Investing in bare ownership: a complete guide

Investing in bare ownership is a real estate investment strategy that consists of acquiring ownership of a home or property. without the right to its immediate useThis is because the property is reserved for another person through usufruct. This model has become increasingly popular among investors seeking to diversify their portfolios and access real estate assets at a significant discount to their market value.

The key to this type of transaction is the separation between ownership and use. The buyer becomes the bare owner, while the seller retains the right of use as a usufructuary, generally for life. This means that the investor cannot live in the property or rent it out until the usufruct expires. at which point it will consolidate full control or full ownership of the property.

The reason many investors choose to invest in bare ownership is precisely this initial discount. Since they can't immediately start using the property, the price is adjusted, allowing them to acquire a home under advantageous conditions. This difference can translate into attractive long-term returns, especially. if the property is located in an area with potential for appreciation.

This type of real estate investment fits well with patient profiles, who do not need short-term liquidity and who seek to build wealth gradually. It is also attractive to those who wish to avoid the active management of rentals, tenants, or issues common in other rental options.

How does an investment in bare ownership work?

Bare ownership represents the legal ownership of a property excluding the right to use or enjoy itThis right belongs to the usufructuary, who may reside in the dwelling or use it as established in the contract.

When someone decides to invest in bare ownership, they acquire that ownership, becoming the bare owner. However, the usufruct remains in effect, limiting the use of the property until it expires. This scheme results from dividing full ownership into two parts: ownership and use.

In practice, this means that the investor performs a long-term real estate investmentThe bare owner receives no immediate income and cannot dispose of the property, but does secure future full ownership. When the usufruct ends (either due to the death of the usufructuary or the expiration of the term if it is temporary), the bare owner automatically acquires full ownership.

To better understand this model, you can find more information in our post that analyzes it in detail. all about bare ownershipIt is also important to note that, during the term of the usufruct, the usufructuary It maintains rights over the property, but also certain obligations.For his part, the bare owner retains ownership and must ensure the proper maintenance of the property in structural terms.

Investing in bare ownership therefore implies assuming a passive position in the short term, but long-term strategic within a well-planned real estate investment.

What is the value of bare ownership? (discount, age and type of usufruct)

The value of the bare ownership is determined subtracting the value of the usufruct from the total value of the property in full ownership. This calculation is neither exact nor universal, but there are widely used guidelines.

One of the most relevant factors is the age of the usufructuary. The larger it is, the lower the value of the usufruct. Therefore, the discount applied to the property price will be smaller. Conversely, if the usufructuary is younger, the usufruct will have a higher value, which implies a larger discount on the purchase.

The type of usufruct also plays a role:

• Life usufruct: It depends on the life expectancy of the usufructuary.
• Temporary usufruct: It has a defined duration.
• Successive usufruct: It remains in effect until the death of the last usufructuary (for example, a couple). This latter case usually implies a longer horizon and, therefore, a greater discount on the property.

Let's simplify things through an example. Let's imagine a property valued at €250.000. If the usufructuary is 80 years old, the value of the usufruct could be around 20%. In this case, the investor I could invest in bare ownership for around €200.000This difference represents the discount applied due to the usage limitation.

It's important to remember that these calculations are approximate. The market, the property's location, its condition, and negotiations between the parties can significantly alter the final result. Even so, This system allows you to estimate the potential profitability of real estate investment.

Advantages of investing in bare ownership

Investing in bare ownership offers a number of advantages that make it an interesting option within the real estate investment landscape, especially for those seeking stability and long-term planning.

One of the main advantages is the discounted purchase price. The fact that the property cannot be used immediately translates into a lower price relative to market value in full ownership. This discount allows access to properties that might otherwise be beyond the investor's reach.

Another important advantage is the potential for appreciation. Over time, the value of the property may increase This is due to factors such as market trends, improvements in the area, or changes in demand. When the bare owner acquires full ownership, they can benefit from this appreciation, obtaining an attractive return.

It also stands out for its reduced management requirements. Unlike other forms of real estate investment, here There's no need to manage tenants or rental agreementsThe usufructuary is responsible for the use of the property, which significantly reduces the operational burden for the investor.

Legal certainty is another strong point. The transaction is formalized through a public deed and registered in the Property Registry, which guarantees the rights of the bare owner and the usufructuaryThis legal structure provides confidence and stability to investment.

Furthermore, investing in bare ownership allows for diversification of assets. Including this type of asset in a portfolio can balance risks and complement other more liquid investments or short-term.

Finally, although it does not generate immediate income, this real estate investment can offer an attractive deferred returnespecially if the property was acquired at a good discount and in a location with potential.

Risks and disadvantages of investing in bare ownership

Despite its advantages, as is often the case in any aspect of life, Bare ownership also involves risksThese are risks that must be carefully analyzed before making a decision of this magnitude.

• Lack of liquidity: This type of real estate investment It does not allow for easy recovery of capital in the short termSelling bare ownership can be complex, as the market is more limited and not all buyers are willing to accept the conditions of usufruct.
• Temporal uncertainty: In cases of life usufruct, It is not possible to predict exactly when it will become extinct the right of use. This directly affects profitability planning and the investment horizon.
• Risk of building deterioration: Although the usufructuary is usually responsible for routine maintenance, the passage of time can affect the condition of the property. The bare owner must take this into account. potential future expenses for renovations or rehabilitation.
• Conflicts over expenses: It is essential to clearly define in the deed who assumes the community expenses, taxes, special assessments or repairs. Poor planning in this area can lead to problems legal or economic.
• Market risk: As with any real estate investment, There is a market riskThe evolution of housing prices, the economic situation or changes in the area can affect the value of the property and, therefore, the expected profitability.

The complexity of these operations makes it advisable to have access to specialized advice like the kind we offer at Aun Más VidaWithout proper analysis, the investor could take unnecessary risks or make poor decisions.

Step by step to invest safely in bare ownership

To invest in bare ownership safely, it is essential to follow a structured process that allows minimize risks and optimize real estate investment.

• Define the objectives: It is necessary to determine the time horizon, the level of available liquidity, and the expected rate of return. This type of investment is not suitable for those who need quick access to capital.

• Carefully select the location and type of property: The quality of the area directly influences future appreciation. Investing in bare ownership in areas with high demand and established services usually offers better prospects.

• Analysis of the usufructuary: This is another key element. Your age, the type of usufruct, and whether it's a single or successive usufruct all affect the investment term. This is a determining factor in calculating the discount and potential return.

• Conduct a full legal review: Requesting a property registry extract allows you to verify ownership and identify any encumbrances or restrictions. It's also advisable to check for outstanding debts, community fees, taxes, and approved special assessments.

• Property condition assessment: Even if the investor is not going to use the property immediately, they should know its current condition and anticipate possible future expenses in maintenance or rehabilitation.

• Draft the document carefully: All relevant aspects must be clearly established: distribution of expenses, responsibilities, insurance, conditions of use and causes of termination of the usufruct. This document will be the legal basis for the operation.

• Having experts makes all the difference: At Even More Life we ​​help you to sell the bare property, and structure each operation so that both the bare owner and the usufructuary have guarantees and clarity in your rights and obligations.

• Formalization of the transaction before a notary and registration in the Property Registry: From that moment, the investor acquires the status of bare owner and their investment is legally protected.

Following these steps allows you to invest in bare ownership with greater security, understanding both the opportunities and the risks, and building a solid strategy within the real estate sector.