Too good to be true leaseback in France ?

R

rory

Guest
I have just started to look at leaseback propertry in the sth of France and it all seems to be good to be true
I would be grateful for any views AAM have on this , has there been a previous thread , when I did a search I could not find anything
 
leaseback

It does seem to good to be true,but it does involve a decent deposit usually (20-30%)

You must also consider the management company you are signing up with and the length of time per year you ar allotted

Generally, you will be paying a little over the odds for the apartment/house (compared to purchasing ordinary) properties

But to some degree this is offest by the VAT refund, if you hold onto the property long enough#

The main benefit is that the property is managed for you and the income is guarenteed

It mostly comes down to time spent in the property

If you want a lot of time, it is not always ideal
If you want a few weeks a year and good capital appreciation, it might be the way to go
 
Re: Irish or French loan ?

I am about to take the bold step and buy a leaseback property in France.

One thing I'd like advice on - should I arrange my loan here (secured on my own residence) or in France (secured on the investment property) ?

As far as I can see, French rates are slightly dearer than Ireland, but afford the option of fixing for a longish term i.e. 15 years @ 4.45%.

Thoughts, anyone ?
 
a

If you take the loan in Ireland

the interest on the borrowing will not be allowed as a deduction against income in France; possible taxcharge

the interest on a French loan will be allowed to set off agianst income from letting apartment

Borrowing in Ireland is of no advantage, except possibly to set up

Also, 4.45% fixed for fifteen years is a better loan than you could get here (fixed for that period, that is)

And remember when buying a holiday home it is usually safer to know what the costs are going to be long term
How much lower can interst rates get?

Who wants to struggle personally for a property you will get 4-6 weeks in per year

The Frence banks will usually loan 80% of the cost price net of VAT refund, so why not
 
France Leaseback

To Manwithdog:

Any harm to ask what part of France your thinking of purchasing the leaseback and is it a 15 or 20 year leaseback scheme i.e if you sell it in year sixteen and it's a 15 year scheme there would be no vat clawback
whereas if it's a 20 year scheme and you sell in year 16
there would be a 5/20ths vat clawback. At least this is my understanding.

Martin
 
Re: France Leaseback

For your information I received the following this morning via my contact in France. Basically Entennial, a French bank have launched a special mortgage for purchasers of leaseback properties. Below are the listed benefits. Doesn't appear to be any drawbacks.

INVESTORS LOAN WITH BANK ENTENIAL
(Specifically for leaseback with 9 years bail)


Summary as at May 2004

Variable interest rate currently 3.65% with a 2% cap
This means that if the rate commences at 3.65%, it cannot rise above 5.65% during the whole term of the loan.

Interest rate fixed for first 2 years
Meaning rate will remain at 3.65% for the first 2 years in any case.

Payments fixed for 9 years, regardless of rate changes
Your payments will remains stable for 9 years regardless of interest rate changes after the initial 2 years fixed period.

Early repayment of loan after 9 years attracts zero penalty
Most loans in France attract an early redemption penalty of 3% of outstanding capital balance for the whole term, but in this case it is limited to 9 years to match with the end of the first lease.

Interest on funds drawn to pay stage payments during construction can be suspended for up to 2 years.
You have to pay interest only on stage payments during construction drawn from the lender and this can be a considerable time before rental income commences. So in this case you can elect not to pay the interest for up to 2 years. Later the normal loan payments will be increased slightly to repay the interest that has been deferred.

Conclusion
The interest rate is very competitive and there are many advantages that are relevant to the buyer of a new and especially, leaseback property making this a very stable loan.
 
How can I find out more about this ?

How can I find out more about this ?

Who are the reputable agencies out there ?
 
tax in France on rented property

Does anyone know how the tax on investment properties works in France?
Are you allowed the interest on borrowing?
At what rate is your profit taxed at?
Do you pay tax here also?
 
Re: tax in France on rented property

A friend of mine has recetly purchased one

According to their agent,
(their agent and not me)

Are you allowed the interest on borrowing?
Click to expand...

if you do not borrow the money in France then all the income will be taxed as if there was no borrwinga (possible large tax bill)

But if there are borrowings in France the interest on these is allowed to be offset aginast income

At what rate is your profit taxed at?
Click to expand...

I believe it is around 20%

Also it is usual to have your tax calculated and paid by the management company as part of their services

Do you pay tax here also?
Click to expand...

