French leaseback?
- Thread starter rjt
- Start date
Forgot to add:
You said previously "If you are looking for speculative gains you should look elsewhere" yet now you are saying that this is a speculative play. You are contradicting yourself. This is in fact a purely speculative play with no return based on rental yield, since you are contributing annually in addition to the large 30% upfront equity payment. I cannot find any rational basis for your alleged 'belief' in these schemes, other than the fact that you are getting commission on each sale you make.
You said previously "If you are looking for speculative gains you should look elsewhere" yet now you are saying that this is a speculative play. You are contradicting yourself. This is in fact a purely speculative play with no return based on rental yield, since you are contributing annually in addition to the large 30% upfront equity payment. I cannot find any rational basis for your alleged 'belief' in these schemes, other than the fact that you are getting commission on each sale you make.
A
Albatross
Guest
I'm new to this conversation and this website. However, I have found a leaseback scheme in a prime location in central Bordeaux that I am about to buy. I figured, like buying any property, the key thing is location location location. And this location is superb. (I was there in February.)
Yes, it is more expensive than the equivalent private apartments selling in the same development, but I expected that given we had the same experience here with section 23 apartments. (actually, it's about the same price when you get the VAT back.) I figured given the guaranteed rental income this would be the case.
However, I am concerned about a few things I am coming across in these replies. maybe I could run my situation past a couple of people with obviously more expertise?
I decided to take an 80% mortgage on the full, VAT inclusive, price of the apartment. That way, when I get my VAT back, the mortgage will be effectively 100%. I acknowledge there will be a significant shortfall over the years between mortgage repayments and rental income, but I can cover this. It means I don't have to put a big lump sum in at the start. I wanted to maximise the mortgage because for tax purposes you can offset interest (maximised) against income, I am told. It is a French mortgage through HSBC.
there is no personal usage, but I don't mind that. reduced rate on personal usage. this is a long-term investment, as far as I'm concerned.
there is a 4.25% return, based on the value of the property. However, the agent, and I do find him very good, tells me that as the property increases in value, so will the return because the 4.25% rate remains the same. This is reviewed on a yearly basis. True??
Also, I had hoped to secure a 15 year fixed-rate mortgage in France but now I am told by the bank over there that this is not possible for investment properties. It will have to be a variable rate. I had understood fixed-rate mortgages were available for as low as 4.1% in France, but the penalties for exiting were very severe. I was prepared to go with this but I'm concerned about the fixed rate.
Anyway, although the location is fantastic, I do have concerns. I found my own independent legal advice to negotiate the sale, but independent investment advice always useful. Incidentally, this apartment is not cheap!
many thanks.
Yes, it is more expensive than the equivalent private apartments selling in the same development, but I expected that given we had the same experience here with section 23 apartments. (actually, it's about the same price when you get the VAT back.) I figured given the guaranteed rental income this would be the case.
However, I am concerned about a few things I am coming across in these replies. maybe I could run my situation past a couple of people with obviously more expertise?
I decided to take an 80% mortgage on the full, VAT inclusive, price of the apartment. That way, when I get my VAT back, the mortgage will be effectively 100%. I acknowledge there will be a significant shortfall over the years between mortgage repayments and rental income, but I can cover this. It means I don't have to put a big lump sum in at the start. I wanted to maximise the mortgage because for tax purposes you can offset interest (maximised) against income, I am told. It is a French mortgage through HSBC.
there is no personal usage, but I don't mind that. reduced rate on personal usage. this is a long-term investment, as far as I'm concerned.
there is a 4.25% return, based on the value of the property. However, the agent, and I do find him very good, tells me that as the property increases in value, so will the return because the 4.25% rate remains the same. This is reviewed on a yearly basis. True??
Also, I had hoped to secure a 15 year fixed-rate mortgage in France but now I am told by the bank over there that this is not possible for investment properties. It will have to be a variable rate. I had understood fixed-rate mortgages were available for as low as 4.1% in France, but the penalties for exiting were very severe. I was prepared to go with this but I'm concerned about the fixed rate.
Anyway, although the location is fantastic, I do have concerns. I found my own independent legal advice to negotiate the sale, but independent investment advice always useful. Incidentally, this apartment is not cheap!
many thanks.
If you invest in property it is always speculative in so far as you do not know what prices will do. So are stocks, gold, antiques - take your pick.Askar said:
The annual contributions are not interest only but repayment based so after 20 years or so the capital is repayed. Try any mortgage calculator for your own figures.
