Can anybody advise me on French leaseback properties?

M

Macd

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Can anybody advise me on French leaseback properties, Are they a good long term investment? l am thinking about the South of France location (Nice). Can anybody advise me of a better location for long term investment? Are there any pitfalls one should look out for?

Also what doyou feel in relation to the German economy. With property prices at a low is it a good time to buy in Germany and if so which part of Germany do people think is the best area?

Regards

Macd.
 
Re: Property Investment

Macd,
You will get better feedback by posting in Overseas Property Investment.
Also, i would encourage you to do a search for leaseback in above mentionned forum. Loads of info/threads about your subject of interest.
 
Moved from Property Investment to Overseas Property Investment.

Title changed to reflect question.
 
French leaseback has been discussed many time on AAM see for starters
 
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Basic thing to remember about french Leaseback is that it can do ok for you if you buy the right property in the right place at the right price. Having said that, nothing on the market from any of the agencies currently meets all these criteria.
Main problem with leaseback is that it is generally grossly overpriced compared to equivalent properties in similar areas. Check the price per sq.m of the property you are buying and compare it to what second hand properties are making locally -- you will usually find that a hefty premium has been added to the leaseback project.
The other issue that keeps the bigger investors away from leaseback is the reality that it is impossible to make windfall gains on leasebacks in France. At best, the properties are valued at a multiple of the rent, and the rents are inflated annually typically against the building index or some other inflation tracker. This means that the price can not rise exponentially as can happen in free marketplace situations, so no windfall, ever.
In reality, the exit strategy from leasebacks is shaky to say the least. You will end up at the end of the lease period with a property that is worth less in real terms that what you paid for it, and with uncertain issues around the cost of maintaining common areas, pools etc. Run-down "end of life" properties like this can be hard to dispose of except at bargain basement prices.
The number of these projects coming on line at present in France is rising out of control, so be very very wary of buying these projects from here on.
Best advice on French Leasebacks? Don't touch them. In particular, never buy the so-called "aparthotel" projects where you are just buying a hotel room at a poor rate of return.
 
They seem to sell these leasebacks to the most gullible who flock to hotel rooms in response to radio adverts who then ultimately purchase at inflated prices and who go away feeling they snapped up some form of investment at a bargain price.
 
This is true, if you carried out due diligence on the surrounding properties in the area and the price of the leaseback property you can determine exactly how much money they have risen the property to supply the leaseback. In my opinion, leasebacks are just another marketing and sales strategy for those who look for a guaranteed income, but what they dont know is that they are being fed their own money. In the USA for example, if a property offers a guaranteed rental scheme they have to register with the Securities and Exchange Commission (SEC) and issue a bond on the basis of this guarantee. Im not familiar how exactly they are doing these leasebacks but im sure they are not issuing bonds.
 
In fact the rentals are usually genuine enough on properties within the French leaseback scheme (the government approved scheme). The problem has two faces, (a) the properties are typically inflated above local norms, and (b) the nature of the product -- index linked rents, and the price of the property being a factor of the rents -- means that the market value can effectively only ever rise by the inflation index.

In summary, even the best leasebacks in France will never give you a windfall profit. Never. The exit strategy is weak, you will be left holding a property that is hard to dispose of and is worth less in real terms than what you paid for it.

To be fair, leaseback schemes in France bear no relationship to the so-called "guaranteed rentals" scams in other markets, although there are a number of the latter operating in France also, particularly on the South coast.
 
Have done some checking on french leasebacks, seems you can offset mortgage interest against rental income, but my irish accountant then tells me I will have to pay irish income tax on french rental income after paying french income tax. Is this correct?............
 
YES. you may to pay irish tax if you have a rental surplus after expenses such as interest etc. You will then get a credit for the french tax paid.
The French DTA covers income taxes but not CGT.
 
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