Real estate: free life annuity, a new way of investing

The French love stone and invest in it to prepare for the retirement legacy. Among them, some long-time owners already use rent as additional income. Caring for them? “When their tenant leaves the premises, the new standards often require the property to be renovated before it can be rented out, but many are reluctant or willing to start work,” said Anne-Sophie Ansar, director of Valeurs Sûres in Roubaix. It is also difficult for them to sell their property because they do not know where to reinvest their money. The solution? Go through the sale in the “free life”, which guarantees additional income for life, while relieving management worries. If you are an investor, this type of transaction, in full development, has many advantages.

Technically, having a free life annuity, the seller, who is called the annuitant, agrees to no longer live in the premises. Thus, the buyer can immediately rent or rent a home and charge rent. He may also work there, but is not allowed to sell the property until the death of the annuitant. The market value of housing, estimated before the agreement, allows the owner to determine the amount of the “bouquet”, the amount he wants to return when signing the contract. Then the difference between the price of the property and the bouquet turns into a lifetime annuity. “The latter is paid to the recipient of the annuity before his death and takes into account his life expectancy”, says Reza Nahai, co-founder of Viva Viager. In practice, if the seller is 80 years old, the income will be much higher than that of a saleswoman who has just celebrated her 70th birthday.

Depending on their needs, the seller can choose a large bouquet and a small annuity or prefer the opposite, there are no rules in this matter. If housing is rented out, only one mandatory requirement must be met: “case law stipulates that the amount of rent paid must be greater than the rent collected, otherwise there is no risk and the transaction risks being retrained,” warns Sophie Richard. founder of the Viagimmo network. In fact, the 1949 law makes lifelong rent accidental, otherwise it may be called into question. This will be the case, for example, if you know that your seller is very ill, because his heirs can then cancel the sale. Similarly, the tax authorities do not hesitate to reclassify life annuity transactions between relatives as a hidden gift if they believe that the value of the property is understated. In short, life annuity is a matter for professionals, and even if the offerings begin to fill the market, it is extremely important that your contract is approved by a professional in this field.

Start only if you have the capital, because banks do not finance this type of loan. In addition, sufficient income is needed to overcome the risks (vacancies for rent, work to be financed, etc.) and, above all, to ensure the payment of life annuity to the end. Otherwise, “the seller could cancel the sale and regain full ownership of his property without having to reimburse the rent or bouquet already received,” says Sophie Richard. However, do not panic if you change your mind, and provided that your lifetime contract provides for this in the clause, you can resell your lifetime rent. In this case, “the value of the property is revalued, then the new buyer agrees to pay an annuity to the recipient of the rent and, if the housing has increased in value, he also pays the bouquet to the seller,” – says Sophie Richard.

In short, a free life annuity is an investment decision worth considering because it allows you to increase your rental assets with less capital when you buy, because you only pay for the bouquet. In addition, the difference between the rent collected and the lifetime annuity can be several hundred euros and calibrated according to your income. (See table). Provided you never forget that your annuitant can also break longevity records.