Leaseback Resales: Why are they attractive investments?
There are a number of reasons for buyers to invest in France through leaseback property resales as opposed to buying off-plan. Before we list those reasons, we shall remind you what a leaseback is.
Buying under the French leaseback scheme is like obtaining a discounted purchase price, with the VAT element ( 19.6% of the price ) which is advanced by the State. On completion of the purchase ( e.g. signing of the acte de vente) you are required to enter into a formal lease with the management company who will then rent the property out on short-term holiday lets. The leaseback contract covers a nine year period. Where the intention is to occupy a property for only a limited time each year, or even not at all, leaseback ownership can offer a regular rental income, without the burden of having to market the property personally, or employ local agents to do this. While such schemes normally offer a regular rental stream, it is commonly the case that the amount of the rent is lower than may be obtained for a similar property if sold directly, although this is probably the counterbalance for not having the burden of marketing the property, cleaning it, managing guests and so on.
So, here are the reasons why they are attractive investments:
– In hard times as we have recently seen and that some are still facing, there are great opportunities arising from the property market. For those who purchased a few years ago and need to sell quickly for whatever reason, some are happy to sell below the current market price for new build or close to the price they originally paid, so it is extremely favourable to buyers.
– From an attractive purchase price, you can benefit from a more competitive rental return. If you compare with what a new leaseback can offer, you could be better off with a resale in terms of profit margins.
– You will still benefit from the VAT advantage as you will ‘inherit’ the VAT benefit from the existing owner with no procedure involved as long as you accept that you will continue with the existing lease in place
– You get the same LMNP or leaseback tax incentive as if purchasing new, meaning that you can deduct your Notaire fees, mortgage interest, etc…from the rental income received to avoid paying taxes on rental income. And finally you can view the apartment you are purchasing, there is no off-plan mystery…which appeals to many investors who want to avoid any unpleasant surprises.
Virginie Hopps-Delplace | Specialist French Property Lawyer
for and on behalf of Charles Russell LLP
5 Fleet Place, London EC4M 7RD
(T) +44 (0)20 7203 5313
(F) +44 (0)20 3023 8024
Tags: French leaseback, investment, leaseback in France
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Wednesday, July 7th, 2010 at
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