Investment comparison
How does a life tenancy investment
compare with buy-to-let?
Both provide exposure to existing UK residential property. Their entry price, income profile, responsibilities, timing and liquidity are materially different.
A clear distinction
The same asset class.
A different proposition.
Life tenancy investment is not a better version of buy-to-let. It is a capital-led alternative for investors who do not require conventional monthly rent.
The consideration
Conventional buy-to-let
Life tenancy investment
Return profile
Income-led through rent, after costs, alongside movements in property value.
Capital-led through entry price, occupancy period, property values and costs.
Entry price
Usually acquired at or close to vacant-possession value.
Acquired below vacant-possession value because the life tenant retains the right to occupy.
Income
Monthly rent, subject to costs, arrears and void periods.
No conventional rental income during the life tenancy.
Maintenance and upkeep
The landlord is responsible for maintenance, compliance and tenant administration.
The life tenant is responsible for maintenance and upkeep under the life tenancy terms, materially reducing routine landlord involvement.
Additional-dwelling SDLT surcharge†
Applies to qualifying additional-dwelling purchases.
Does not apply to the current Life Tenancy Investments structure under current legislation.
Primary uncertainty
Rental performance, costs, regulation and the property market.
The timing of vacant possession and the property’s value at that point.
Liquidity
Generally saleable through the conventional residential market.
An established specialist resale market provides a route to sell before the life tenancy ends. It is smaller than the conventional residential market, so timing, price and buyer availability depend on prevailing conditions.
The distinction
Capital growth rather than conventional monthly income.
For the right investor
A long-term route into residential property with materially less routine management than conventional letting.
†Based on current UK legislation and the Life Tenancy Investments acquisition structure. Tax treatment depends on the investor’s circumstances and may change. Investors should obtain independent tax advice.