4 benefits of investing in open property

Registration for the meeting on our website on Wednesday, June 15, from 18:00 to 18:30. People on set with La boutique des placements, MONETIVIA and Réside Études

Investing in open property often gives you the opportunity to buy real estate at a lower cost. Bare ownership also allows you to optimize taxation, facilitate the transfer of your assets to your children, or make them liquid to increase your purchasing power after retirement.

When we plan to buy real estate, we often imagine the acquisition of real estate in full ownership, ie the walls and the right of use. However, housing, offices or SCPI (Société Civile de Placement Immobilier, also called la pierre-papier) can be “dismembered”. The dismemberment consists in separating the ownership of the walls, on the one hand (then it is “naked possession”), and the use of space, on the other hand (then they speak of “usufruct”). The dismemberment operation can have many benefits for both the buyer (naked owner) and the seller (usufructuary).

The terms of dismemberment can be personalized according to the goals of the seller’s inheritance. Similarly, the investor has many investment decisions: in new or old, choosing an individual or institutional (public or private) usufructuary, as well as for a certain period of dismemberment before acquisition (usually 8 to 20 years).

Advantage № 1: Real estate at a lower price due to the leverage effect

Investing in real estate allows you to buy only the walls, receiving a discount compared to market prices. Therefore, it is especially interesting in areas where real estate prices are high. During the dismemberment operation, the distribution key allows you to determine the value of bare property and the value of the usufruct associated with the dismembered property. At the end of the dismemberment period, you regain full ownership of the property and can resell the property without deferring the discount. By investing in open property, you can also benefit from a leverage. Indeed, to make this purchase, you can take a bank loan (on terms other than the traditional mortgage to purchase real estate in full ownership).

Advantage № 2: Invest in real estate without raising taxes through open ownership

When you buy property, you carry out a so-called “neutral” tax transaction. In fact, you do not receive a monthly rent (unlike a rental investment) and therefore do not have real estate income, which can be stated in the tax return. As for the real estate tax (IFI), the usufructuary is obliged to pay it, and the naked owner in most cases avoids it.

In addition, when you resell property after its temporary dismemberment or after the death of the usufructuary, for example, your capital gain is calculated from an estimate of the value of the undivided property when you acquired ownership (not just the amount of your investment). In fact, the capital gains tax base is declining. In addition, tax benefits are applied depending on the length of retention of the naked owner. You may even be exempt from capital gains tax from 22e year of detention, in some cases.

Advantage № 3: Dismemberment improves your purchasing power in retirement

In 2022, non-proprietary investment decisions are evolving, in particular, with the traditional lifetime annuity. Initially, the dismemberment was carried out between individuals and consisted in the fact that the investor paid the seller a monthly life annuity until his death. In the case of joint life annuities, operators specializing in the division of real estate act as intermediaries between buyers and sellers. This simplifies the process and avoids direct customer-seller relationships that may be of concern. There are also decisions to share with institutional usufructuaries (social or private landlords, except for life annuities).

Renunciation of ownership allows older sellers to increase their purchasing power after retirement. Indeed, they receive capital from the operation, which is called a “bouquet” (the cost of usufruct is paid immediately). This avoids capital gains tax if the property in question is their principal place of residence. Thus, they can continue to live in their home, while having capital, which allows them to earn extra income or implement a project.

Benefit № 4: Transfer your assets with reduced inheritance tax

Dismemberment is also a useful tool to anticipate the transfer of your inheritance. In fact, you can donate your incomplete property to your children without any inheritance costs (up to a limit of € 100,000 per child every 15 years). Similarly, a usufructuary can make a donation to his children for part of the “bouquet” collected during the transfer of his property, and thus help his relatives when they need it.

The dismemberment solutions to be investigated are many and varied. To help you choose the one that best suits your personal situation and your wealth goals, Sidoni Vatrigant and two of her guests are exploring the benefits of open ownership at our next En Plateau Avec event.

Registration for the meeting on our website Tuesday, June 21, from 6:00 pm to 6:30 pm For more information and to add this event to the agenda: click here