Share on Facebook

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

Share on Facebook

Le Clos Savornin – located in Luberon in the heart of Provence
(a hidden French gem that’s now available to international buyers)

It is an exclusive and well-designed new build hamlet consisting off 22 top of the range villas with private swimming pools and high quality individual services such as a concierge.

The development has elegant outdoor spaces with Provencal decor and enjoys an exceptional location close to a typical Luberon village. The architect recreates a Provencal spirit with typical lanes, colorful houses, small paved squares, refreshing fountains, shady petanque pitches and an old fashioned washhouse.

The location:
The Clos Savornin is well located, 900m from the centre of Saint Saturnin les Apt village. It is a typical Provencal village with sleepy lanes, ramparts, fountains, a washhouse and former mills. The village is surrounded by 30 hamlets and set in 18,750 acres of garrigue, woods, cherry trees, olive trees and vineyards. Here are some great places to visit:
- Gordes village (20mn)
- Alain Ducasse restaurant & Spa (2km)
- Aix en Provence (55mn)
- Chateauneuf du Pape (for wine amateurs, 1h10)

It is also located 1h10 from Marseille international airport.

The investment:
* Your villa will be managed by a well known management specialist.
* Rental income up to 3.83% guaranteed for 11 year lease
* The buyer will get 19.6% VAT cash back
* Personal use for several weeks per year (includes July & August)
* Rental income paid quarterly.

Request More Information
For further information on latest availabilities please do contact us on +44 (0)20 7428 4910 or email at info@sextant-new-build.com

Share on Facebook

The French leaseback system could be one of the best as it is a guaranteed and advantageous rental scheme with numerous incentives.

Firstly, if you purchase a holiday residence in France, you will be able to get the 19.6% VAT back. In order to get a full VAT refund, you will need to rent your property for at least 20 years. The VAT can be paid and claimed back by the developer, in which case you will pay less for you property. Otherwise, the developer can help you out through the claiming process and charge you a small commission for the service. If you choose to do it on your own, expect an average of 9 months delay to get your money back.

Furthermore, the property management company will make things easier for you: the rent will be paid by the property management company whether it is occupied or not. Moreover, it will take care of all your home and paperwork maintenance (repairs, refurbishment, bills…). In addition, it guarantees up to 5% net return on your property.

Finally, you have to declare your income in France and therefore pay taxes. However, thanks to the treaty between France and the UK, you will not be asked to pay taxes twice.

Over the past few years, the economic context changed leading to an evolution of the leaseback investment. At first, typical purchasers of leaseback properties in France were pure investors that were attracted by low rates, enticing rental yields (the measure of the percentage of income return you get from an asset) and the fully managed investment properties.

Potential buyers now have a different profile and different reasons as to why they choose the leaseback option.

If you think you will use your holiday home for only a few weeks a year (up to 8 weeks usually with a maximum of 6 months/year), then the leaseback concept is for you: No need to be a professional investor! You can rent the property out the rest of the year and make profit out of your investment.

If you have a holiday home and don’t want to take care of all the maintenance work while you are there: simply go for a leaseback and leave it to the property management company.

Leaseback is also the solution to your mortgage issues as the rental income will cover some of the amount due.

Another advantage of the leaseback is that property management companies usually let you swap your weeks of occupancy with other resorts: you do not have to stay in the same place forever anymore. Should you prefer to go to the countryside or the sea this year instead of the mountains, then all you need to do is ask!

In conclusion, as opposed to a few years ago when the leaseback was attractive only for investors looking for cost effective investments, it is now a completely viable and convenient option for people purchasing for lifestyle reasons.

Share on Facebook

Investments in tourist residences are based on a “triangular” theory:
DEVELOPER (D) – INVESTOR (I) – OPERATOR (O)

Put simply, “I” acquires a property from “D” and then signs a commercial lease with “O” who then pays the rent to “I”. Rent is at this point guaranteed, that is to say “fixed”. ie. A property worth €200,000 at a flat rate of 4% rent per annum will therefore be paying rent of €8,000 per annum.

In order to avoid pitfalls, some property managers felt it would be more realistic to use “sliding scales” (variable rates). This usage of variable rates would mean that, for example, managers could guarantee a flat rate of 2.5% over a 9-year period and then at the end of each year, they could pay back a percentage of the residence’s or manager’s turnover to the investors. In this case, there are elements of both “fixed” and “variable” rates.

