I vaguely remember reading something about buying property with a longtermism perspective, but I can’t remember the justification against doing it. This is basically using people’s inclination to choose immediate rewards over rewards that come later in the future. The scenario was (very roughly) something like this:
You want to buy a house, and I offer to help you buy it. I will pay for 75% of the house, you will pay for 25% of the house. You get to own/use the house for 50 years, and starting in year 51 ownership transfers to me. You get a huge discount to own the house for 50 years, and I get a big discount to own the house forever (starting in year 51).
This feels like a very naïve question, but if I had enough money to support myself and I also had excess funds outside of that, why not do something like this as a step toward building an enormous pool of resources for the future? Could anyone link me to the original post?
That’s like what is known as a “life estate” except for a fixed term of years. It has similiarities to offering a long-term lease for an upfront payment . . and many of the same problems. The temporary possessor doesn’t care about the value of the property in year 51, so has every incentive to defer maintenance and otherwise maximize their cost/benefit ratio. Just ask anyone in an old condo association about the tendency to defer major costs until someone else owns their unit . . .
If you handle the maintenance, then this isn’t much different than a lease . . . better to get a bank loan and be an ordinary lessor, because the 50-year term and upfront cash requirement are going to depress how much you make. If you plan on enforcing maintenance requirements for the other person, that will be a headache and could be costly.
I vaguely remember reading something about buying property with a longtermism perspective, but I can’t remember the justification against doing it. This is basically using people’s inclination to choose immediate rewards over rewards that come later in the future. The scenario was (very roughly) something like this:
This feels like a very naïve question, but if I had enough money to support myself and I also had excess funds outside of that, why not do something like this as a step toward building an enormous pool of resources for the future? Could anyone link me to the original post?
That’s like what is known as a “life estate” except for a fixed term of years. It has similiarities to offering a long-term lease for an upfront payment . . and many of the same problems. The temporary possessor doesn’t care about the value of the property in year 51, so has every incentive to defer maintenance and otherwise maximize their cost/benefit ratio. Just ask anyone in an old condo association about the tendency to defer major costs until someone else owns their unit . . .
If you handle the maintenance, then this isn’t much different than a lease . . . better to get a bank loan and be an ordinary lessor, because the 50-year term and upfront cash requirement are going to depress how much you make. If you plan on enforcing maintenance requirements for the other person, that will be a headache and could be costly.