Should I sell French buy to let or not

J

Jaded

Guest
Hi
Just thinking aloud and looking for some opinions/experiences........3 years ago I bought a one bed holiday home purely as buy to let investment in Sth of France,(Nimes) I financed it by borrowing against family home, total investment €85000, I have no problem renting it it is purely holiday home on communal site, this year I took in €4200 for 7 weeks rental.

In addition to the full mortgage I have communal fees of €1000, elec of €300 and insurance of €150.

Due to the slowdown in the property market does the rent I get justify all the costs (it doesnt cover the mortgage but more than covers the interest part and all the other costs.) I have been assured I would get €95 to €100k which is slightly less than other properties were sold for last year would I bebetter taking this money and reducing my mortgage or holding on and taking the rental income?
What taxes would I have to pay if I got €95k?
Tks
 
You seem to be making a net return of 3.17% on 7 weeks rental, before Irish income Tax - You may not be allowed to write off interest on the mortgage against rental as the mortgage is against your family home - check that out. You have use of the apartment for 45 weeks but if you were only interested in it as an investment, that may be of little interest to you. IMO if you get €95k for it you may be liable for 20% tax on the gain (assuming French CGT plus difference between it and Irish CGT up to 20% and taking double taxation agreement into account). €15k profit not be sniffed at in current climate.

Slim
 
regarding the interest relief, you can offset this. regarding the CGT you would pay 16% in France and 4% in ireland ie 20% due in Ireland - the rate you have paid in france
 
Maybe I'm wrong, but with French lease backs isn't there a VAT refund which is partly repayable if you sell early?
 
Mine isnt leaseback so VAT repayment wont come into play. I am kind of pushed towards selling am just afraid of the timing ie if I put it on the market and it doesnt sell I may be out a years rent if I go ahead and advertise for 2009 rent can I still put it on the market with no viewing for the 7 weeks....that is always going to be an issue whenever I sell so might just take the plunge.....
 
Opposite view ... you obviously have a proven rental property, given that you can make 700 euro per week for 7 weeks of the year ... or a 5% net yield with only 7 weeks rent out of 52 weeks.

Even though it is in a holiday area, you should be able to rent it out for between 6-9 months of the "closed" season to a local looking for short term rental of say, 700 euro per month - thereby doubling your gross income. This should ensure that you are actually in a cashflow positive situation .. and therefore why would you sell in a falling market? Wait for the next upturn/cycle in French property values and sell as prices rise again.
 
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I thought there was a problem with French Double Taxation agreement in that it did not apply to CGT i.e. liable to 2 rates fo CGT - not sure of this, however. Also, point made previosly about VAT clawback likely to be relevant.
 
Hi Jaded

Are you selling because you want to reduce your mortgage on your home?
Have you lost interest in the area your holiday home is in?

Because if you don't have to sell...it would be better not to at the moment.

A large part of the market for holiday homes in France is the UK buyer.

They are leaving in droves at the moment.

Mainly because the retirees cannot afford to live in France with the 30% or so drop in their pensions caused by the drop in the pound/euro.

Have a look at forum for further info specific to the Nimes area.

Good Luck
 
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