Knowledge Base & Resources
Knowledge Base
Financial Investment
Definition of Usufruct
Usufruct: In a Nutshell it Means
Bare ownership is nothing more than the value of the deprived property only of the right of usufruct which can be for life or for life.
This means that with bare ownership, you buy a property, but allowing those who probably already live there to live in it, which is usually the owner of the house who has just sold you bare ownership of it. The person who retains the usufruct therefore retains the right to remain there for life.
source : www.gabetti.it
Why Buy a House in Usufruct?
A medium-long term investment that is safer, more profitable and more competitive than many others
- the initial investment is contained since you buy the property at a much lower price
- the investment is revalued doubly: increase in the market value of the property and advancement of the age of the usufructuary. So whoever buys puts his savings in the “best safe in the world”!
- bare ownership can be resold at any time and always revalued
- you are entitled to tax breaks (first home and taxes calculated on reduced tax values), you do not pay IMU and TARI or condominium expenses or ordinary maintenance (to be paid by the usufructuary)
Practical example
- Let’s say you buy a €300,000 apartment from a 75-year-old owner.
- According to the tables of the Revenue Agency, the payment is agreed with a 35% discount, therefore €195,000.
- Suppose that after 12 years you are no longer willing to wait for the usufruct to expire while the usufructuary has reached the age of 87. So you decide to resell your property.
- Then you will be able to resell it, even assuming that the property has not revalued on its behalf and therefore its value net of inflation will always remain the same.
- then, based on the usufruct evaluation tables, you can resell it at a 15% discount or at the price of 255,000.
- Then you will be able to calculate how much you have earned: you have invested €195,000, you have resold it for €255,000 with a surplus value of €60,000 which corresponds to a 30% higher yield which corresponds to an annual rate of 2.6%.
- How much would you have earned with BOTs?
source: www.luxuryvillaitaly.com
Market Statistics
Who Sells
81.1% of those who sellFrom the Tecnocasa and Tecnorete affiliated agencies, it appears that they do it to raise liquidity, to maintain a certain standard of living, or to meet needs related to advancing age and sometimes to support their children in buying a house.
62.2% of those who sellare over 65 years of age.
57.6% of those who sellhey are single, widowed, divorced or separated.
Who Buys
81.8% of those who buycarries out the operation as a long-term investment, while the remaining part does so with the intention of securing a main residence at a more advantageous price.
74.5% of those who buyIn 2021, 74.5% of bare ownership sales were aimed at long-term investment. This is a growing percentage compared to 2019 but slightly down compared to 2020. In fact, bare ownership allows you to buy the property at a lower price than the market price.
67.3% of those who buyThey are couples without children or with children and 43.2% choose three-room apartments and 21.6% choose four-room apartments
42.5% of those who buyThe most sold type with the formula of bare ownership is the three-room apartment with 42.5% of preferences.
32.7% of those who buyThey are single.
32.4% of those who buyare aged between 35 and 44, while the percentages of purchases by the under 35s and over 65s are low.
26.3% of those who buythey are between 45 and 54 years of age.
26.3% of those who buythey have children. In fact, parents often buy bare ownership and then give it to their children.
25% of those who buycome, a treasure to supplement their retirement.
24.3% of those who buyBuyers between the ages of 45 and 54 are in second place among buyers
21.6% of those who buythose between 55 and 64 years of age are placed.
13.5% of those who buyè over 65. Sono coppie e coppie con figli.
8,1% di chi compraThey are over 65. They are couples and couples with children.
Typologies of sales
43.2% of saleshey are three-room apartments
21.6% of salesthere are 4 rooms
16.2% of salesThey are two-room apartments
10.8% of salesthey are independent or semi-independent properties In 2021, independent sales amounted to 10.8% of the total, a decrease compared to 2020 but an increase compared to 2019 when, in the first part of the year, they stopped at 7.0%.
8.1% of salesthey are made up of five rooms
How they are purchased
86.5% of paymentsit was proceeded directly in cash. Compared to the past, therefore, less recourse is made to a mortgage for the purchase of bare ownership.
13.5% of paymentsoccurred with the help of a mortgage loan
Where the trades were made
- Lombardy, with 1,916 properties
- Lazio (1,216)
- Veneto (1,117)
- Piedmont (706)
- Tuscany (434).
