Selling your house to your own company has a technical name: the Owner Buy Out real estate, or OBO. The principle involves transferring a property owned in your name to a structure that you control (most often a real estate investment company subject to corporate tax), which finances the acquisition through borrowing. The seller receives cash, the property remains under their control, and the debt incurred by the company generates deductible expenses.
The operation is legal, but it follows strict rules, non-compliance with which exposes one to tax reclassification.
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Real estate OBO: legal mechanism and suitable company form
The OBO relies on a real transfer of ownership between two legally distinct entities: you, as a natural person, and your company. For the sale to be valid, the company must have its own existence, a corporate purpose consistent with the acquisition of real estate, and borrowing capacity from a banking institution.
The real estate investment company subject to corporate tax is the most frequently used form. It allows for the deduction of interest on loans, maintenance expenses, and the accounting depreciation of the property, which reduces the taxable income of the structure. A real estate investment company subject to personal income tax does not produce the same effect, as rental income goes directly to the partner.
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Some arrangements go through a family limited liability company or a wealth management simplified joint-stock company. The choice depends on the transmission strategy, the number of partners, and the targeted tax regime. A notary and an accountant are involved in all cases: selling to oneself requires an authentic deed, just like any real estate transfer.
To delve deeper into this type of wealth arrangement, the OBO real estate offer on Bien Construire details the conditions to be met before proceeding.
Sale price to one’s company: why the estimate conditions everything
The main point of friction in an OBO is the price. The tax administration considers that the seller and the buyer are related. If the property is undervalued, it may reclassify the difference as a disguised gift or abuse of rights. If the property is overvalued, the company bears an artificial depreciation and disproportionate financial charges.
The price must correspond to the actual market value of the property on the day of the sale. In practical terms, this means that an independent appraisal is essential. The sources accepted by the administration are:
- An appraisal conducted by a certified real estate appraiser, independent of the seller and the purchasing company
- References of comparable transactions in the same geographical area, sourced from notarial databases (DVF, Perval)
- A valuation opinion issued by a real estate agent, provided it is substantiated and dated
Producing two or three of these elements strengthens the robustness of the file in case of an audit. A price set “by feeling” or based on an old estimate constitutes the primary reason for reassessment in this type of operation.
Risk of abuse of rights: what the tax administration monitors
Abuse of rights is the real risk of the real estate OBO. Légifiscal specifies that the administration monitors these operations when the main objective is tax optimization without genuine economic substance. In other words, the company must have a reason to exist beyond just the tax advantage.
Several signals alert the tax authorities:
- The company was created solely to repurchase the property, with no other activity or wealth project
- The seller continues to occupy the property without paying rent to the company, or pays rent significantly below market value
- The sale price deviates significantly from local references without justification
- The loan taken out by the company is secured only by the seller’s personal assets, which nullifies the legal separation
The penalty in the case of abuse of rights is not limited to reassessment: surcharges apply on the evaded taxes. The taxpayer must be able to demonstrate the substance of the operation.
Bank financing of an OBO: conditions to anticipate
Banks are familiar with the mechanism of real estate OBOs, but they do not finance them like a traditional loan. The borrowing company is often new, with little or no balance sheet. The property to be acquired serves as the main guarantee, and the seller is also the director of the buyer.
In practice, the bank generally requires a contribution from the company (often funded by the share capital or a partner’s current account), a mortgage on the property, and sometimes a personal guarantee from the director. The rate offered is often higher than that of a residential mortgage, as the perceived risk is greater.
The financial arrangement must also anticipate the company’s ability to repay the loan. If the property is rented out, the rents cover part of the repayments. If the seller occupies the property, they pay rent to their own company, which serves for repayment. In both cases, the business plan of the real estate investment company must hold up throughout the duration of the loan.
Capital gains tax for the individual seller
For the seller, the transfer triggers the capital gains tax regime for individuals. If the property sold is your primary residence on the day of the sale, the capital gain is exempt. This point is often the primary motivation for the OBO: selling your primary residence to your company, receiving the net price after tax, and then occupying the property as a tenant of the real estate investment company.
If the property is not the primary residence, the capital gain is taxed after applying the allowances for the duration of ownership.
The primary residence exemption only applies if the property is actually occupied as the main residence at the time of signing the deed. A property vacant for several months or declared as a secondary residence does not benefit from this exemption. The administration checks the consistency between the address declared for tax purposes, energy bills, and the actual departure date.
The real estate OBO is not a scheme reserved for large estates. An owner who wishes to free up cash, prepare a transfer, or shift a property into a rental income logic can find a suitable framework. The absolute condition remains the economic coherence of the operation: a fair price, a company that actually operates, and notarial and accounting support from the outset of the project.