Which French Leaseback should I choose?
Nowadays, if you want to finance your French leaseback property, it is better to select one which has a yield lower than 5%; otherwise, banks might decline your mortgage because they will be afraid that the management company of your leaseback will not fulfil all the financial requirements.
However, buying conditions in France are currently excellent. The exchange rate is extremely favorable since Sterling reached a 19-month high against the euro at the end of June reaching €1.203. If you’re thinking about purchasing a leaseback property, you might be interested in one of our new programs in Argeles Sur Mer, a traditional small village located in the south of France on the Mediterranean coast, at the foot of the Pyrenees Mountains and the Spanish border. With its 7km of sandy beaches, long flower-bedecked and landscaped seaside promenade, Argeles draws in the crowds every year. Les Demeures de la Massane is a new residence offering apartments and villas with terraces and/or gardens. Purely Mediterranean in style, its architecture is a harmonious blend of wood, light coloured stone and ochre shades. The communal area comprises an aquatic centre with a swimming pool and a paddling pool, a spa with sauna, gym and a Jacuzzi, a games area for children and a bowling pitch.
If you purchase a 1 bedroom apartment for 120k€ HT in this residence, you will receive an annual rental income of €4,560 HT with a yield of 3.80%. The rent will be paid by the management company, regardless of the actual occupancy of the premises.
In order to obtain a mortgage for this leaseback, you can ask for an interest only mortgage with 100% LTV (Loan to Value Ratio). Accordingly, it will cover 100% of the purchase price of your property excluding VAT (the VAT is financed by the developer) but you will need to secure 30% of the total amount on a side investment such as on a life insurance contract or a bond. It is important to know that when you purchase a leaseback, you will need to fulfil financial obligations. Indeed there may be some shortfalls that mean that the capital required to fulfil these obligations may exceed the available capital. But there is no need to worry; with this kind of investment you are more likely to have a low shortfall.
If you want more information regarding investments options on this leaseback, we can send you a detailed leaseback simulation.
In addition, as the rental income of your new property will be revised every three years in line with the reference rental index, there will be a clear capital appreciation after a few years. The rise in the value of your asset is also an important part of your investment.
To sum up, there are four major points that will allow you to develop the value of your asset:
– The capital appreciation. This is part of the return on investment and must be considered as an investment goal from the beginning of the project. The property value of your investment will increase through the years due to price inflation.
– The side investment interests. By securing 30% of the total amount required, you will not just be making a classic deposit as this side investment will add revenues to your asset, by generating interests. For example, with a secured amount of 36k€ HT on a life insurance contract for a purchase of 120k€ HT, you are able to obtain a yield of 4%. It will be a considerable capital received just from the interests of this side investment.
– The rental appreciation. It should definitely be considered as the main part of the leaseback investment. Revised every three years, your rental income is likely to increase from a minimum of 1.5% to 2% maximum per annum. Consequently, shortfalls will certainly decrease every three years.
– The diversification of your investments. These leaseback mortgages are a good way to generate additional revenues and are more rewarding years later if you are able to purchase another one in a different location. These assets will be a major security for your golden years.
So if you are interested, do not hesitate to get professional advice, for example from Sextant Mortgages, in order to receive simulations for leaseback mortgages.
Tags: French leaseback, French Leaseback properties, French Mortgages, leaseback provence, new build provence
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Friday, July 9th, 2010 at
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