Too good to be true leaseback in France ?

hi

Hi there,

Does anyone know the situation with leaseback whereby the management company only runs 7 months of the year (April to Oct).

What happens in the other months? Can you stay there over the Christmas holidays for instance?

Also Is the rental fixed or does it pay more if tenants are acutally staying? I am trying to work out how much the rental actually pays out if you were to only take 2 weeks off season there yourself.

Frenchleaseback

Anyone puchased in Corsica?

French leaseback - legal advice

Does anyone know of solicitors in Ireland that have experience of overseeing these processes - I just got draft contracts etc. but don't know who to get to look at them!.
Do people normally just trust the french notaire and selling agency, or it is OK to get any property type solicitor in Ireland to do it?
I know these things are regulated by the French government, but would definately like to have someone on my side give me the OK (or am I being paranoid?)
Anyone have experience of this? Thanks.

Irish Solicitor

I got the name of an Irish solicitor,but when I contacted him he said his fees were €350 plus VAT per hour plus costs....which turned me off him pretty quickly!I haven't however managed to find anyone else,so may be forced to go with this guy,as I too would like someone to have a look at the contract & the lease agreement.
Where are you buying yourself?
If you want the name of this guy,I could mail it to you.

Re: Irish Solicitor

I'd suggest contacting the commercial section of the French Embassy to get a list of local solicitors that they use and you should be sorted.

Re: Irish Solicitor

How did you get on with this golfmad ?

French Solicitor

I'm still waiting to see if I can a mortgage over there....having a bit of difficulty as i have a couple of properties here,which doesn't help,as they compute your abliity to pay by dividing your total income by 3(including investment incomes) & then taking your full existing mortgages off this...so i'm left with nothing!

Re: French Solicitor

I'm considering getting a mortgage in Ireland instead of France just as its simpler. Because of the double taxation agreement there should be no disadvantage(?), other than rates differences. golfmad - is there a reason why you don't want to do this?

..

You'll get mortgage interst relief on a mortgage taken out in France but not from an institution here.

Mortgage in France

yes.....as far as i'm aware you would not be allowed the interest on an Irish mortgage in France.....so you would be running up a French tax bill

Re: Mortgage in France

...according to my agent this is not true - its quite possible to get a mortgage in Ireland and set the interest payments against overseas rental income. Pro of doing this is you save about 3K on fees BUT, con is that your house here is used as collateral. I'm going to go for the french loan and pay the fees, but only because I'd prefer to keep the investment risk totally seperate from my house here...

Re: Mortgage in France

according to my agent this is not true

Click to expand...

Is your agent an expert tax advisor? Does your agent have a vested interest in encouraging you to proceed with a purchase, regardless of the tax impacts for you? Has your agent given you this advice in writing?

Re: Mortgage in France

Hi

This is a case where most of the replies are probably correct! For example, the Irish Revenue do allow interest to be offset against foreign rental income in calculating Irish tax liabilities. However, the French authorities do NOT allow interest on foreign loans to be offset against French rental income when calculating French tax. Therefore, if you get an Irish loan to buy your French property, as you can't offset the interest you are likely to end up paying French tax on the rental income. Under the double taxation treaty, your tax liability for the same French rental income will be assessed by the Irish Revenue - they will offset the interest payments against your overseas rental income and will reduce your resulting liability by the amount of tax you paid in France. In most cases this will mean you probably won't be liable for tax in Ireland. Therefore, despite what you have been told it is more advantegous to get a French loan where possible (which is then taken into consideration by both the French and Irish authorities when calculating your liability).

Also, I think a 3K charge on organising a French mortgage is very steep. There are better deals out there. Also have a close look at the mortgage products on offer - some of the products are far more advanced than what we have in Ireland.

Regards,
Paidi O'Reilly
(paidioreilly@hotmail.com)

Re: Irish Solicitor

Hi

If you're buying a unit within a development then try and find other Irish buyers and share the costs with them. Solicitors involved in advising people buying French property make an exorbitant amount from translating documents and reviewing contracts. Even though the documents are generally the same for all buyers, they charge the full fee to each of their clients! Share the costs with other buyers and you will dramatically reduce your purchase costs. I'm currently trying to get a group of people with an interest in French property together in order to do just this (as well as for other reasons -such as negotiating discounts, etc.). Best of luck.

