Invest in Bare Ownership in Luxembourg
Investing in bare ownership lets you acquire a property with a 30 to 40% discount in exchange for the temporary transfer of the usufruct. At term, you recover full ownership automatically, with no additional costs.
How Does Investing in Bare Ownership Work?
When the usufruct ends (death or fixed term), you automatically become full owner with no further payment or formality.
The 6 Advantages of Investing in Bare Ownership
30-40% Discount
Buy a property at a reduced price thanks to the deduction of the usufruct value.
No Rental Management
The usufructuary manages the property throughout the dismemberment period.
No Property Tax
The property tax is the responsibility of the usufructuary during the dismemberment.
Limited Maintenance
Only major repairs (structure, roof) are the responsibility of the bare owner.
Built-in Capital Gain
Recovery of full ownership with no additional costs when the usufruct ends.
Financeable
Banks finance this type of acquisition despite the absence of immediate income.
Temporary vs Lifelong Dismemberment
| Type | Duration | Discount | Risk | Profile |
|---|---|---|---|---|
| Temporary (SCPI) | 10-20 years fixed | 35-50% | Low | Cautious investor |
| Lifelong (elderly) | Life of the usufructuary | 30-70% | Medium | Opportunistic investor |
Temporary Dismemberment
Fixed term (10, 15, 20 years). Often offered by SCPIs or developers. Predictable yield, limited risk.
Ideal for: Retirement planning, tax savings
Lifelong Dismemberment
Linked to the life of the usufructuary. Larger discount but uncertain duration. Higher gain potential.
Ideal for: Investors accepting uncertainty
Yield Simulation
Example: Lifelong bare ownership purchase
Characteristics
Your investment
Purchase price (bare ownership)
350 000 €
-30% vs vacant value
Value recovered at term
500 000 €
(+ market evolution)
Built-in capital gain
+43%
i.e. ~3.6%/year
Note: This calculation does not account for the evolution of the property market. If the market rises 2%/year over 12 years, the property would be worth ~€634,000 at term.
Risks and Precautions
⚠️ Risks to Know
- •Uncertain duration (lifelong): the usufructuary may live longer than expected
- •No income during the dismemberment
- •Major repairs at your expense (structure, roof)
- •Illiquidity: resale more difficult before term
✓ Recommended Precautions
- ✓Check the condition of the property before purchase (technical survey)
- ✓Negotiate the allocation of charges in the deed
- ✓Build up savings for major repairs
- ✓Diversify: do not bet everything on a single property
Frequently Asked Questions
What are the advantages of investing in bare ownership?
Investing in bare ownership offers a 30-40% discount on the purchase price, no rental management, no property tax during the usufruct period, and automatic recovery of full ownership at term with no additional costs.
What is the yield of an investment in bare ownership?
The yield comes mainly from the capital gain on the reconstitution of full ownership. For a lifelong dismemberment with a 30% discount and a life expectancy of 12 years, the annualised yield is around 3-4% excluding property market evolution.
How do you finance a bare ownership purchase?
Luxembourg banks finance bare ownership purchases, generally up to 70-80% of the bare ownership value. The absence of immediate rental income is offset by the prospect of scheduled appreciation of the property.
Can I resell my bare ownership before the end of the dismemberment?
Yes, bare ownership is transferable. However, the secondary market is more limited. The value of your bare ownership increases mechanically over time (as the term approaches) and with market evolution.
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