BEFORE: This “mixed” rent incorporating the two types posed taxation problems in leasebacks located in the ZRR, Zone de Revitalisation Rurale or “countryside under re-development”. The tax would depend on each tax office’s interpretation of the make-up of fixed incomes, so the investor would lose his tax advantage.

NOW: It is no longer an issue as the line is “if the income is erring on the side of fixed rates, then there is no need for independent interpretation.” It means that the tax deduction will not be affected any more within the ZRR.

Changes to commercial lease systems for 2010.
Up until the end of 2009, in the event that the management company could not fulfil its contractual obligations, property investors were required by law to sign a commercial lease with a new management company otherwise they would lose their tax advantages such as the VAT rebate on New Build properties . Now, with the law changes made for 2010, potential investors can avoid tying themselves to a new precarious lease with another management company. Investors can avoid the commercial lease altogether and grant a management mandate to a professional manager. For example, an experienced manager specialising in hotel management or in holiday centres, or if the owners decide to run the whole operation themselves without the involvement of middle-men (although it might be very complicated to do so due to the number of owners in those types of residences who usually have 100 apartments).

There are 2 conditions to this new law:
1)    The so-called “self-management” of the residency must involve at least 50% of it.
2)    The “self-management” of the residence is possible after 1 year only if the owners could not agree on another management company. In practice, this period of 12 months isn’t ideal for residences in difficulties, “It would be necessary to allow investors, who are already without rent, to find a solution to their money woes more quickly,” according to Yannick Aure, the Head of Exhore, (Exploitation d’Hotels et de Résidences).

Yannick, himself a specialist in hotel management, has proposed a management mandate to investors who agree a re-sale price of the lease for a token sum  will receive  the commercial funds of their property in line with a judicial proxy.

At Sextant Properties, we hand-pick the French leaseback developments, making sure that the management companies are sound and will be able to fulfil the rental contracts they sign with the buyers.

Share on Facebook

The yield has been increased to 4.2% ex VAT, with all furniture included, for ALL apartments on this development.

This is a fantastic opportunity for those wishing to purchase property in Eyzies de Tayac, a beautiful 14th century town nestled on the left bank of the Vézère river in a lush, unspoilt valley surrounded by limestone cliffs in the heart of the fabulous Dordogne region which welcomed over 2.9 million visitors in 2008.

OPEN DAY Thursday 14th January 2010

Those choosing to invest here will also receive a NOMAD Card, entitling them to use any of the company’s catalogue of properties for an extraordinary 50 € per week.

Why not visit this stunning development and discover all the Dordogne has to offer?

Share on Facebook

Sextant Properties is currently marketing a leaseback development for sale in the French Alps with a yield up to 4.5% (ref 19547). Having appeared on the market on the 21st September 2009, the development is attracting an overwhelming amount of interest. – as of the 12th November, 47 of the 77 apartments have been sold, and 5 others are reserved.

The 25 remaining properties still offer plenty of choice. It is unlikely that any of the properties will still be available in January. Here is why you can buy today without being affected by the unfavourable exchange rate:

The properties are ‘off plan’, which means that the buyer pays little now. Additionally, taking out a French mortgage will result in monthly payments which are the best way of responding to currency fluctuations.

If you buy apartment number C001 on the market at €175,800 (including VAT) you will need to pay only €154,764 because the VAT will be reimbursed. You can take a 100% mortgage on the price excluding VAT (€154,764) and the property can thus be financed in the following way:

> Due now 5% Reservation deposit: €8,401
> On signature of the mortgage offer, brokers fees €774 to be paid in December 2009
> Just before signature with Notaire, Bank fee €1548 (to be paid in March 2010)
> After signature with the Notaire refund of extra deposit €2,248

For the next 24 months you pay life insurance payments of around €41 per month (subject to approval). The delivery is scheduled in November 2011. You will then start to receive a rental income every three months from La Grange, and this will be used to pay back the mortgage.

Our specialist broker, Athena Mortgages, gave us a quote for this particular property, as follows:

The start date for repayments will be in March 2012. The buyer will need to pay €286 per month from that date. The rental income will be increased every 3 years, and, for this reason, the shortfall will decrease with time.

In summary, the purchase of an ‘off plan’ property worth €175,800 would only require an initial payment of €10,723, which would be paid in several instalments. Industry experts predict that the exchange rate will have improved significantly by March 2012, making the reality of investing in French property far more accessible than most people think.

If you do not want to miss this unique opportunity, contact us on 020 7428 4910 or visit the reference 19547 for more details

Share on Facebook