About French leaseback
Why
buy leaseback in France
What
is a leaseback
How
do they work
Why buy leaseback
in France?
French leaseback
properties provide holiday accommodation in the most
popular regions of France. The French leaseback
scheme is a government initiative to encourage and
promote both investment and tourism in France.
It is a national scheme overseen by the French
minister of tourism and offers the assurance of
government regulated contracts and financially bonded
developers.
French leaseback properties offer an excellent scheme
for some investors. The leaseback scheme provides the
security of knowing that your property is in the
hands of a reputable holiday management
company. The management company is engaged in a
long term lease contract to let and maintain your
property. The upkeep of your leaseback property is
paramount to the success of their business, so they
can attract customers and rent the property as often
and as much as possible within the terms of the
contract.
The incentive of the 19.6% VAT refund is a real
benefit, as often the VAT is pre-financed by the
developer, meaning an immediate saving for the buyer
on the property purchase price. In addition,
furniture packs are VAT free. French mortgages are
available on leaseback properties up to 80%. A
leaseback scheme can run for a maximum of 20 years,
but there is a degree of flexibility. The initial
contract is for between 9 and 11 years, and once this
period is over, you can choose to sell the property
or renew the contract for a further 11 or 9 years up
to 20 years in total. You can also choose to sell the
property mid contract to another investor providing
they take over the leaseback contract with the
holiday company.
Once the leaseback contract has come to the end of
its term, you have a property which has been kept in
top condition in a popular location and which has
achieved good capital appreciation. If you
decide to sell before the end of 20 years, you may
have to refund a proportion of the VAT to the French
government, but, with inflation currently low in
France, this will be a relatively small amount to
pay.
As many people have limited holidays, it can be ideal
to know that you have a few weeks of personal use of
the leaseback property and that you will return to
the property to find it clean and ready to occupy.
Location and professional property management are the
key to the success of a leaseback development in
France. Once these conditions are met, the
French leaseback scheme offers the assurance of a
sound long term investment.
What is a
leaseback?
French leaseback property is purchased freehold. The
French leaseback scheme is designed to encourage both
investment and tourism. Under the terms of the French
leaseback scheme, the purchaser of a new property is
entitled to a VAT refund. (TVA in French). The refund
of the 19.6% VAT is a major incentive when buying a
leaseback property in France and an immediate
financial benefit in reducing the property purchase
price.
The purchaser grants a lease to a holiday management
company appointed by the French developer who will
pay you rental in return for use of your leaseback
property. In some cases a rental income is
guaranteed, depending on the number of weeks to be
rented per annum.
The initial lease is for between 9 and 11 years, with
the option of renewing the lease with the same
holiday management company for a further period up to
19 years. It is possible to sell a French
leaseback property before the end of the lease term
and without VAT refund penalty providing the buyer is
able to take over the leaseback contract.
French leaseback schemes can offer personal use of
the property for periods of between two and fifteen
weeks depending on the particular leaseback
development. In cases where the leaseback property is
purely for investment, it is possible to opt for no
weeks of personal occupancy. Properties range from
small studio apartments to substantial villas.
We currently offer leaseback properties in desirable
locations in the Vendée region.
We feel that our French leaseback properties offer
the benefit of VAT return, rental income and maximum
personal enjoyment. Due to the build quality
the properties also enjoy excellent resale potential
after nine or twenty years.
French Leaseback Schemes - How do they work?
The French leaseback scheme is a government
initiative to encourage and promote both investment
and tourism in France. It is a national scheme
overseen by the French ministry of tourism and offers
the assurance of government regulated contracts and
financially bonded developers.
Under the leaseback scheme, the buyer agrees to
lease the property back to a holiday management
company for year round rental. This is usually for a
period of 20 years, and in return the buyer receives
a refund of the vat included in the purchase
price.
Leaseback schemes are a popular way to purchase a
property in France because they allow the purchaser
an amount of personal occupancy whilst benefiting
from an immediate saving on the purchase price. In
most cases the annual rental income is
guaranteed.
Due to the financial advantages, leaseback schemes
have “mushroomed” in France. We feel it
is important, however, that buyers understand the
background to a leaseback development. Buyers into
the scheme should realise that a leaseback property
cannot and will not meet the same requirements as a
property purchased for one’s personal and
family needs. When buying a leaseback property you
are buying into a holiday rental environment with
regular changeovers, perhaps noisy neighbours, and a
different day to day living.
In addition, the success of a leaseback development
rests on two elements: its location and the long term
performance of the rental management company.
A development in a very rural area, which only comes
to life in the summer months, may not be the best
long term investment as far as resale potential is
concerned.
How well the development is rented during the first
lease will determine whether the management company
renews the lease, and whether it will carry on
guaranteeing an annual income, and at what level.
Again it is in the interest of the management company
to perform well, but buyers must remember that there
is no obligation on the part of the
management company to renew the lease. Hence the
necessity to choose a location with good amenities
and a good tourism track record. From a leaseback
owner’s point of view, the standard of
maintenance carried out by the rental management
company on both the property and its shared
facilities is also a key factor. It will be in the
interest of the management company to see to this for
the duration of the first lease. However, should the
management company not renew the lease, owners need
to be aware of the options available as far as
letting and upkeep are concerned.
The leaseback scheme serves
a very specific purpose which is to promote and
develop tourism. A leaseback property may not be the
most suitable buy for someone looking for a
traditional family home with the flexibility and
identity such ownership would bring. On the other
hand, if you are looking for an investment
opportunity without having to manage or maintain it
yourself, then a leaseback property could be an ideal
way for you to invest in French bricks and mortar. It
is worth looking at all the leaseback opportunities
available before deciding whether a leaseback
property is right for you.
Patricia Fevrier, founder
and Managing Director of the new build property
specialists A Place in France, FrenchEntrée
New Build Zone Sponsors.
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