Mortgage for leaseback in France

L

LBB

Guest
Hi,

We are investing in a new leaseback in south of France. It's in a good location, in an area we love, and we are happy with the deal that gives us 4.5% and 6 weeks personal use.

We'd love some advice re; what type of mortgage is best - should we go the French route, interest only, or take out a mortgate in Ireland. the agent is suggesting french, interest only option to us, but not sure of the advantages/pitfalls etc.

Any advice would be great!
Ta,

LLB
 
French mortgage will be dearer than in Ireland.
I dont think you can get a mortgage in Ireland for a house in France and may have to mortgage your own house in Ireland. You may not wish to do this.

Interest on mortgage taken out in Ireland can as far as i am aware be put against rental income recieved in France.
 
Hi, I heard that to get out of leaseback during the contract period is a bit of a nightmare, ie. if you want to sell etc be careful about this.

On mortgages speak to any French bank.
 
I would recommend you talk to
Tahminae Madani, France Home Finance
TEL France : +33 (0)1 44 88 59 44 * MOB France : +33 (0)6 76 00 92 04 * FAX France : +33 (0)1 44 88 59 41
[FONT='Calibri','sans-serif']TEL UK[/FONT][FONT='Calibri','sans-serif'] : 0871 733 6983 * FAX UK : 0871 733 6984 [/FONT]
[FONT='Calibri','sans-serif']www.francehomefinance.com[/FONT]

[FONT='Calibri','sans-serif']I've no vested interest but spoken to Tahminae on a couple of occasions and she seems very clued in[/FONT]
 
I find this a strange question. I have discussed these schemes before.

A lease back is a property back fixed income investment (possibly index linked). To take out a mortgage to buy one is not too far away from borrowing to buy a bond. That would make sense if the bond was payming more than your borrowings, but at 4.5% rental yield, this ain't going to be the case here.

Save you money and spend it on renting 6 months each year.
 
Camry said:
I find this a strange question. I have discussed these schemes before.

A lease back is a property back fixed income investment (possibly index linked). To take out a mortgage to buy one is not too far away from borrowing to buy a bond. That would make sense if the bond was payming more than your borrowings, but at 4.5% rental yield, this ain't going to be the case here.

Save you money and spend it on renting 6 months each year.
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Casteljaloux is near Marmande or Agen not too far from Bordeaux. There is a number of investors involved in purchase of French Leaseback in Domain de Guitard, Casteljaloux with Jean Claude Vernoille, please refer to thread Leaseback in Casteljaloux for more information.

Did you get a French solicitor to check out the legal contracts before you pay over any money. I would advise you most strongly to do so.
 
Use a french bank, its easier from a tax point of view when making your returns plus you can use your earnings to raise the capital rather than assets when dealing with an irsh bank.


BTW you can sell your freehols leaseback at any time you just need to sell it with the remainder of the management contract in place. Make sure you buy with resale in mind.


save your money and rent for 6 months as suggested above is crazy! If you have a 4.5% return and go interest only you will have a self financing asset, appreciating with your own usage!


Try CAFPI for mortgage info

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stuartmccorm said:
appreciating with your own usage!
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However, this is the unknown quantity. It could also depreciate or stay the same. Secondly, I don't think a 4.5% return is enough to make the investment self-financing, when taxes and other fees are taken into account.

I don't think renting is such a crazy idea, when compared to an investment like this one. Most holiday makers will also appreciate the fact that they are not tied to the same place every year.
 
Agree with Budapest and Camry, 4.5% is not a self financing asset far from it with the current trends. If that 4.5% is gross then its not even close. with leasebacks in areas that are not developed and in low economic zones there is little chance of capital appreciation in my view unless there is some sort of other spark in the area aside from property construction

Unless the developer has priced the unit exactly correct with demand in the market for that area, it may depreciate on paper straight away.

These leaseback schemes have to give at least 6% for them to be in anyway attractive. you cant be dipping in to your pocket every month to cover an at best static asset. As already mentioned you might as well be spending your cash on renting accomodation
 
4.5% rental return with an interest only mortgage and 20% deposit ....wgich is the norm these days.....creates a neat self financing asset.

4.5% is uually net after all management costs! This is usually indexed linked with inflation so goes up each year!

Also you can usually rent your 6 weeks occupancy to boost your return

[broken link removed]if your location is good, its very unlikely you will have a 'static asset' over a ten year period!! When has this ever happened?
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property over a ten year period has never decreased in France. Places like Nice will never depreciate. The french dont allow massive building therfore ther is a lack of space....supply and demand

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stuartmccorm said:
BTW there are no other nessary expences, 4.5% is a net return!!!!!!
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It is possible that furnishing won't be required, but what about repair, electrical, plumbing, gas, repainting, etc. expenses?

Secondly, it's not always possible to offset all of your tax. It totally depends on the specific personal circumstances of the investor.

stuartmccorm said:
Places like Nice will never depreciate.
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It's obviously never possible to say this about any city/country. In any case, it is very rare for a leaseback property to be well-located. They are almost always situated in secondary locations, have little to no local market, are overpriced according to local comparisons and are sold to amateur investors or those who are drawn by the 'personal usage' part of the agreement.

A 4.5% return is categorically too low for an investment such as this one, with little potential for capital appreciation. It's possible to get much higher rates of return by leaving the money in a high-yielding deposit account and renting a holiday let in a different part of the world every year and not be confined to the same place.
 
Are you sure you want a leaseback.? We looked into this in depth 2 years ago in South of France. Alot depends on track record of company re their commitment and ability to maintain property .

Plus, very important, most leases expire approx 9 years afterwards. Terms they offer then may not be as attractive.They tie you in for further 9 year period.

However, biggest problem is, if you want to sell. Most leaseback companies only offer you the 'construction inflation rates per annum.' And then usually minus certain amount.

In France past couple of years this has been around 2%. So, lets say after 10 year period your property may only have increased by 20%. Not great. Trying to sell it independent of the leasing company is not good option, because other similar properties in the developement will obviously be at this set price range. No buyer will pay extra in these conditions.

However, if you are buying this for life style option, maybe benefit by full family use, and not expecting it to keep pace with inflation well thats a different scenario. Hope this helps.
 
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