Originally published at SovereignMan
When Hugh Hefner finally sold one of the most famous homes in the world back in 2016– the Playboy Mansion– the market was a bit slow. And Hefner had to settle for about half of his original $200 million asking price.
But in exchange, the then-90-year-old got a sweet deal: He didn’t have to move out. The buyer would only take possession of the property once Hefner passed away.
A similar deal took place between Hollywood socialite Zsa Zsa Gabor and the buyer of her $11 million Bel-Air estate. For three years after the sale, until her death at age 99, Gabor remained in her 28-room, French Regency-style mansion, which had been her home since 1973.
Buying a property and allowing its previous owner to live there until his or her passing is not just another quirky Hollywood arrangement. Although rare in the US, it has a long legal tradition in Europe.
And if you find the right property, at the right price, you could nab an Italian Villa for a HUGE discount, even more than 50% off.
Before I explain this legal construct, let’s first establish why it makes sense to consider diversifying part of your savings into foreign real estate.
As I wrote in a recent Notes article, the US government just released its annual fiscal bill of health. Conclusion? Uncle Sam’s net worth is now NEGATIVE $75 TRILLION… almost exactly the size of the global economy as a whole.
To say this is disastrous is a colossal understatement. There will be a reckoning. I don’t know when it will occur, but there’s not a single nation in the recorded history of the planet that has proved immune to the basic financial laws of the universe. Not one.
Diversifying a portion of your savings makes sense when you realize what might be coming down the pipeline. At worst, it will help hedge against the risk. At best, it might actually save your assets.
What kind of diversification makes the most sense to look into? I’d say those that are portable, like gold and silver… and those that are international, like foreign real estate.
And if you can get that foreign real estate for a song, then of course, that’s even more attractive.
That’s where this legal structure comes in. It allows you to buy Italian, French, and Spanish property (to name a few) for anywhere from a 30-to-60-percent discount.
The legal concept is called “Bare Ownership”, and it has been used for centuries in Europe.
The framework is simple: under Bare Ownership, an owner sells his/her property rights to a buyer, and the two parties each become part owners. Once the original owner passes, the rest of the title is conveyed to the buyer.
You could say it’s called “bare” ownership because the buyer “barely” owns the property upon the initial sale: the seller is the one who is legally entitled to live there. But again, once the seller passes away, bare ownership becomes full ownership, and the buyer receives clean title and no transition or estate issues.
The arrangement provides both parties with benefits: an older person with property can receive a much-needed cash infusion without having to deal with the immense stress and grief of moving and finding a new place to live.
And a patient buyer is able to eventually acquire a nice property at well-below market value. If you pick the right real estate, it might even increase in value between the time you buy it and the time you take possession.
This type of sale is becoming more and more common between foreigners and Europe’s elderly: fewer than ten percent of retirees in Spain and Italy, for example, have private retirement savings. So upwards of 90% are counting on the government to take care of them.
That’s a problem. These governments are flat broke and rapidly running out of cash. Italy’s banking system is on a knife’s edge and in substantial need of a bailout. So these retirees really need cash.
Rather than selling, however, and having to find somewhere else to live, many pensioners are starting to turn to Bare Ownership.
Just like Hugh Hefner.
And for the buyer, Bare Ownership can be a solid structure to consider if you’re looking to internationally diversify your portfolio via a medium-term investment. You might sell it someday at a higher value. In the meantime, your money is in a hard asset, not fiat currency.
And just like the Playboy Mansion’s buyer, you could end up with a great property… for half the price. If you’re working on your Plan B, then Bare Ownership is something to consider.
If you are already a member of our flagship international diversification service, Sovereign Man: Confidential, you can read our full report for more details, legal contacts, and information.