5 questions you should ask yourself before investing in a ski resort
While the entire France is experiencing a cold snap, and with the forthcoming school holidays, the most enthusiastic skiers can’t stop talking about the growing quantity of snow in the country. However, a week’s holiday doesn’t come cheap. Should you invest in an apartment? Would you let it? Or live in it sometimes as well? Will global warming have an impact on the market? Here are 5 questions you should ask yourself to make the right decision.
1. What type of investment should you make?
There are three possible types of buying in the French Alps:
– The purchase of a holiday home for personal purposes exclusively
– A purely financial investment
– A mixed investment with profitability (by letting) and personal occupancy
2. How would you use the apartment?
If you want immediate profit coupled with long term investment you should buy with a Leaseback scheme! It is the purchase of an accommodation in a new touristic residence, that is to say a residence with fully equipped apartments (kitchen and bathroom), ready to live in, usually offering recreational facilities such as sauna, swimming pool, fitness rooms, etc. The buyer signs a commercial lease with the residence manager for a minimum length of 9 years (renewable). During this time, the management company collects the rents, is in charge of the usual maintenance and everything that concerns marketing to find tenants. A share of the rents is then paid to the owner, according to the purchase agreement he chose: either a purely financial purchase (the owner receives therefore the maximum profitability for the accommodation) or a mixed purchase (the manager deducts the number of weeks the owner used for his own leisure from the rent he should have received with a pure investment option). The maximum occupancy rate is usually 8 weeks (but can be up to 6 months), but it is advised not to exceed too many weeks, otherwise the profitability become too low. These terms (number of week and their distribution) must be determined in the contract with the agent and the management company. It is important to note that there is a possibility at the contract renewal (after 9 or 11 years) to modify the personal occupancy and the rent paid accordingly.
With this type of purchase (LMNP), the property is financially depreciated because the leaseback enables to collect rents which will not be taxed for the next 20 years (it uses complex French tax calculation which is taken care of by a French accountant for €280/year).
With a French leaseback LMNP scheme, the owner can use his property up to 6 months per year.
3. Which return do you expect from your investment?
Usually, the profitability fluctuates between 3.5 and 4.5% according to the development, the location and the potential future capital appreciation. The difference between the yields comes from the price of the lands, not the rents, which are roughly equivalents for the same types of estate with equivalent locations.
4. Where to invest in priority ?
Be careful not to buy anywhere! Pay attention to investments in ski resorts where the prices rose sharply recently and are now at the “maximum of the maximum”. On the contrary, it is advised to look around alpine resorts at high altitude, where the prices haven’t reached their maximum potential yet, such as Les Arcs, Tignes, and Les Ménuires. Or the resorts linked to a major ski domain.
You should notably favour the resorts located at least 1,800m high. All the consulted experts agreed on this: it is necessary to give priority to the high altitude resorts, which will offer – a priori – a good snow cover for a long time again. Some prefer the North Alps (Haute Savoie), offering a better snow covering rate considering their aspect. The director of the Pierre-Simon Laplace Institute considers that if the weather becomes warmer, the average snow cover rate will raise from 100 to 150 metres every 1°C. According to him, 2°C temperature increase will be overtaken in 30 years.
Think about alternatives to ski. « People’s habits have completely changed » says Pascale Jallet. People skiing all day long become scarce. Consequently, you should better choose a resort which diversifies its activities.
5. Finally, will your investment be as interesting as a seaside investment?
Despite the crisis, the resorts occupancies in the Alps are always close to 100%. Besides, as the buildable lands in the mountain become rare, mountain properties promise a good price resistance to economic fluctuations. It is possible to make interesting investment profits in ski resorts which are relatively preserved from the global warming: numerous tourists go there, and as a consequence, rents will rise in the future. It could be profitable as well to avoid some resorts in a too low altitude. Jim Beattie favours an investment combining pleasure and profitability, so that the owners also enjoy their holiday home.
Source : www.challenges.fr
Tags: french alps, French Property, investment, leaseback, ski resort
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Thursday, February 9th, 2012 at
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