When you read the last word “life” in the title, you have two possible reactions:
Either you make a face thinking that the life annuity is too immoral for you, either you are confused because you do not really know this type of investment.
Before discussing the advantages of buying a life annuity, I must explain to you the definition of a life annuity.
Behind this term is the notion that you buy real estate (apartment or house) by paying an initial contribution (called the bouquet) and a monthly annuity to the seller until his death.
Generally, in the case of the so-called occupied life annuity, the accommodation is lived in by the seller until his death or his departure in a retirement home.
Sometimes it is uninhabited in the case of a so-called free life annuity, and the property can then be inhabited or rented by the buyer. You can now buy annuities online as well.
If you are open and curious to learn, then let’s discover the strengths of buying a life annuity to easily invest in real estate.
The life annuity is affordable
As I told you previously, when purchasing your life annuity, you must pay a contribution that often represents less than 30% of the value of the property.
Thus, it is possible to start investing in a life annuity with an amount of 20,000 dollars (or less): You should know that a bank loan is almost impossible in life to pay this contribution.
So, you will have to build this nest egg by saving on your own. Paying Yourself First is a habit you need to develop in order to become a successful investor.
The life annuity frees you from bank financing
One of the advantages of a life annuity is that you do not immediately pay the full value of the property. Indeed, it is the seller of the life annuity who gives you credit. It’s like giving you a loan to buy him his own house. By way of interest, the seller lives in the accommodation until the end of his life. Parallel to a real bank loan, it’s like paying off the loan as long as your banker is alive. Of course, it is better that the seller is always older than you (twenty years minimum).
The life annuity allows you to buy cheaper
Not only does the seller give you credit, but he also “pays” you rent.
In fact, he doesn’t pay you that rent every month. Only an allowance representing this amount of money is subtracted from the real estate value of the property. Thus, the seller advances his rent to you, corresponding to the number of years of his statistical life expectancy.
The life annuity is zero management
The life annuity is, therefore, a “tenant” who has paid his rent in advance. He will take good care of the property because it is his “home” to which he remains very attached.
Therefore, no management is required in the case of a life annuity.