BARE OWNERSHIP. WHAT IS IT?
It is a form of equity release that is proving to be very popular in France, Italy and the UK. Now however, bare ownership is becoming very popular with Spanish property owners too.
What is it?
With bare ownership, the property owner sells their home to an investor who will either be a family member, or a complete stranger. A family member may do it to help out a parent while ensuring that they eventually inherit the property. An investor will look on the deal as any other- what’s in it for them?
For the sake of this argument, imagine that the property owner has a Spanish home worth approximately 150,000. Here, is problem one. How do we know what the property is really worth? The difference between a Spanish bank valuation, the local estate agent valuation and the catastral or town hall valuation could be 30,000 euro in any direction. If the property was in London we would not have this issue so finding out what the owner would put in their pocket if they sold today is step one.
We think that our estate agent contacts are the best valuers,but both buyer and seller need to get valuations. In this example, the price of the property is 150k, after all valuations have been done.
Next, how old is the owner? Remember, the investor only takes possession of the property after the death of the owner. Whether the owner is 99 years old, or 69 years old changes things dramatically. In this case, I’m saying that the owner is 75.
Now back up briefly. Before finding the buyer we use a simple formula to work out how much of the value of the property the investor will/should pay. If the returns are not high enough, the investor will not be interested.
If buyer and seller agree to the sale with the buyer paying 50%, then we move on to the next step.
More details available.