Trend
- Rif. www.wallstreetitalia.com
- Rif. www.gazzettadellalombardia.com
- Rif. patrimoniefinanza.com
- Rif. mutui.segugio.it
Market Trends
In recent years there has been an increase in the sale and purchase of bare properties, historically favored by the economic crisis which has affected the real estate market and access to credit in general and by the progressive aging of the Italian population which, together with a difficult labor market entry for young people, has in particular oriented family decisions towards the idea of transferring in advance the bare ownership of one’s own (or new) property to the children, maintaining the right to live there until one’s death.
Source. www.altalex.com
Double the requests
The increase in visits relating to the “bare ownership” typology in April 2020 translated into a doubling in the level of requests compared to the previous period, with a peak in February 2022.
Source.: www.wallstreetitalia.com
How to calculate usufruct?
- You start from the appraisal value of the property
- The current legal interest rate established by the Ministry of Finance is considered. From January 2023 it is 5%
- The percentage of the usufruct relating to the age group of the usufructuary (the owner who sells) is applied, which is progressively lower as the age of the usufructuary advances (the older the age, the higher the price).
- Multiply this percentage by the valuation price of the property.
In the table below there is a real case for a €250,000 property.
We have added a fourth column which takes into account life expectancy (currently estimated at between 85-87 years), the convenience of looking for a property sold by a ustructuary within a certain age range and the minimization of the risk of keeping the investment blocked for too long time by exploiting the possibility of reselling it before the expiry of the usufruct, protecting oneself from various risks including, mainly, a deterioration of the property, and rising inflation, etc. etc.
This table shows that the best compromise is a purchase from a usufructuary aged between 73 and 82 years.
Value confirmed by the market analysis made by the most active real estate agencies in the sale of bare ownership.
| Usufructuary age ranges | Usufruct percentage | property case € 250K | savings | Convenience |
| 0 – 20 | 95% | 12,500.00 | 237,500.00 | Nothing |
| 21 – 30 | 90% | 25,000.00 | 225,000.00 | Nothing |
| 31 – 40 | 85% | 37,500.00 | 212,500.00 | Nothing |
| 41 – 45 | 80% | 50,000.00 | 200,000.00 | Nothing |
| 46 – 50 | 75% | 62,500.00 | 187,500.00 | Nothing |
| 51 – 53 | 70% | 75,000.00 | 175,000.00 | Low |
| 54 – 56 | 65% | 87,500.00 | 162,500.00 | Low |
| 57 – 60 | 60% | 100,000.00 | 150,000.00 | Low |
| 61 – 63 | 55% | 112,500.00 | 137,500.00 | Low |
| 64 – 66 | 50% | 125,000.00 | 125,000.00 | Low |
| 67 – 69 | 45% | 137,500.00 | 112,500.00 | Low |
| 70 – 72 | 40% | 150,000.00 | 100,000.00 | Low |
| 73 – 75 | 35% | 162,500.00 | 87,500.00 | high |
| 76 – 78 | 30% | 175,000.00 | 75,000.00 | high |
| 79 – 82 | 25% | 187,500.00 | 62,500.00 | high |
| 83 – 86 | 20% | 200,000.00 | 50,000.00 | Low |
| 87 – 92 | 15% | 212,500.00 | 37,500.00 | Low |
| 93 – 99 | 10% | 225,000.00 | 25,000.00 | Low |
Basically, if I buy an apartment for €250,000 from a 74-year-old owner, I pay €162,500.
If I resell it 5 years later (the usufructuary will be 79 years old) I can resell it for €187,000 with a net proceeds of €24,500 which corresponds to a return greater than the 15% made in 5 years, therefore equal to an average annual return of 5%.
Source: patrimoniefinanza.com
PROS/CONS for those who buy
PRO
you can have a property at a cheaper price than other properties of the same type and size on the market, which you can use in the future or donate to your children
The usufructuary has the obligation to keep the property in excellent condition, guaranteeing effective maintenance
The value of the property grows steadily over time and therefore you can resell it before the end of the usufruct while still guaranteeing an unbeatable investment.
