Simon’s Town Real Estate News

Sell Your Simon’s Town Home And Stay On Till You Die

There are many retired people in South Africa and even Simon’s Town homeowners staying in their lovely homes that increased in value from R300 000 to more than R3 million. Great. But many can’t afford the current high living costs. Medical bills, food and petrol prices all increased out of control. At least that’s how we are experiencing it.

The kids have their own lives to live while your Simon’s Town house has locked-in-value you can’t use. You want to have some capital NOW. Unfortunately scaling down to a smaller home is not the right thing to do now with the deflated real estate market. Depending on the situation, selling your home for a reduced figure may be the only option.

However, this article is not about downscaling. No, it’s all about selling your home while you and/or your spouse continue to live in it until you die. Some time ago the idea was discussed in the You-Magazine of all places and I decided to investigate.

The idea is called feature selling, home reversing or equity release plans.

Basically you sell your home today to someone who only takes occupation the day you die (or your spouse dies depending on who departs last).

Obviously many investors will not be interested in the property if they cannot make money from the arrangement. To make the deal attractive you’ll sell your property for R1.5 million instead of the current value of R3 million. This means that you unlock R1.5 million and you get to live in your home for free until…..

Now you can take the R1.5 million and spend it, you can travel, pay the outstanding bond, or you can invest it and at 10% you’ll have R12 500 gross a month. This may be a lot better than your current situation and you still live in your home.

Why Would The Investor Buy Your Simon’s Town Property?

Let’s consider the unfortunate situation where he occupies your house (because of death) within 12 months. He will potentially make more than a 100% on his investment. Depending on the deal you select there can be a rebate if you die within the first few years of the deal.

Selling your Simon’s Town home while you continue to live in it is a flexible alternative but it has pros and cons. Before we get there let me share with you some of the flexibility:

• You may want to sell only a portion of your home through a second bond. Say you sell 25% of the property then the investor will get 25% of the value when you die. But remember the investor will not pay you the current value of the 25%.
• You may opt for an interest only lump sum borrowed against your property. You’ll pay the interest until you die, you get a lump sum to spend and the lump sum is repaid when you die.
• You may have read the story where the owners wanted to sell their property, live in it till they die and then your estate pays the new owners what they paid. An example will explain this: You have a home of R3 million, you have other fixed assets of many millions that will only be liquidated when you die. You want the cash now. To get cash you sell your property for R3 million and you agree to give the new owners back their R3 million when you die and they keep the property. Ridiculous but true.

What are the Pros?

• You’ll have cash to spend.
• No ongoing repayments to make,
• The investor makes all of his money when the property is sold (meaning; when you have left).
• If you only sell a portion you’ll know at the outset what share of your home will be left to your family.
• You continue to share in any rise in the value of your property (unless you have sold its entire value).
• If you only sold a portion you can take extra cash advances, depending on the amount you originally took.
• If you are a smoker or have a serious illness, you may be able to get a bigger payment.
• The older you are the more money you’ll get.

What Are The Cons?

• The investor will buy at a discounted price.
• The younger you are the less attractive these ideas become.
• If you die soon after taking out a plan, you could effectively have sold off your house (or a share of it) on the cheap.
• Your home may not automatically qualify as investors are choosy about the properties they invest in.
• The kids may get nothing when you die.

The choice is yours. I would recommend to my family and friends; if they want money to enjoy their last years then go for it. The kids can look after themselves. There’s no reason why the elderly need to battle while they can unlock capital from their home.