Partial Sale of Real Estate: Advantages, Disadvantages, Taxes & Co. – for Apartments, Houses & Land
Partial Sale of Real Estate – For good reason, Real Estate has been considered a secure retirement provision for some time now. They are value-stable and low-risk – perfect for an independent life in old age. Therefore, the partial sale of your own property is an ideal option. You sell part of your property, quickly gain liquidity, and can continue to live there. However, every decision also comes with disadvantages. In this case, inflation, follow-up costs & Co. Learn everything about the advantages and disadvantages of the partial sale here, why you should definitely take a look at the right of use, and what tax consequences the partial sale entails.
What is meant by partial sale?
If you choose to sell part of your property, you are not selling the entire asset, but rather a portion of it. Typically, this involves between 10 and 50 percent of the property. You then receive the purchase price for the sold portion and can continue to live there by paying a monthly usage fee – comparable to rent. Thus, no second person moves into your property. Instead, you remain the sole occupant.
No one else moves in, yet you are allowed to continue living there
More on the advantages shortly. Here is a summary of the partial sale:
- A part of the property is sold (usually 10-50%)
- Partial sale of a house: Yes
- Partial sale of an apartment: Yes
- Partial sale of a plot of land: Yes
- You remain the sole occupant of the property
- You pay a monthly usage fee
At first glance, this sounds quite interesting. But why should you consider a partial sale? Let’s take a look at the advantages.
Advantages: Quick liquidity, renting & Co.
A partial sale brings a variety of benefits. You quickly gain financial flexibility, benefit from future value increases, and can generate additional capital through rental. More details on this shortly.
Summary of the benefits of a partial sale:
- Quick sales process
- Fast liquidity
- Future sale & purchase possible
- No move-out required
- Profit from potential value increase
- Profit from potential rental income
- Exclusive usage rights possible after sale
One of the key advantages of a partial sale lies in the exclusive usage rights of the property, which is even possible after a full sale:
Usufruct: Exclusive Usage Rights After Sale
As already explained, you can continue to live in the property after completing a partial sale. Let’s take a brief look at the two options available to you for selling the property:
- Partial sale without prospect of full sale or
- Partial sale including full sale in X years
If you choose to partially sell your property and have agreed with the buyer to fully sell your share after X years, the right of usufruct allows you to continue living there even after the complete sale of the property. You will then continue to have the sole right of use.
The advantage: You are never dependent on the goodwill or consent of the seller at any time.
Swift sales process and quick liquidity
Whether with or without the possibility of full sale – compared to a regular real estate sale, selling part of your property involves far fewer obstacles. If you want to sell your property completely, you usually go through several phases from preparation through creditworthiness checks to the sales contract. Especially the verification of the buyer’s creditworthiness can certainly take a long time.
The steps of a regular sale:
- Prepare documents
- Valuation
- Real estate marketing
- Creation of a listing
- Conducting and planning viewings
- Negotiation of the sale
- Processing and drafting the purchase contract
- Handover of keys
The advantage of partial sale? With a partial sale, most of these steps are completely skipped. Instead, you deal directly with the financial service provider, who then buys a portion of your property from you. This saves you time and quickly provides liquidity.
Steps of a partial sale in comparison:
- Valuation
- Processing and drafting of the purchase agreement
- Handover of keys
Both purchase and sale possible in the future
Additionally: If you want to sell your share of the property in the future, the partial buyer usually helps you achieve the best possible price. After all, you are both interested in a high profit, and a repurchase at a later date is also not excluded.
Profit through appreciation and rental income
Sollte die Liegenschaft zudem in Zukunft and Wert gewinnen, profitierst auch du als Miteigentümer davon. Denk daran: Sie gehört bis zu 50 Prozent weiterhin dir und ausziehen musst du auch nicht. Umzugskosten und der, mit der Suche nach einem neuen Wohnobjekt verbundene Stress fallen somit für dich weg. Selbst wenn du zu einem späteren Zeitpunkt doch ausziehen möchtest, bist du nicht an einen Gesamtverkauf gebunden. Stattdessen kannst du die Immobilie vermieten und dadurch weiteres Kapital für dich rausschlagen.
Als Teilbesitzer des Objekts steht dir auch die Option der Vermietung offen
Je nachdem kannst du auch nur einen Teil des Objekts vermieten. Das bietet sich zum Beispiel bei einer Doppelhaushälfte oder einem größeren Haus an.
Nachteile: Folgekosten, Nutzungsentgelt & Inflation
Every medal has two sides, so does partial sale. Even though a swift sales process and quick liquidity may sound tempting, you should consider the disadvantages of partial sale. The follow-up costs should not be underestimated, especially the usage fee.
Paying a usage compensation
As a partial seller, you do not have to move out, but can continue to live in the property as the sole user. In return, the partial buyer and new co-owner will set a monthly usage compensation, similar to rent. The exact amount depends on the sum paid out and usually ranges between 3-5 percent of the sale price.
Usage compensation lies between 3-5% of the paid sum
The amount refers to each year. Here is an example calculation:
- Monthly usage fee = 3%
- Purchase price: 100,000
- Calculation: 0.03 * 100,000 / 12
- Monthly usage fee: 250 Euro
Result: If you have sold part of your property for 100,000 euros, a monthly usage fee of 250 euros per month becomes due, which you have to pay to the new co-owner.
Loss due to inflation & devaluation of money
According to the European Central Bank, the current inflation rate is 2% per year, although we are currently at 5% (as of 01/22). We find that even a value increase of 25% or 30% over 15 years cannot compensate for inflation – a major disadvantage of partial sale!
Value increase cannot always compensate for inflation
You should therefore reconsider whether a partial sale is really worth it under these circumstances. If partial sale seems too risky for you, you can alternatively choose a real estate annuity. We will briefly introduce it to you:
Alternative: Real estate annuity or life annuity
Real estate annuity means that you sell your property completely and retain a lifetime right to live in and use it. Additionally, you can look forward to a small monthly payment. The advantage: Maintenance costs are no longer your responsibility, as the new owner will take care of them.
Real estate annuity explained simply:
- Direct, complete sale of your property
- Lifetime right to live in and use the property
- Small, monthly “extra pension” from the seller
- No maintenance costs
Conclusion: Is a partial sale sensible? – Taxes, inheritance & Co.
Whether a partial sale makes sense depends on your personal circumstances and future plans as well as the current financial situation. From a tax perspective, a partial sale does not differ from a regular property sale. Likewise, the inherited portion of a property may be sold with reference to BGB § 2033 paragraph 1, as you, as a co-heir, are entitled to dispose of your share of the estate. Similarly, in the case of a divorce: here, you may already sell your share of the property after the separation year.
Summarized:
- Partial sale is influenced by personal circumstances
- No tax difference between partial sale & sale
- Heirs’ community: partial sale of inherited property possible
- Divorce: partial sale possible after the separation year
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