In France, the sale of a life annuity investment property is based on the following principle: the property's price is computed and determined as with any normal real estate transaction. This price is then paid in part immediately in what is referred to as "the bouquet", and the unpaid portion is converted into a life annuity.
The annuity amount is calculated using mortality rates tables and thus is dependent on the age of the seller. The annuity, also known as "arrears", is to be paid by the buyer (debtor) starting as of the date of sale until the death of the seller (creditor).
Therefore, a life annuity transaction forms an uncertain contract since the total amount of the price paid by the buyer could end up being either less or more than the actual value of the property depending on the date of death of the seller.
Why buy a life annuity property?
This investment method allows you to own a property for a low initial cost (the bouquet) relative to the overall value of the property without having to go through a bank. In return, you are subject to an variable contract based on the lifespan of the seller, since its expiration can not be defined at the outset unlike standard loans.
You will then become the annuity debtor and, as such, you will pay rent to the seller (the creditor), the same way that a buyer would make his/her loan payments. "Many expatriates prefer this type of investment," said a real estate professional. They opt for this type of transaction such as by buying their future home in Paris or any other region in order to recuperate the property upon their return to France; in fact, many Parisians also purchase property on the Cote d'Azur via this method.
Although this market remains confidential, we are starting to see more advertisements for such properties on the Internet (i.e. viager-libre.fr, solutionviager.com, viagers-occupe.fr), and some real estate firms even specialize in this type of sale.
What about taxes and fees?
The payment of condominium fees depend on the agreement between the parties. In general, they follow the same procedures as with standard leases; therefore, the seller will pay for all maintenance work and minor repairs and the buyer will be responsible only for major repairs. Similarly, the seller will only pay the housing tax, while the buyer will pay the property tax. It is also important to note that the rent paid to the creditor is not tax deductible
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