French leaseback?

Will soon have c.€25000 to invest. Seriously considering French leaseback in South-East-near ryanair routes. Anyone any pros/cons?

Have you checked out the many existing threads on French leasebacks?

I would recommend that you seek expert advice before deciding on an investment of this type.

Note that the already points this out to people. No need to post that and nothing else in response to every thread that you come across.

No harm in emphasising the point, just to be on the safe side!

just saw your thread on french leasebacks.
i'm just after moving from the industry.
i wouldn't touch them.
too many issues.
you want to ask all the questions, and get replies in writing.

it's basically a con. put your money into rabodirect. not joking, it's a better investment!

cheers folks. will give it a lot more thought and research

Hi MarkR,
Thanks for your insider contribution. I was thinking of French leaseback too & you put me right off.
I've also been thinking of buying in France on a normal buy to let basis...a friend in the business recommends Perpignan (spelling ?)
Would you have any views on this region?
I'd be most grateful for any info.

Perplexed said:

a friend in the business recommends Perpignan (spelling ?)

Click to expand...

In what business? The business of selling property to punters?

MarkR said:

just saw your thread on french leasebacks.
i'm just after moving from the industry.
i wouldn't touch them.
too many issues.
you want to ask all the questions, and get replies in writing.

it's basically a con. put your money into rabodirect. not joking, it's a better investment!

Click to expand...

Hi MarkR could you please let me know what the drawbacks are?

Hi All

I looked at French Leaseback last year and found properties overpriced.

I bought in St Cyprien which is on the coast approx 15 km from Perpignan. Absolutely love it!!!. Its where the french go on holiday beautiful port town. Wonderful Beach with views of the snow caped mountains. Not alot of english spoken in St Cyprien so the whole family have signed up for French Classes. I am renting this summer with a French Agent and have so far rented 7 weeks ranging from 290 euro off season to 534 high season...so am well on my way to 5% I would have been guaranteed with leaseback. Approx. 1.5 hours drive from Sking in the winter. Take note that apartments for sale are very small, usually ranging from about 30-40 metres square, and this includes mezzanine level which has attic roof (sloping). We saw properties ranging for 70,000 to 114,000 euro (including agent fee's). On top of this you have the notary charges.

We bought through a english speaking agent who helped with paperwork, opening a bank account etc, but if you speak French, go with the local immobilisers as we paid equal commision to both immobiliser and agent.

Ryanair fly into Gerona, and its about an hours drive to St Cyprien/Perpignan from their. Or you can fly to london (5 hour stopover) then on to Perpignan.

Good Luck

French govt has withdrawn from the supply of social housing over the last few years, many skeptics here in france question if these schemes leasebacks and "de Robiens" will be future low cost housing.
9 years time when the tax deductions and the guaranteed returns end and the market is flooded with these properties, the state will move in and buy them up cheaply.

Thanks for all the comments.

Clubman : Yes he is in the business of French Property but he also happens to be a friend. He & his brother are both buying apts in this particular development......guess he's putting his money where his mouth is ? He would also recommend buy-to-let as opposed to leaseback although he's not as scathing as markR.....says it depends on if you want part investment/part holiday home in which case leaseback is an ok idea. Also says ( & I think we all know this ) that with any guaranteed rental you'll pay over the odds.

Patchy : Good news ! Ryanair are flying direct from Dublin to Perpignan starting this summer. Have always been told that cheap flights to an area are an indication of a good investment location. You make it sound like a wonderful region & I it's great that you have your place so well booked.
The French lessons won't go astray especially if you have children doing exams....

le francais : Interesting idea & probably a grain of truth in there somewhere.

MarkR said:

just saw your thread on french leasebacks.
i'm just after moving from the industry.
i wouldn't touch them.
too many issues.
you want to ask all the questions, and get replies in writing.

it's basically a con. put your money into rabodirect. not joking, it's a better investment!

Click to expand...

Can you tell us why its a con.....what issues are you referring to?