This scheme was established in 1976 with the approval of the French government and has many thousands of investors.
As with any investment people should get their own information and make your own mind up.
A
Albatross
Guest
bacchus said:
thanks for the reply. I thought there was a double taxation agreement between Ireland and France. If I do go for this, do you know anything about getting an Irish mortgage to cover and leaseback property in France? If you can get one, what are the tax implications?
cheers.
Fine. So you now agree it's speculative (contrary to your previous e-mail) and there are no returns on the yield even with a 30% deposit. YOu are absolutely right to say that people should make up their own mind, rather than rely upon what is being said by those who have 'belief' in these schemes, and earn commission from selling these properties. I am just surprised that, as an agent, you could not even make a case for a return on the guaranteed yields with a 30% equity deposit.
Your distracting points about how long these schemes have been in existence is of practically no relevance whatsoever, nor indeed is the cash on deposit comment. The question is are there better returns in property elsewhere. And that is what individuals should make up their own mind about!
Clearly you are intent on misquoting me.Askar said:
What i said was that the loan can be repaid in 20 years or so after which the property is yours. Any capital appreciation is speculative, unless you believe values will be less in 20 years than they are now. As such this makes a very good case for a definite return. No doubt there are better returns to be had from property, but there are also the attendant risks.
My understanding is that you pay tax on rental income according to French Revenue rules. Not sure what the rates are.
You then have to advise Irish revenue and calculate tax according to Irish Revenue rules
Gross Rental Income
Less Allowable expenses which includes Interest on Mortgage only
Net Rents
Tax at your marginal rate
2% Health Levy
Less Tax paid in france
Tax due to Irish Revenue
See [broken link removed] for more details of Tax on Rental Income including foreign rental income
You should also be aware of the following:
When you sell the property you will have to pay CGT in Ireland and in France. Double Tax agreement does not extend to CGT (currently under negiotation) but who knows when it comes into effect
Legal situation with regards to inheritance.
Letting to tenants - Tenants have very strong rights. You can't for instance evict someone during certain times of the year (Oct to April I think)
You then have to advise Irish revenue and calculate tax according to Irish Revenue rules
Gross Rental Income
Less Allowable expenses which includes Interest on Mortgage only
Net Rents
Tax at your marginal rate
2% Health Levy
Less Tax paid in france
Tax due to Irish Revenue
See [broken link removed] for more details of Tax on Rental Income including foreign rental income
You should also be aware of the following:
When you sell the property you will have to pay CGT in Ireland and in France. Double Tax agreement does not extend to CGT (currently under negiotation) but who knows when it comes into effect
Legal situation with regards to inheritance.
Letting to tenants - Tenants have very strong rights. You can't for instance evict someone during certain times of the year (Oct to April I think)
I have not misquoted you in any way. Of course, you can (and probably will) continue your bluster indefinitely. I think readers can make up their own mind about your comments, and in particular your last one:
"Any capital appreciation is speculative, unless you believe values will be less in 20 years than they are now. As such this makes a very good case for a definite return."
If that is your 'very good case' analysis for a 'definite return' I think that says it all about your sales pitch!!
"Any capital appreciation is speculative, unless you believe values will be less in 20 years than they are now. As such this makes a very good case for a definite return."
If that is your 'very good case' analysis for a 'definite return' I think that says it all about your sales pitch!!
K
Keentoinvest
Guest
Has anyone here tried to claim their vat back from the french leaseback? Id be interested to know how long it took
My husband checked out Global Mortgages Direct and Smyths who are in Dublin, we went with Global Mortgages Direct for our property in Italy. The fee they cost us though, was 500euro, not 95! Still, its been a painless enough process. We also looked at the French Leaseback - in my opinion, a complete waste of time! Over-priced, bad locations, our property in Italy is being managed by a local rental company and we are hoping for a 7% yield (net) for just 8 months rent.
molliesassy
Registered User
- Messages
- 38
May I ask what part of Italy and how did you find it?
S
steveb
Guest
bacchus said:
Reply is a bit late but:
The reason French people don't buy it themselves is that they have no money and you have to remember they are the ones going to these places on holidays!
To choose the right leaseback, you need to pick a good area, as this is key to the leaseback.
Having been involved in this, I have studied it thoroughly, and the fact that they give you the yearly yield is their confidence in the rental of these properties.
You should also know that a lot of small developers work on leaseback, and they would not risk the chance of loosing money on this if it was a scam!
Leaseback is not that bad.... and this is why hundreds of irish people are buying it!