If the income is taxed in France, then under the Double Taxation Agreement betwen Ireland and France, it need not to be taxed here

I do not stand over anything here (it is only what I have heard)but if you contact a good agent in France they should be able to not only confirm this (if correct) but be able to show/prove what they are saying
 
Re: tax in France on rented property

under the Double Taxation Agreement betwen Ireland and France, it need not to be taxed here
Click to expand...

I may be wrong, but I don't think that's how Double Taxation agreements work. If (tax) resident in Ireland, you are liable to taxation for all income received - from wherever in the world. If there's a Double Taxation agreement with a country from which you receive income, then any tax you pay there will be allowed against your Irish Tax liability.
 
I have been looking into this lately and there is loads of information out there, perhaps too much because I am now a little confused. Anybody willing to have a stab at the following questions for me

In relation to the reclaiming the Vat on the purchase price some websites I have looked at say it is 19.6% whereas others mention a figure of 16.4% or is this figure (16.4%) something totally different?

Also what are the Notaire costs likely to be?

Do the French Banks lend up 80% of the total price (Vat Inclusive Price) or up to 80% of the Vat exclusive price?

Say on a leaseback property costing €175K what is the initial outlay for the investor?

Any help greatly appreciated
 
In relation to VAT, the VAT rate is 19.6%.

So, for a property costing 100,000 ex-VAT, the VAT would be .196 * 100000 = 19,600. Total Cost : 119, 600

If you take 16.4% of the Total Cost i.e. .164*119600, you get 19, 614 - the VAT component.

It just depends which way you look at it.
 
too good to be true leaseback in france ?

Hi,
I have done quite alot of research into foreign investing over the past few months and concluded that French leasebacks is where it's at right now.

You get a guaranteed rent (usually 4.5 to 5.5% of the VAT excl price) net of expenses and usually have restricted access to the property yourself as well.

I had major concerns at the start about how a return is 'guaranteed'. However, in France, there are a number of very large holiday companies (for eg. Pierre & Vacance, Odalys, etc) who block book the development for a period (usually 9 years) and offer a guaranteed return. The guarantee is due to the size of the letting company. Smaller companies usually negotiate a guarantee with a bank.

When you compare the returns to the (approx) 3% return (prior to expenses) you get with Irish property it is a good investment.

Regards,
Property Owner
 
Re: too good to be true leaseback in france ?

Hi,

I too have been looking at various options buying abroad and have decided that a lease back French property seems the best for me. I'm still a bit confused on the tax situation and the implications of the double taxation.

Lets say I borrow in France and my rental income is 10K. The interest on the mortgage is 8K which is tax deductable. I therefore am liable for tax on 2K (less any other deductable expenses)

My understanding is that if I borrow in Ireland then I'm not allowed to offset the interest against rental income. Can anyone confirm this ?

Finally, under the double tax agreement I'm allowed to claim credit for any tax paid in France in my Irish tax return. However, given that I will be able to offset the interest in France, the tax liability will be small. Can the Irish revenue simply not say that under Irish tax law I am liable for tax on the full amount and therefore only allow me to claim a credit on the tax paid on 2K ? Hope this makes sense ?

For the record the Notaire fees in my case are 4.5%. The development itself has a phased payment schedule. The furniture is charged for before the foundations are laid - thought that was a bit cheeky !!! Rental income is almost 6% and the rent is linked to some sort of French construction index (The management company only pass 80% of this on - i.e. if the index 2.5% then my rent only goes up by 2% - I presume the keep the rest for themselves).
 
French Leaseback

Has anyone looked at the inheritance laws in France? My understanding is that the property passes to children. Also property tax is based on all property owned both in Ireland and France and can be quite high.
 
Leaseback

Hi All,
I'm sure their must be some pitfalls. One one of the websites advertising these properties, they show an example of a property in year 1 beaing € 140000 and in year 15 being €386000. I think this is a bit optimistic myself. Does anyone ghave any idea on how much property prices have gone up in France over the last number of years?

What property tax is involved?

Thanks
Paul
 
which website

What website(s) are advertising these properties?
 
leaseback

i am also lookingat lease back in france,found web site french entree.com good on tax issues
 
interest tax relief on rental incoming

According to the Revenue, when I spoke to them
regarding borrowing here in Ireland to buy in Hungary,

they said it was possible to offset the interest paid here
against rental income

is it different for sale-leaseback?
 
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