Contro
Not all banks grant loan mortgages, so you need to find the right one or have the whole amount available or reach an agreement for an installment payment with the seller. This is because the banks consider bare ownership an investment and not a purchase of a property to be used immediately.
PROS/CONS For Who Sells
- An option for the future as a complement to retirement. Most real estate experts point out that the sale of bare ownership is an option especially among those between 65 and 70 years old and looking for a supplement to their retirement. It is one of the best ways to obtain liquidity on an illiquid asset such as a house without giving up its use and enjoyment until death. That is to say, for many people the sale of bare ownership predominantly confers benefits to their daily lives.
- The heirs of the usufructuary who transfers the property will not be able to dispose of it, since the property becomes the property of whoever has the bare ownership.
The Case of Forthcoming Future Retirees
- I want to find a new, smaller house, suitable for us without children, with less expensive maintenance and a condominium
- I have to reduce the daily cleaning work that my wife and I will eventually have to do, albeit with the help of an hourly lady
- I need to arrange some cash (liquidation, for example) to balance my children’s inheritance
- I have to find a home
- in a city close to at least one of my children but more livable. For example a city between 50,000-300,000 inhabitants.
- it must be just outside the historic center to avoid parking problems and close, but not too close to a road
- close to supermarkets and shopping centers to be reached on foot or by bicycle
- all services at a maximum distance of 2-3 kilometers to be reached on foot or by bicycle
- very green
- nearby bus/metro stops maximum 300 meters.
- guest parking
- exposure: east/south with at least 2 sides
- energy class good for energy saving
- rather low condominium installment
- garage
- surface area 120-150 m2
- two bathrooms
The Case of Investment for Children
- at least one child under the age of 10
- possess a degree and who considers education indispensable for a professional affirmation
- own a home that is adequate for his income and standard of living
- have an above-average family income to be able to afford to pay a mortgage or an adequate saving capacity having an interesting liquidity, perhaps coming from a newly received inheritance.
- Having identified a university (and therefore a city) compatible with the predispositions of the child/children
- Having identified the characteristics of a property for a single person (the child) or a couple (premarital) therefore a floor area between 50-100 square meters.
- Having located the city, the area, the location of the property that has public transport within walking distance (maximum 300 meters)
- condominium installments, maintenance costs, etc. quite contained
- Possibly that the property will revalue within the next 10 years on the basis of the master plan of the area or the location of neighboring commercial (or residential) areas under construction, therefore anticipating the building boom which will take place within a maximum of 10 years
- Services, offices, schools, universities, shopping centres, junctions within a radius of less than 2 km.
- garage, cellar, box which acquire more significant commercial value
The Case of Treasure Chest for Old Age
This category includes those who have a certain amount of liquidity available who want to invest in a safe way not believing in stock speculation (stock market, bot) and intend to diversify (therefore not within their own business area such as a private company).
Therefore it is an investment to avoid leaving them in the bank’s safety deposit box or directly on your current account.
Those people who are not too convinced about investing in the securities market (government bonds, stock exchanges, bonds, gold, etc.), are afraid to invest in the real estate market because renting is no longer convenient due to taxes, expenses and the risk of not being paid or of incurring legal disputes due to the tenant’s negligence.
The best idea would be to give it to someone who you are sure is very shrewd – as if it were his own – who really has an interest – and has the disposition – to keep it in excellent condition and therefore who can deal with the ordinary expenses and ordinary maintenance while preserving the net return on investment.
Therefore, the real estate investment must be easily monetisable, even in an emergency, and in any case the yield remains almost preserved thanks to its objective commercial revaluation to mitigate the risk of selling off in an emergency.
So the optimal property could be
- provide for the demobilization of the investment between 7 and 15 years (usufruct)
- reliable tenant
- condominium with centralized services
- box, cellar, garage, parking space because they enhance the property
- surface area between 70 and 110 m2
- excellent position
- condition of the property in excellent condition
- verification of the revaluation of the area and of the property
The Case of Pure Financial Speculation
- evaluate the term of the annuity usufruct based on the life expectancy of the usufructuary
- anticipate the sale of bare ownership
The Case of Far-Sighted Young People
- the monthly saving capacity
- the time forecast in which he will have to choose his “stable accommodation”
- The amount of immediate liquidity available
