Sell apartment against annuity

Many seniors face a financial dilemma. In some cases, neither savings nor pensions are sufficient to cover ongoing living expenses. In other cases, health problems can cause care costs to rise. The only way out: selling their own home.

But for many older people, their home is more than just a roof over their heads. It is their home, where they have lived for decades and which is familiar to them. Selling their apartment can mean being torn from their familiar surroundings and having to move into an unfamiliar environment.

In such cases, selling for an annuity can be an attractive option. By selling your home for an annuity, you can continue to live in your home and supplement your monthly pension payments.

How the real estate pension works

The life annuity is an agreement between the seller and the buyer in which the seller transfers ownership of his property to the buyer in return for a lifelong annuity. The amount of the annuity is determined when the contract is signed and depends on various factors, such as the value of the property, the age and life expectancy of the seller, and current interest rates.

In return for the annuity, the seller retains the right to live in the property for life. This means that he can continue to live in and use the property. This allows you to continue to stay in your familiar surroundings and still provide yourself with financial security.

The life annuity in summary:

• Apartment is sold to annuity provider
• Monthly annuity payment instead of purchase price payment
• Registration of a lifelong right of residence

Requirements: Age & property value

In order to receive an annuity, certain requirements must be met. To ensure a calculable financial risk for providers, many set a minimum age for sellers. This is usually between 60 and 65 years. In addition, unencumbered real estate is usually preferred and the minimum value of the property is also usually fixed, as it guarantees a minimum real estate annuity. Here, one can be guided by the individually set value of the provider. As a rule, providers demand a minimum pension of 150 to 250 euros per month.

The requirements at a glance:

• Minimum age of the seller: 60 years and over
• Minimum payout: from 150 euros per month
• Property free from encumbrances

Taxes: Income tax on income share

In the case of the real estate life annuity, only the income share is taxed, as annuity payments are classified as “other income” under the Income Tax Act. The share of income is influenced by various factors, in particular by age at the time the contract is concluded, and can be deducted from tax as a special expense. The taxation share decreases continuously with increasing age at the time the contract is concluded. This means that older persons generally have to pay less tax than younger persons.

Life annuity or traditional apartment sale?

In addition to the annuity, you can also opt for a traditional sale of your home. The advantages of a complete sale: You receive the agreed purchase price paid out in one go. The sale price is usually higher than with a life annuity, but you lose all ownership rights to your home.

As mentioned above, the life annuity allows you to continue living at home while freeing up your real estate assets. In addition, you save the cost of moving and do not have to buy a new apartment or pay rent.

Here are the advantages at a glance:

• Life annuity: no need to move out & release of real estate capital.
• Traditional sale: payment of the full purchase price

Conclusion: Secured into old age

Overall, the sale of an apartment for a life annuity offers older people an attractive alternative to the traditional sale of an apartment. The life annuity makes it possible to convert the sale proceeds into a monthly pension that is paid out until the end of one’s life, thus guaranteeing a regular income in old age. At the same time, one must be aware that by selling the property, all ownership rights are transferred to the buyer. For this reason, it is important to take enough time in advance to weigh up the respective advantages and disadvantages and to make the best decision for yourself.

The pro rata sale of house & apartment explains

A partial sale of a property is a great way to release a portion of your real estate equity and continue to retain sole right of occupancy and use. In a partial sale, up to half of your property is sold to a partial sale provider. You receive the purchase price immediately. The usufructuary right is secured in the land register and in return you pay a monthly usage fee to the partial buyer.

This brings with it a host of advantages. Let’s take a closer look at them.

Advantages of the partial sale

Whether selling part of your home privately or through a professional part sale provider, you retain your financial independence, stay in your familiar surroundings and can also benefit from additional cash flow.

The advantages of the partial sale at a glance:

• Improved liquidity
• No need to move out of the property
• Sole usufructuary right to the property
• Possibility to continue using the property or rent it out
• Repurchase by seller or heirs possible

More financial freedom through instant payout

One of the biggest advantages of a partial real estate sale is that you have immediate cash without having to sell the property outright. Thus, you can quickly and easily get money to meet financial obligations, make investments or fulfill a lifelong desire.

Sole usufructuary right to the property

As a partial seller, you get the right to live in your home and use it as you wish. You can use the property for your own use and have family members or caregivers move in. In addition, the usufruct right allows you to rent out your property.

Wealth accumulation through renting & appreciation

A partial real estate sale can also be a way to contribute to wealth accumulation by renting out the property. By renting out the property, regular rental income can be generated, which can serve as additional income.

In the event of an increase in the value of the property, you will also benefit, for example if you decide to sell your property completely after 10 years.

Sellers & heirs benefit

Not only you as the seller benefit from a partial sale, but also your heirs. Since your liquidity is increased, the family is relieved financially. After your death, the heirs are also granted a priority right of repurchase of the sold share. If your heirs decide to sell the entire property, the partial buyer takes over the settlement and your heirs do not have to worry about anything.

There are also a few things to consider when partial selling. So what are the partial sale disadvantages?

Disadvantages of the partial sale

Compared to other models, such as the life annuity, you remain the owner of the property in the partial sale. Due to the registered usufructuary right, you can generate additional cash flow through the property, but at the same time this also comes with some costs.

User fee: Monthly payments to partial purchasers

As already mentioned, as usufructuary you have to pay a monthly usage fee to the buyer. The amount of the user fee depends on various factors, such as the current economic situation and the purchase price paid out. Since the amount of the user fee differs depending on the partial sale provider, it is advisable to compare the different partial sale companies in order to find the best possible offer for you.

