The Viager Investment market is a very small and specialist market.
Firstly, if you are considering purchasing a viager investment you will need to be a cash buyer. Because of this your only financing option is a French Equity Release Mortgage.
What is a Viager Investment
A Viager investment is a French property transaction which completes on the death of the seller.
The transaction has two parts. The first part, is a down-payment which you pay at the outset called the bouquet. The second, the rente, is regular payment you pay from the date of purchase until the death of the seller. Thus you will not know the actual price of the property until the seller dies and you add all the rente payments to the bouquet.
Usually, the seller stays in the property – this is a called a viager occupé.
However, some sellers hands over the property immediately – this is called a viager libre. Garages in central Paris are sometimes sold in this way.
The rent is a function of the property value and the age of the seller or, occasionally, sellers. The bouquet, down-payment, is agreed by negotiation.
The rent element is determined by actuarial calculations, not by the health of the individual seller.
This is an investment with an unknown duration, although re-sale is possible.
The yield is unknowable in advance.
Viagers can be an excellent investment. But they can be high risk so they make most sense as a speculative part of a large financial portfolio unless they can be acquired as a viager libre.
- Viagers often live in desirable locations, such as Paris or the Côte d’Azur, making these properties accessible and affordable.
- The initial investment (the bouquet) is low in relation to the property’s open market value. Notaire fees are correspondingly low.
- The administration is less complicated than raising a mortgage for a full-price property.
- The viager continues to pay maintenance and service charges (excluding taxe foncère).
- The market is small, around 5,000 thousand per year.
- The rent is revised annually, not fixed.
- The viager can outlive actuarial expectations.
The Case of Jeanne Calment
The most famous viager case is that of Jeanne Calment, viager and Me André-François Raffarin the purchaser, who was also Jeanne Calment’s notaire.
Me Raffarin purchased Madame Calment’s apartment in May 1965, when she was 90, paying a monthly rent of around €390.
She went on to become the oldest person on earth, dying in 1997 aged 122.
Me Raffarin died in 1995, aged 90, by which time he had paid Jeanne Calment about €142,000 rent.
The case has led to the entry of a new term in the French property lexicon, TGV (théorie des grands vieillards) which states that it is a mistake to purchase a viager from someone who is already exceptionally elderly because, statistically, they have a good chance of living much longer.
If you are considering making an investment in a viager you will find useful legal information on the French Government website.
Key Viager Terms
- Bouquet – The down-payment on a viager transaction.
- Crédirentier – The person receiving the rent (the viager).
- Débirentier – The person paying the rent, the purchaser.
- Rente viagère – Rent paid to the viager, monthly, until death.
- Valeur venale – Market value of the property if empty.
The Bottom Line
Essentially a French bank will view the financing of a viager investment in the same light as a request to borrow funds to invest in financial derivatives and in the current financial climate few French banks relish the risk.