French Leasebacks

[paulo123]

I'm considering purchasing a property in france and have already been pre approved for a mortgage of €100,000ish....was looking at leasebacks as they give a guarenteed income for the first 9-11yrs. What does concern me is selling the property on. I am aware that you have to keep the property for 20yrs to avoid paying tax to french govt. but was also wondering if there were any other things to be aware of. Also can anyone recommend any good sites, as the ones I'm looking at seem to all have the same few developments on them

 

[auto320]

Best advice in general nowadays is to steer clear of French leasebacks. Most, if not all of the offerings now on the market are too small, too expensive against local market norms, and have limited resale potential at end of lease life.

Developers in France, as anywhere, tend to get more and more greedy, and this is what has happened in the leaseback sector. A couple of years ago you coud buy some decent properties in this sector, but they have squeezed and squeezed until no vaue remains for the investor. Avoid!

 

[amor]

I agree. Apparently leaseback properties are so small they are only suitable for holiday accommodation so you might be stuck with it down the track and it wouldn't be suitable to go and live in during your retirement (if that's what you had in mind). After being in France last week, we are looking more at getting an apartment or small house that can be rented out to local French on a long term basis as there seems to be a need for that type of accommodation (down in the languedoc anyway). Then if we want to live there for a while in our twilight years we have that option. Some people we talked to there believe leasebacks in France are a disaster waiting to happen.

 

[auto320]

Agreed. They started out as a good idea, but greed took over and they got smaller and a lot more expensive. Many earlier ones were ok, but I woudn't touch any of the current offerings with a bargepole.

 

[Optimistic]

Hi, My brother bought a ski lease back in what is to be a great area and was/is a great project, with good returns. He closed on it well over a year ago. It was bought thru a well known and recognised Irish based company that specializes in French lease backs. He is having big problems getting the "guaranteed" lease back funds lodged into his account, without much help from the agent here in Ireland.

Would he buy again thru this company? No way, and they were the first ones to begin selling here in Ireland. If you proceed be very careful. I agree with auto 320, there are to many fingers in the pie to have returns left for the investor.
Optimistic

 

[Staples]

After being in France last week, we are looking more at getting an apartment or small house that can be rented out to local French on a long term basis as there seems to be a need for that type of accommodation

Something to bear in mind is that long term tenants in France have stronger rights than in Ireland or elsewhere and it may prove difficult to move them if/when you decide you want to move in yourself. There are several books available on the subject on buying a house in France, many of which deal with these and other issues. Probably worth the few euros if you're not too sure.

 

[Kendr]

What Auto says about some of the latest offerings is correct.

However, I think to a large extent leasebacks still do what they say on the tin.
When they work: - yes you get the VAT back - yes you get the guarenteed rent - over the course of the property's life you get a cheap holiday home.

Are they comparable to standard property investements? No.

Location is crucial, type of development is crucial. eg. Who in the future will want to live in a holiday village?

But some (again mostly built a few years ago) were not that much different to other standard apartment blocks and this could help the resale.

BTW. Bought one a few years ago - I have no connection with any company trying to flog them. To me it's a cheap investment sitting on the sidelines of my portfolio.

 

[paulo123]

Many thanks for the advice...........much appreciated

 

[Staples]

To me it's a cheap investment sitting on the sidelines of my portfolio.

It's a cheap investment in the sense that you get a guaranteed return but what about your capital investment?

For example, if you buy a property for 100K, you're guaranteed your (say) 4.5% but who's to say the 100K is protected? If you wanted to sell, how likely would you be to recoup your 100K? Anything less negates the value of your guaranteed income.

Current leasebacks are little more than holiday-sized properties that you couldn't reside in for more than a couple of weeks. For the same money you could probably buy a residential-sized property in a comparable location, albeit without the guaranteed income (although your eventual income would likely to be as valuable).

 

[Kendr]

Quite right in many respects Staples. Don't get me wrong here, I'm not speaking as some advocate for leasebacks.

I bought mine some years back. And in a residential area. Not holiday sized. One leaseback in a widely spread portfolio.
Having a leaseback as your single investment - probably a bit silly.

Anyway, with regard to your example of 100K. My outlook on investments is a bit different to yours I think:

eg: 20k of that would be mine, the rest is the banks.
Guarenteed rent pays off the banks investment (mortgage).

So I'm exposed to the tune of 20k. VAT rebate covers most of that.
So I'm hanging on for a return on 5k. Worth a punt.
Worst case = holiday pad for 5k.
(Plus various taxes and fees paid down through the years)

 

[auto320]

Leasebacks bought a few years ago were often ok, price just showing a small premium on local market. Now however the prices are typically inflated by 50% or more against local rates for comparable properties. In other words, the 5% annual return for 10 years is built into the price. The developer is covered, but you cannot exit with a profit after 10 years.

Anyone buying leasebacks without measuring them against the local market is crazy, and buying them off plan at exhibitions is even more crazy. You need to go to the location and see the prices being obtained for similar properties before considering buying any of them, Never buy them "on the blind."

 

[Colby]

We took a different view with this, we bought a leaaseback property in a holiday type setup indoor pools outdoor pools sports courts etc as we have 2 children and were looking for a holiday home. The thing about ours is it is very light leaseback we only give it to the management company for 4 weeks every year in August which covers our maintenance bill roughly. We manage to take 5 or 6 trips ourselves a year and rent it out ourselves for any other time. Its working really well for us, we have made wonderful French friends and plenty of other nationalities, our kids have made friends that they meet any time we are over there. One beside us has recently been sold at a much higher price than we paid 3 years ago but we love it so much would not even be contemplating selling no matter how the market goes. The complex contains a mix of leaseback/non-leaseback mostly owned by French people some with small chilidren some semi-retired. Just posting really to let people know that this type of leaseback exists the fact we didnt have to pay the VAT meant the difference in us being able to afford a 1 bed house and the 2 bed house that we now own and also meant that we had some money guaranteed to go towards the maintenance bill each year.