[Agenda partenaire] Stones By Crystal organizes as part of the series of international webinars “45 MINUTES PATRIMOINE”, a webinar dedicated to real estate investment in bare ownership. You can already register for the one on Thursday, December 10, which will take place from 1:30 p.m. to 2:15 p.m. Paris time, from 7:30 a.m. to 8:15 a.m. New York time.
The French residential real estate market has been very attractive for several years. Last year, there were more than a million transactions with an increase of 11% compared to 2018 and a rise in real estate prices of 5.2% in the 10 largest French cities. Maintaining lending rates at a historically low level fully contributes to this attractiveness.
Even though the COVID-19 crisis has had and is having significant impacts on the economy, there are several signs that real estate should remain attractive. The current low interest rate policy contributes to the valuation of goods and to maintaining their attractiveness compared to other asset classes. The needs for housing, work, production and sale remain intact. In all cases, the need for long-term projection is essential. However, to succeed in your investment, you must know differentiate the territories as well as the markets according to the types of assets.
Let’s take an interest in bare ownership, which together with usufruct constitutes one of the two components of full ownership.
The principle of a real estate investment in bare ownership lies in the fact that its usufruct is held by a third person, natural or legal. In the context of “packaged” real estate programs for bare ownership, the usufruct is generally held for 15 to 20 years by an institutional lessor, who manages, leases and maintains the property throughout this period. During this phase, the bare owner does not receive rents and his property does not earn him anything. At the end of 15 or 20 years, the investor becomes full owner of the property at its market value and without transfer rights. He is then free to rent it, to occupy it or even to resell it.
Bare ownership real estate investment has many advantages:
– Its acquisition price is significantly lower than that of a freehold property
This type of real estate investment allows investors who buy only the bare ownership of a property to pay for it 30 to 50% less than if they had acquired it in full ownership. Through this initial discount, the assets are valued or possibly remain stable, as the end of the period of holding of the usufruct by the third party approaches. A lower purchase price also implies lower notary fees than in the case of a freehold acquisition.
– Real estate property without the constraints and inherent charges
By relinquishing the usufruct of his property to a third party, the bare owner investor is freed from the constraints and charges inherent in the management, rental and maintenance of the property, these legally incumbent on the usufructuary. Charges, co-ownership work, property tax and housing tax and all other expenses related to the use of the property, are, depending on the case, the responsibility of the tenant or the usufructuary.
– Undeniable tax advantages
Beyond the absence of housing tax and property tax, real estate investment in bare ownership has no impact on the income tax of the bare owner since no rental income is collected. .
When the investor has taken out a loan to acquire bare ownership of a property, the amount of interest thereon may be deductible from property income generated by other property. In the event that the investor does not otherwise benefit from other property income, this interest is deferred for 10 years on future property rents, thus extending the possibility of tax savings.
Finally, this type of investment also presents a major advantage for households subject to the solidarity tax on wealth because the value of the property held in bare ownership does not enter into the taxable assets at the IFI. The asset will only return to the investor’s IFI calculation base when the latter recovers full ownership.
Still within the framework of a long-term asset investment, the choice to acquire temporary bare ownership is a solution that is even more efficient in the current period. By taking up the criteria mentioned to make a good real estate investment, temporary bare ownership offers real property advantages such as, among other things, the absence of taxation and management constraints during the period of dismemberment.
Attend the December 10 webinar (1:30 p.m. to 2:15 p.m. KST, 7:30 a.m. to 8:15 a.m. New York time), dedicated to real estate investment in bare ownership.
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