Real Estate Investor · Rockaway, NJ · Member since 2009 · 32 posts · 2 votes
Hey Gang,
I have a lead that is 2 houses on one lot. One house is paying $800 a month and the other is a Life Estate where they are paying 50% of the yearly taxes and utilities. The relative in the life estate is in their 80s with no plans of leaving. I've never dealt with life estates so I wanted to get some feedback of how I could structure a deal (if possible).
Sounds like a fairly rare situation. Two folks who may have experience with life estates would be @Rick H. and @K. Marie P {Whose '@' reference seldom works}, perhaps they could chime in.
Sounds like a fairly rare situation. Two folks who may have experience with life estates would be @Rick H. and @K. Marie P {Whose '@' reference seldom works}, perhaps they could chime in.
Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
10y
@K. Marie Poe - Have you left BP.?
The other portion of a property owned subject to a life estate is called the "Remainderman" interest.
While it is possible to purchase either the remaindermen interest or the life estate (or both) no conventional lender will finance such a fractional interest unless or until consolidated into one.
Knowing thus can work in your favor. Time is on the side of the young buyer who is smart and patient.
You must find a seller who wishes to monetize their hard-to-finance fractional interest and be prepared to wait out the lifetime or changing housing needs of the life estate owner. Also, don't forget that they need sufficient mental capacity to transfer title when the time does come to sell.
In the meantime, I'd buy the other half with seller financing or swap other property or assets for the equity.
Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
10y
A remainder in property law of the United Kingdom and the United States is a future interest given to a person (who is referred to as the transferee or remainderman) that is capable of becoming possessory upon the natural end of a prior estate created by the same instrument. Thus, the prior estate must be one that is capable of ending naturally, for example upon the expiration of a term of years or the death of a life tenant. A future interest following a fee simple absolute cannot be a remainder because of the preceding infinite duration.
For example, a person, D, gives ("conveys") a piece of real property called Blackacre “to A for life, and then to B and her heirs.” A receives a life estate in Blackacre and B holds a remainder, which can become possessory when the prior estate naturally terminates (A’s death). However, B cannot claim the property until A's death.
There are two types of remainders in property law, vested and contingent. A vested remainder is held by a specific person without any conditions precedent; a contingent remainder is one for which the holder has not been identified, or for which a condition precedent must be satisfied.
Just to clarify the situation, there are 2 houses on one lot (one deed). How can I buy half the property? Also, there's 3 other heirs involved so I have to take that into consideration. I already mentioned a seller financed offer which the lady will get back to me but I'm getting the feeling it prob won't work for them.
Also, could you elaborate a little bit more on swapping other property or assets for the equity?
Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
10y
It doesn't matter.
Title and possession are completely separate issues. Unless a life estate title interest specifies and restricts possession of one unit, legal title affects the entire property.
The sellers have a problem, not you.
Also, I'm confused about heirs. Are these current heirs or persons who stand in line to inherit when the life estate owner is deceased?
There are 4 heirs involved, the father passed away and they inherited the property. One unit has been rented since 2008 and the second unit is a relative with the life estate. Hope that clarifies.
Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
10y
You need to decide how you intend to benefit and understand your attachment to an opportunity that frankly has little attraction, in my book.
Since you're not going to get conventional financing on a fractional interest, you'll either have to pay cash for the remainderman interest, trade something else to be used as consideration (another property, car, boat, RV, etc.) or note(s) secured by the subject property or perhaps another property.
What is/are the problem(s) the sellers wish to solve? How important are they to solve? What's it worth to them to get the problem(s) solved?
Real Estate Investor · Rockaway, NJ · Member since 2009 · 32 posts · 2 votes
10y
The sellers don't have any interest in keeping the property any longer and would like to sell for cash. "what's it worth to them". not sure what you mean. they are asking for a cash offer.