What is a Popi (Property Options for Pensioners & Investors)?

There's a new type of investment product on the market called a Popi, which stands for Property Options for Pensioners and Investors.

We spoke to investment expert Peter Koulizos about this unusual way of connecting investment seekers and pensioners who own a property.

Peter has a Popi of his own, so has experienced the process first hand.

What is a Popi?

A Popi is an agreement between a pensioner (or any senior home owner) and an investor.

The investor pays the pensioner a monthly fee in exchange for the option to buy the pensioner’s home in the future but at today's price.

Generally, a pensioner is “asset rich but cash flow poor”. They own their own home, which may be worth many hundreds of thousands of dollars, but have to live off an aged pension which is only a few hundred dollars per week.

In effect, a Popi allows the pensioner to receive cash from an investor on a regular basis, and in return the capital growth of the property will be passed on to the investor.

A Popi lets the pensioner receive regular cash from an investor and in return, the capital growth of the property is passed on to the investor

What are the advantages & risks for the pensioner?

There are numerous advantages for the pensioner. A Popi enables them to live their retirement more comfortably, pay for essential services, take a holiday, save for future aged care; the list is endless.

The attraction of a Popi for a pensioner is the monthly cash flow they receive. This allows them to stay in their home rather than shifting, downsizing or even worse, taking out a reverse mortgage. One of the biggest benefits of this monthly payment is that it doesn’t affect their aged pension; they receive their pension entitlements plus the monthly option fee.

The downside is that they miss out on the future capital growth. If the property increases in value, they will only receive what it was worth at the time the option agreement was signed.

As far as children are concerned, as part of the Popi agreement, the executor has to be made aware of the agreement and sign a form. The assumption is that the executor is one or more of the kids but if the kid(s) are not the executor(s), maybe the parents think it's none of the their kids' business!

And the investor?

A Popi allows an investor to get into the property market without requiring a deposit or taking out a loan. Providing the investor has sufficient cash flow, all they need to do is pay a monthly fee and they are able to benefit from the capital growth of the property. However, my favourite is that there are no tenant hassles; the pensioner still owns the house and is technically not a tenant.

The downside is that the investor isn't able to control when they can buy the property; that is controlled by the senior and is triggered when the pensioner wants/needs to sell their home. So a Popi isn't ideal for people who need maximum control over their investment timelines, or need access to rapid investment strategies.

You can find more detailed information about Popi at www.popiaustralia.com.au, and before undertaking any kind of investment, you should always consult professionals who will be able to assess your financial situation and appetite for risk.