I just thought I'd throw in my tuppence worth..I have 2 friends both of whom have bought in both Perpignan and St. Cyprien and both are equally disenchanted with the whole experience. While both properties are with agents for rentals, the one that is seasonal has had a very poor performance being vacant for most of the summer last year and the block in Perpignan failing to attract the rental yields expected. If you are buying with a view to having some weeks yourself place your property with an English Holiday rentals company specialising in the area as in my experience local "agences" are more involved in the selling than rental of property and do not market the properties as well as tourism based companies. From my work I know that there is often a shortage of rentals in the Argeles/Collioure and Banyuls sur Mer area so perhaps here would be a good place to look? Feel free to pm me if you want any more info!

heracles said:

Can you tell us why its a con.....what issues are you referring to?

Click to expand...

- 20% over-priced (easy to understand why- you get 19.6% after 15 years onwership)
- over supplied
- advertised return based on unrealistist rental prices.
- high unoccupancy rate due to high rent.
- while the tax insentive associated to these leasebacks "could" make sense for French resident, it does not for none French resident as you will ultimately end up paying 42% tax (assumption you are on 42% tax band) no matter how good the French tax benefits are.

Why do you think they are so much advertised in Ireland? b'cos they can not sell them to the French themselves!!

Stay clear....

bacchus said:

- 20% over-priced (easy to understand why- you get 19.6% after 15 years onwership)
- over supplied
- advertised return based on unrealistist rental prices.
- high unoccupancy rate due to high rent.
- while the tax insentive associated to these leasebacks "could" make sense for French resident, it does not for none French resident as you will ultimately end up paying 42% tax (assumption you are on 42% tax band) no matter how good the French tax benefits are.

Why do you think they are so much advertised in Ireland? b'cos they can not sell them to the French themselves!!

Stay clear....

Click to expand...

I don't understand Bacchus. With Leaseback you are guaranteed a %net return over 9-11 years. Why is unoccupancy relevant? Why also are you saying 42%? Surely you have CGT not income tax on your gain? I would not expect that you would glean much income from the property with an 80%+ mortgage.

Does your advice have a sound basis?

Del.

Del3D said:

With Leaseback you are guaranteed a %net return over 9-11 years.

Click to expand...

I would have thought that the key point was the fact that most of these offers have the leaseback guaranteed rental income built into the initial purchase price - i.e. you will generally pay a premium for such a property over and above a similar property on the open market with no rental guarantees.

No ClubMan, not true in my experience.
The guarentee is not underwritten by money coming out of the developers own pocket (i.e. the profit on his sales) but rather from the government, by way of a refund on the 19.6% VAT which is levied on the building costs. So there is no necessity for the developer to have to add a premium to the price to cover the rental guarentee.

Now, you might of course find some developers trying to up the price a bit because they think we're mugs, but this is where you need to do your homework and compare pricing (locally, and regionally) and be clear about value and future marketability.

In my opinion the REAL issue with Leasebacks is that (usually) the premier development sites are snapped up by straightforward developers selling to the open market with no Leaseback or guarentees. These guys know their premier location will deliver good sales without the hassle of arranging leaseback contracts, VAT refunds, and permissions with the bureaucratic French authourities.
As a result, you generally find leasebacks in what I would call 'second tier' areas or sites. Places which would be more difficult to market to a sceptical buyer without the carrot of a guarenteed income.
A few years ago - when the French property market was in the doldrums - you might find a prime located leaseback. Not any more. For instance, you will no longer find a leaseback on the Cote D'Azur sitting on a marina, or a popular beach. They are found way back in the hinterland where prices are lower.

If you bought one in the good old days, in a great location - lucky you!

Meccano said:

The guarentee is not underwritten by money coming out of the developers own pocket (i.e. the profit on his sales) but rather from the government, by way of a refund on the 19.6% VAT which is levied on the building costs. So there is no necessity for the developer to have to add a premium to the price to cover the rental guarentee.

Click to expand...

There may be no necessity but that doesn't mean that they won't do it! Aren't the prices of tax incentive properties here in Ireland (e.g. S.23 or whatever) often inflated over and above the price of similar non tax incentive properties to take account of the tax breaks? Why would something similar not happen in other jurisdictions especially if the developer could get away with it?