Regards,
Paidi
(paidioreilly@hotmail.com)

Re: Irish Solicitor

Thanks, carriglee.
When I talked to the selling agent about this, he said that it is possible to take the mortgage out in Ireland, and get a letter from the mortgage provider here to give to the notaire in France saying that the property is mortgaged here. This then means that the french revenue are aware of the mortgage and give you relief on the interest appropraitely.
BUT - I've having real trouble trying to verify this from any other source. (seems amazing there's such a lack of information on this!)
Can anyone else verify this?

Re: Irish Solicitor

Just talked to the notaire about this and he said that it is possible but may be 'complicated'. Of course, he will examine my particular situation and give me a direct answer for 1-2 hours work at 150 euro an hour (plus VAT, I presume)!!!
I reckon this is all rubbish and there's no problem doing it...

Lease Warning

The following is an extract from a post on the motley fool regarding leasebacks:


"The reality is that you are lending a company money to enable them to build a hotel. In return they pay you a relatively small amount of interest, considering you have very little chance of calling in the loan early and you are also taking a fairly significant credit risk."

I really don't know whether you have much chance at all of calling in the loan at all! There is no secondary market, and I don't know what the long term future of these sort of apartments is. Do they just linger on for fifty years, and then they're so tired and run-down they can only be demolished? What position are the owners in then?

Going through the hypothetical process of trying to buy a 15y old one secondhand, and seeing how the process looks to a secondhand buyer, seems essential research to me. One way or another, you need a regular flow of secondhand buyers to have a secondary market, and I really doubt that is the case.

Perhaps, if you really want to buy one of these apartments, buying a 15y old one actually makes better sense. There would be so few other secondhand buyers, many less than (I assume) the potential 15y sellers, that I expect you could play the sellers off to get a very low price.

Re: Lease Warning

Hi Dan

I think the problem is that many people buy leasebacks with their eyes closed. The French generally buy leasebacks with the intention of creating a second income (to subsidise their pensions). They don't tend to buy leasebacks with the intention of speculation i.e. selling to take advantage of price increases. In fact I don't think the French have ever shown an appetite for residental property investment like the Irish or British. It was not until recently that leasebacks were sold outside of France. Therefore, there is very little history of re-sales upon which to base conclusions about the returns. However, if you think about it then it should be clear that the ability to re-sell leasebacks within the term of the initial lease is very limited. Firstly, the buyer would have to take on the lease. Secondly, the annual rent increases at the rate of construction inflation. This is usually well behind property price inflation. Therefore, as each year passes the rental yield as a percentage of the property value drops. In fact after a few years, the yield is probably too low for many investors to be interested. Therefore, no one should be planning to exit a leaseback investment until towards the end or after the end of the initial lease. Otherwise leasebacks are good 9+ year investments (especially when one compares the yields and potential appreciation with Ireland or with our best performing pensions). If 9+ years is a bit too long a view, then you should have a look at schemes with rental guarantees but no commercial leases. These generally have leases of 3 years. We're currently looking at a few of these and they look promising. Hope this info helps.

Regards,
Paidi O'Reilly
(paidioreilly@hotmail.com)

PS You will find leasebacks for sale with some local agents and some web-based companies. In fact if you shop around you may be able to buy discounted property through this approach (but you will have lower yields).

Re: Irish Solicitor

Hi Sleppeah

Since your posting I have spoken to a few people involved in the French property market (as brokers and agents) and they believed that while it may be possible in theory (to offset the Irish interest against the French rental income), they have never seen it done in practice. This may be largely due to French red tape and resistance to change. So therefore if you manage to push it through it would be excellent. Please keep us informed.

Regards,
Paidi

..

This whole debate about leasebacks raises two questions in my mind.

1 At the end of the 9 yr lease, what happens? If only a proportion of the owners are intersted in enetering a new agreement at that stage, surely the holiday company is going to be less intersted in entering an agreement with any of them?

2 Someone has mentioned that the scheme has already been widely used by the French. Assuming some of them have come to the end of their initial 9 yr lease agreement, what have been the actual experiences regarding resale and/or renewal of lease.

Anyone have any idea?