Interview: What to know about investing in properties with usufruct?

1. What are the main differentiators of the real estate investment model with usufruct compared to other traditional options in the real estate market?

The usufruct model stands out in several ways from traditional real estate investments, like buying to rent or flipping properties. First, it provides access to off-market properties that aren't typically available through standard channels, as homeowners often prefer this discreet option to unlock value without fully selling their property. There's no operational hassle with tenant turnover—no dealing with vacancies, evictions, or maintenance disputes—since the usufruct holder (the original owner) remains responsible for regular upkeep and property taxes, while investors only handle unforeseen extraordinary maintenance. It's a leveraged purchase, with higher discounts for more extended usufruct periods, making it more capital-efficient. Tax-wise, it's also efficient, as capital gains taxes are deferred until a future sale, and there's no regulatory uncertainty surrounding rent controls or increases, unlike rental properties. Overall, it's a passive, low-risk entry into appreciating assets with built-in social benefits.

2. How can we transparently address potential doubts or concerns from investors regarding this innovative and still underexplored model?

Transparency is key to building trust, especially with a model that's innovative in markets like Portugal and Peru but well-established elsewhere. We emphasize that ownership is legally proven and secure, backed by civil law frameworks where usufruct has been used for centuries—it's particularly common in France, for example, with a mature market for such transactions. The transaction involves a straightforward sale of ownership, accompanied by a lifelong or fixed-term usufruct agreement. This eliminates risks associated with inheritance disputes. There are no accruing interest payments, hidden fees to intermediaries, or unexpected costs. Investors have no periodic cash flow obligations beyond the initial purchase, as the usufruct holder is responsible for covering property taxes and regular maintenance. We provide clear legal documentation, educational resources on our platform, and case studies to demystify the process, ensuring investors feel confident in the reliability and long-term value of our offerings.

3. Is the liquidity of this investment directly tied to the death of the usufruct holder?

No, liquidity isn't solely dependent on the usufruct holder's passing. While the full ownership transfers at the end of the usufruct term (which could be lifelong or fixed), investors can resell the bare ownership at any time through the UZU platform or other channels. This allows for "flipping" the investment for those with short- or medium-term horizons, potentially capitalizing on market appreciation or changing needs. Our marketplace facilitates secondary sales, enhancing liquidity and making it comparable to traditional real estate, where properties can be traded before full maturity.

4. How does this model reconcile financial returns with positive social impact? How does the usufruct model benefit the holder of the usufruct?

This model is inherently a win-win, striking a balance between strong financial returns for investors and meaningful social impact. For the usufruct holder—often elderly individuals, families in transition, or those facing financial pressures—it provides immediate liquidity by unlocking a significant portion of the property's value (typically 40-70% of market price) without forcing relocation. This supports dignified aging, helps cover medical costs, funds family needs, or eases inheritance planning, reducing economic stress and promoting housing stability amid gentrification or market shortages. For investors, acquiring at a discount ensures competitive returns with minimal management burden, while contributing to social good by enabling homeowners to stay in their communities. It's impact investing at its core: profitable, ethical, and transformative for society.

5. From a financial perspective, what kind of return or appreciation can an investor expect when acquiring a property with usufruct compared to a traditional purchase?

Investors can anticipate equal or superior returns compared to traditional real estate, where properties are bought and rented out. UZU recommends setting a discount based on factors such as the usufruct holder's age and the rental yield of similar properties, ensuring the effective yield matches or exceeds rental income streams plus property appreciation. For younger homeowners, the longer usufruct term requires a higher discount (e.g., 50-60%), which amplifies leverage and potential upside upon full possession. Unlike traditional buys, there's no immediate rental income but also no voids or management costs, leading to a more predictable, deferred value realization. In an appreciating market like Portugal, this can translate to substantial long-term gains, with the added benefit of tax deferral.

6. What is the investor profile most aligned with this type of investment, and why?

The ideal investor for UZU is familiar with the real estate sector and prefers a passive approach, avoiding tenant management. They seek long-term exposure (5 to 20 years), with attractive returns through the acquisition of discounted properties in prime locations. This profile includes retirees building legacies, high-net-worth individuals, family offices, or institutional investors, such as impact funds.

7. How does UZU mitigate risks associated with this model and ensure transparency for the investor throughout the process?

At UZU, risk mitigation and transparency are foundational. We partner with reputable law firms in each market to handle due diligence, ensuring that all transactions comply with local regulations, such as Portugal's Civil Code or Peru's property laws. Standardized legal documentation minimizes ambiguities, with clear contracts outlining rights, responsibilities, and valuation methods. As an option, UZU can provide monitoring services for property status, including maintenance updates during the usufruct period. The usufruct holder is responsible for regular upkeep, while investors are only accountable for unforeseen, extraordinary maintenance costs. We also offer educational tools and third-party appraisals. Full disclosure of fees, taxes (e.g., capital gains or stamp duties), and potential scenarios is provided upfront by our real estate broker, fostering trust and allowing investors to make informed decisions every step of the way.

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