Choosing an investment property in open ownership allows you to develop your assets. What you need to know.
The effect of the principle of dismemberment of property
The acquisition of ownership of real estate is the result of the dismemberment of ownership. This division consists in the division of fully owned property into two separate parts, the right of ownership for use, which is also called usufruct, and the right of ownership. Usufruct is an opportunity to use and use property. Bare property is the possibility of owning real estate and the right to dispose of it.
The interest of this approach is the result of a tax or inheritance strategy. This legal instrument is used to optimize investment in real estate, to plan the transfer of its assets or to exempt from paying taxes.
The effect of the principle of dismemberment of property
The dismemberment of property is always carried out over a period of time. Then this mechanism is temporary. At the end of the dismemberment period, which may last 10 or 20 years, the usufruct ceases, and thus the naked owner becomes the full owner of the property. This step is then performed automatically without compensation at the end of the period.
Why invest in bare property?
Investing in property is an excellent lever for developing and investing in real estate below market price. This decision on the inheritance requires not to live in the property or not to lease it during the dismemberment period. This solution will be even more effective in cities with a high cost per month. That’s why it’s wise to invest in property in Greater Paris!
What are the benefits of investing in open property?
1) Reducing the purchase price
Investments in open property offer a discount of up to 40% of the cost of free ownership. This reduction occurs because the naked owner does not own 100% of the property. In fact, the usufruct is maintained and stored by the institutional landlord. Then the value of the usufruct is the amount of rent that the naked owner does not receive during the entire period of dismemberment.
2) Without commissions and fees
The division of property does not give the naked owner any fees or taxes associated with its acquisition. The usufructuary must then collect rent and pay various fees. The latter ensures the proper condition of housing and undertakes to maintain the property in proper condition. Various works and repairs, as well as daily maintenance of housing will be the responsibility of the usufructuary. The property tax and the cost of joint ownership will be borne by the landlord, not the naked owner.
3) No consideration is expected after dismemberment
At the end of the section, ownership is consolidated, and you get your full ownership back at no extra cost.
4) Interest from bank financing
Among the many benefits of investing in open property are 2 favorable levers:
No real estate tax: At the time of dismemberment, the property is not part of the inheritance, as the owner owns only part of the housing. This leads to an increase in assets stored in the calculation of MFIs. The naked owner is also not responsible for the MFI. After the succession, the property is fully integrated.
Optimized property income: The dismemberment of property leads to a lack of rent and, consequently, income from land for the naked owner. For certain profiles of investors, this effect is desirable because it does not increase their taxation. Also, who says that no rent means no rent risk.
However, through investments with a bank loan, interest will be calculated and will create a deficit of land associated with various land incomes. Building overhaul bills can be deducted from your other property income.
Succession and dismemberment
The dismemberment of housing can be done in different scenarios. We also find this in the case of donations in open possession. In France, then, you can predict your own succession. To this end, the dismemberment mechanism makes it possible to preserve the usufruct for the parents and give the children the right of ownership. This is often the case for primary or secondary housing, or even for rental investment. In case of succession, the duties paid will be calculated exclusively from the value of the net property. The calculation is based on a scale determined by the tax authorities and is in the form of a table showing the distribution between the usufructuary and the equity of the naked owner. The share of usufruct will decrease according to the age of the usufruct. Thanks to the communication vessel, the share of the naked owner will also increase.
During the succession, the usufruct gives way to the naked owner, who becomes the full owner. This step is then performed automatically at no extra cost.
How to choose a product in dismemberment?
Acquisition of property rights is primarily an investment in rent. Therefore, it is advisable to invest in an attractive city where the real estate market is healthy and dynamic. Heritage cities with a high price for it should be preserved. Investing in property in Strasbourg, Cannes, Paris or Nice, for example, is an option.
You have two options:
- Choose a municipality with a large number of jobs to facilitate long-term rent
- Choose a tourist city to facilitate short-term seasonal rentals
Once you have identified an attractive municipality, you should choose your area carefully. It will be advisable to keep the environment clean, provide local shops and services. Don’t forget to mention the places that are served by various public transport.
It is important to remember that tenants are very sensitive to their immediate environment. The living environment should be pleasant and have greenery.
Investment in open property, what is the profile of investors?
There is no typical open profile investor profile. The type of investment is aimed at a wide range of investors. It will all depend on the strategy of the buyer’s assets. In fact, it is important to approach real estate investment strategically, not a product approach.
Investing in open property will achieve different goals. It will be advisable to choose a dismemberment mechanism when you want to prepare for retirement and regain full ownership to enjoy it on a beautiful day. Subsequently, the owner can live there as his main or auxiliary place of residence, rent it out with furniture, for example, or sell real estate. Therefore, it is a solution that offers a wide range of solutions in the long run. Other investors will choose this solution to avoid MFIs. In fact, this mechanism allows you to take advantage of tax benefits.
Investing in open property is a long-term investment. The first advantage is the reduction given to the naked owner and the absence of payment. If the location is strategic, the value of the land will increase over time, and the cost of free ownership will then follow this increase at the end.
An example of an investment with bare property
Mr. and Mrs. Otto bought an apartment for 200,000 euros. The mechanism of dismemberment of property through the acquisition of property rights allows you to take advantage of a discount on the cost of full property, which is 40%. Thus, Mr. and Mrs. Otto invest only 80,000 euros – ie 200,000 euros X 40%. Then it means savings on the purchase price of 120,000 euros.
This dismemberment will take place over 15 years. After the fifteenth year is over, Otto will regain full ownership of the property and will be able to:
- collect rent
- live in good
- resell property