would not recommend they purchase a property with a short lease, these purchases are best left to experienced buyers as there can be a minefield of obligations tied up with the ending of the lease which may be difficult for them to comply with, given their ages.

If the idea of renting does not appeal, I would also take a look at the over 55's flats. I recently assisted with the purchase of 2 of these for elderly relatives with no dependants or spouse, and due to the bad press this type of property has received over the last few years bought them both with equity share of 75% for around £25,000 each. This left funds to completely refurbish inside and I would happily live in either of them. The additional benefit is they have a warden onsite, useful for the later years. You do need to check the service charge amounts are affordable, payable monthly, but the block my relatives in is kept in first class order. I hope this is all helpful, best wishes. Yvette Newbury

9:56 AM, 3rd December 2012
About 6 years ago

Personally I wouldn't like to spend the last 20 years of my life in something that "wasn't mine".
Also with a good life insurance policy to pay off half the capital so that half goes to that one's family ... and by second death both respective families would have some capital passed on and time to sort the possesions out before the sale to liquidiate - or even keep.
Life insurance and mortgages at 70+ might be a no no though.
But given we are all going to live to 100 soon why don't they make the retirmement age 80 and let all the other financial dealings follow suit. That is nature - becasue then the late life fluidity / mobility will create more houses available - especially if people move on to purpose 80+ new build houses - if there were such a thing on mass. In fact lets set ourselves up as mobile council and enforce all of that by law.
But seriously, I think the perception of age and work and money lending is just that - a perception. 60 is just a number as is 70 as is 80. I think everyone should ex-sponge the association in their minds between these numbers and reality. Otherwise 70 years old end up living a life dictated by the markets as 'a 70 year old' when they just want to chill out with maybe 30 years plus left to do so.


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