Costs: Surveyor, notary & Co.

In addition to the monthly usage fee, a real estate partial sale may also come with some additional costs and fees. One of the most important cost factors is the preparation of the partial sale contract, which must be certified by a notary. There are also costs for an appraiser who determines the current value of the property. Which fees you have to pay yourself, and which costs are borne by the partial buyer, also varies from provider to provider.

You may incur these costs as a partial seller:

• User fee
• Expert’s fee
• Land register & notary fees
• Maintenance costs
• Administrative expenses
• Implementation costs
• Speculation tax, if applicable

Therefore, it is advisable to find out in advance about the expected costs to facilitate long-term financial planning.

Requirements: For whom is a partial sale worthwhile?

So, after looking at the advantages and disadvantages, the question becomes:

For whom is a partial sale of real estate worthwhile?

When a pro rata sale makes sense and when it does not depends on your property as well as on your personal circumstances. In most cases, the purchase price of the sold portion should not be less than 100,000 euros. Since a maximum of 50% of the property is purchased in a partial sale, only properties with a minimum market value of 200,000 euros are usually considered. Since the partial sale of real estate is a real estate annuity model, the offer is usually also aimed more at seniors.

You should have these prerequisites:

• Value of the property: at least 200,000 euros
• Payout: at least 100,000 euros
• Minimum age of the seller
• Ideally: completely / largely paid off property

The partial sale is most interesting for owners who need liquidity but do not want to give up their real estate assets completely and would like the property to remain in the family until the heirs later decide what to do with the property – an option that a life annuity and a reverse mortgage do not offer.

Conclusion: A comparison of providers is worthwhile

Overall, the partial sale of real estate offers an attractive opportunity for property owners to quickly and easily obtain liquidity without having to sell the entire property. Especially for older people, the partial sale can be a good option to achieve financial freedom. In addition, renting out the remaining part of the property or increasing its value can help build wealth. Since the conditions differ, you should take enough time in advance to compare the different partial sale providers with each other to find the best offer for you.

“Sell half of the apartment”

Sell quickly, get money quickly, that’s what more and more want, who find at an advanced age that their own 4-walls are getting too big. Whether 3-room apartment, 4-room apartment or even comfortable 5-room and more.

Those who want quick money for the condominium, more and more often looking for “partial sale apartment”. Because one hears of many advantages: Fast, uncomplicated, no credit check. That’s true, but there is also a disadvantage, the user fee, which you pay monthly afterwards.

Quickly sell 10-50% shares of an apartment

The different sellers buy apartment shares between 20% – 50%. If the market value of your condominium is in the 7-digit range, you can sometimes sell “only” 10% of the apartment.

• Up to 1 million value = 10-50
• Over 1 million value = 10-50

Here schematically shown with 20% sold share, a 3-room apartment:

Partial sale condominium: what is it?

First, let’s start with the definition of the partial sale of an apartment.

What is the partial sale of an apartment?

As described at the beginning, you sell apartment shares between 20% – 50%. You sell the shares to a financial company. This makes you a condominium owners’ association consisting of two parties. In return you get the proportional purchase price quickly transferred, independent of banks / loans.

Fast money, sounds great or?

Whether selling in Berlin, Hamburg, Munich, Cologne or even “smaller” cities, there are advantages to paying the purchase price quickly without any credit check (compare credit at the bank). But there are also disadvantages: The user fee and likewise with the total sale.

Usage fee = rent for your apartment

After partial sale = you have to pay usage fee

The finance company becomes the partial owner of your apartment. However, you remain the sole user of the apartment. Therefore, from now on, you pay a monthly usage fee, quasi “rent” for the part of your condominium that no longer belongs to you.

Depending on the provider, this usage fee is approximately ~ 3% p.a. (per year). A simple, quick calculation of the usage fee.

• Usage fee (ETW): 3% p.a.

Formula usage fee (depending on the provider) per month:

• Monthly usage fee = 3% * purchase price (share) / 12
• = 3% * 100.000 / 12

With this you pay 250 euros per month.

User fee at 100.000 Euro = 250 Euro / month

As always, depending on the provider. All providers can be found here in the partial purchase apartment: comparison.

This is how the financial company refinances itself.

Disadvantage? User fee vs. credit

Uncomplicated and fast money for the condo, this is a really tempting offer. That is why you should take a second look at the various partial purchase offers for apartment.

Those who resort to the really simple sales offer, quickly get money. But for this, you pay – as learned – the monthly user fee. Many use the offer because you think, I can not get a real estate loan, especially at an older age.

At the same time, a real estate loan is much cheaper! Especially at the current interest rates. Currently you pay here only 1% p.a., instead of 3% or more, as with the partial sale.

Comparison partial sale / credit:

• Partial sale / month = 250 euros
• Mortgage loan / month = 85 euros

So remember, simply put:

Real estate loans are (currently) 66% cheaper!

So it’s worth talking to your local bank and maybe 2 or 3 alternatives.

Partial sale of real estate: advantages, disadvantages, tax & Co.

Read more about partial sale here – A look at costs of use, advantages, disadvantages, the total sale, the calculated increase in value under inflation and a comparison, what is “cheaper”: partial purchase or the alternative real estate loan, more specifically the mortgage loan? In addition taxes, sale from community of heirs, divorce and much more. My recommendations for sellers!

• Partial sale property
• Partial sale provider comparison