Real estate: free life annuity, a new way to invest

The French love stone and invest in it to prepare their retirement legacy. Among them, some longtime owners are already using the rent as additional income. Taking care of them? “When their tenant leaves the premises, the new standards often require the property to be refurbished before it can be re-rented, but many do not have the will or the funds to get started,” says Anne-Sophie Ansart, director of Valeurs Sûres in Roubaix. They also find it difficult to sell their property because they don’t know where to reinvest their funds. Solution ? Pass the sale in the “free life”, which guarantees additional income for a lifetime, while eliminating the management hassle. If you are an investor, this type of deal has many advantages to the fullest.

Technically, with a free lifetime annuity, the seller, called the renter, agrees to no longer live on the premises. Thus, the buyer can immediately occupy the property or rent it and receive rent. He may also do work there, but may not sell the property until the death of the rentee. The market value of housing, assessed before the transaction, allows the owner to determine the size of the “bouquet”, the amount that he wants to receive when signing the contract. Then the difference between the price of real estate and the bouquet turns into a lifetime annuity. “The latter is paid to the recipient of the annuity until his death and takes into account the duration of his life”, says Reza Nahai, co-founder of Viva Viager. In practice, if the seller is over 80, the income will be much higher than if it were a saleswoman who has just celebrated her 70th birthday.



Dario Ingiusto / L’Express

Depending on their needs, the seller can choose a large bouquet and a small rent, or prefer the opposite, there is no rule in this matter. If a property is rented out, there is only one imperative to comply with: “case law indicates that the amount of rent paid must be greater than the rent received, otherwise there is no longer any risk and the operation risks being reclassified,” warns Sophie Richard. founder of the Viagimmo network. Indeed, the law of 1949 gives the life annuity an accidental character, otherwise it may be called into question. This will be the case if, for example, you know that your seller is very ill, because his heirs can then cancel the sale. In the same way, the tax authorities do not hesitate to reclassify life annuity transactions between relatives as a disguised gift if they believe that the value of the property is underestimated. In short, a lifetime annuity is a matter for the experts, and even if offers start to flood the market, it is imperative that your contract is approved by a professional in the field.

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Only start if you have the capital, because banks do not finance this type of operation on credit. In addition, sufficient income is needed to cope with the risk (renting vacancies, work that needs to be funded, etc.) and, above all, to ensure that the annuity is paid to the end. Otherwise, “the seller can cancel the sale and regain full ownership of their property without refunding the rent or bouquet already received,” emphasizes Sophie Richard. However, don’t panic if you change your mind, and as long as your life contract provides for this in a clause, you can resell your life annuity. In this case, “the value of the property is revalued, then the new buyer agrees to pay rent to the recipient of the rent, and if the housing has increased in price, he also pays the seller a bouquet,” says Sophie Richard.

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In short, a free lifetime annuity is an investment decision to consider as it allows you to accumulate rental assets with less capital upon purchase since you only pay for the bouquet. In addition, the difference between the rent charged and the life annuity can be several hundred euros and calibrated according to your income. (see table). Provided you never forget, your annuitant can also break longevity records.


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