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Property Leaseback Sales
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What does a 'French Property Leaseback' mean?
This unique scheme has operated now for 20 years, however when our Managing
Director, Stuart Law, introduced the scheme commercially to the UK in 2003
it really began to take off with British buyers. The  French
Property Leaseback scheme enables people to be able to afford to buy their dream
holiday home or overseas freehold investment property in France and to cover
a lot or all of the mortgage costs with a guaranteed rental income (typically
3-7%
of the property price per year). The rental income comes from a large European
holiday company who will rent out and manage your property on your behalf for
typically 9 years. You also don’t have to pay VAT on the property which
saves you the 19.6% uplift that normally applies to all new property – a
nice discount of 16.4% from the normal price !
As the owner of the property you would usually have some use of the property
for holidays for a few weeks of the year if you wish (please check the individual
useage terms for the scheme you are interested in as this varies significantly
between schemes). There is also the added benefit of buying the property fully
furnished and already fitted with a kitchen and bathroom plus appliances, knowing
that your property is not left empty and unattended for weeks or months at a time
and that the maintenance etc. is paid for by someone else ! Some people ask if
this is too good to be true ? Well there is only a limited amount of property
available at any time under this scheme, it sells very quickly, you should view
the investment as being for 20 years to get the best returns and rental incomes
on new schemes are dropping as prices of property goes up – those are some
of the catches !
The majority of people who own holiday homes in France, only actually live
in them for a few weeks of the year. In addition, French inheritance laws mean
that many properties are owned by many family members who cannot agree what to
do with the property - this also leaves many properties empty. This is why the
French government has introduced 'Residence de Tourisme', or French 'Leaseback'
schemes to try and increase the quantity of holiday accommodation available in
tourist hot-spots in order to cater for more tourists and increase the tourist
revenues of France !
Basically you get a holiday home you own, usually with use of it for several
weeks of the year with a fixed rental income guaranteed for the rest of the year
and a discount to market value of the property represented by a 19.6% VAT refund
on the whole property from the French government. (All new property has VAT in
the total price, this refund represents a 16.4% discount to market value).
For pure investors there are also schemes for corporate let purposes that offer
apartments on the French Leaseback scheme - the returns can be higher - often
in the 5-6% range and in good locations in Paris, Toulouse and Bordeaux. These
corporate let leaseback investments usually have no personal usage included but
the returns are higher.
View
our list of French leaseback investment properties - click here
How the French Property Leaseback scheme works
Some new properties for sale in France have negotiated a 'Residence de Tourisme'
status. This means that a purchaser can buy the freehold of the property with
or without a mortgage and then lease it back to the developer or a rentals company
for a pre-determined period (usually around 9 years) at a fixed rental. At the
 end
of the lease period, the property will be returned to the owner in perfect condition
although in theory the company could have the right to renew the lease for a further
9 years. Most of these properties include pools which can be accessed free of
charge. Other facilities that a development may have, such as a gym, may be charged
for. During the 'off-season' periods, although the property can be used, the extra
facilities may not be available.
Each property purchased in this way often has options for the purchaser to
make use of the property for a few weeks of the year at no cost. Each development
has its own definition of Very High, High and Low season weeks and at the time
of your purchase you would define how many of each weeks you wanted to keep for
your own use, normally none to six weeks dependant upon each scheme.
The owner of each property has first choice of which weeks to spend at the
property, and would be sent a form at the beginning of each year to request their
preferred weeks.
In order for the rentals company to guarantee the rent for 9 years it is vital
the development is in a high demand location with good facilities - the same attributes
that tend to drive a good capital gain in a property.
For investors who are interested, a rule of thumb can be used for calculating the breakeven point of a leaseback property investment. A 20% deposit with an interest only mortgage would normally breakeven. However, most leaseback purchasers chose to make a 20% deposit and then take a 25 year capital repayment mortgage which, depending on the yield of the purchase, means that the purchaser would need to make an initial small top up to their rental income in order to pay the mortgage payments each month. However,once the VAT rebate is used to reimburse part of the mortgage this small top up will be reduced further if not reduced to nothing. In addition, as rental income is reviewed and increased this top up will be reduced further.
Most investors in the French property market now prefer this "capital repayment/top up each month" option as they look at the leaseback scheme as a pension booster. You may find our mortgage/investment calculator useful in this respect to give you an idea of your anticipated monthy cash flow. For more information on how to use your leaseback investment as a pension booster please do not hesitate to contact one of our International Property Consultants on 0845 400 6000.
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View
our list of France leaseback properties for investment - click here
For
Frequently Asked Questions on French Property Leaseback click here.
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