A lease-back plan is a plan where you
buy a property then grant a management company the right to use it for
short-term tourist rentals, this usually over a period of 9 years.
You receive in return major tax breaks from the French administration
as well as a guaranteed rental income for the duration of the
contract.
Anyone can buy a lease-back property -there are no restrictions for
non residents.
The buyer pays the asking price for an apartment, in some cases less
the VAT; In return for a lease-back contract to a management company
the buyer gets a net guaranteed return. These returns are net during
the term of the lease, which means net of the running and insurance
costs, as well as index-linked.
Everything is covered, from management fees to city tax, water and
electricity charges, heating and air conditioning, even down to
replacing the furniture. In terms of returns, property price rises may
seem modest against those occurring on the stock market on the short
term, but when financing is used the return potential is much higher.
A tourist property will come into its own over a medium to long-term
period.
A lease-back contract may provide for you to occupy the property
yourself free of charge for a period of 2 to 4 weeks per year.
If you do not want to do so you can allow others to occupy the
property on your behalf or, or usually, surrender the right in return
for a higher payment from the company.
Only approved companies can offer lease-back plan and those that do
are usually subsidiaries of leading French companies of major size,
status and scope. The guarantee from them is, therefore, worth having.
The plan does not have anything to do with timeshare. You buy a
freehold apartment and you are the legal owner from day 1.
It is registered in your name in the French land registry. You are
merely allowing someone else to use your property for part of the year
in return for a cash payment.
At the end of the lease-back period, the property is yours to do with
as you please. You can continue to rent it out, use it yourself or
sell it or possibly to start a new lease.
By using leveraging you can invest a relatively small amount and yet
reap the gains on a large amount. Assuming the bank lends 80 % of the
property value, you can gear your own money by up to 5 times, thus
multiplying your potential return by up to 5 times. And banks will
lend more money for longer periods at lower interest rates for
property than for almost any other asset. With tourist properties,
rental incomes are received monthly and so can conveniently be used to
repay the loan, which is seldom the case with other investments.
There are cheap mortgages available in France for up to 90 % of the
purchase price with fixed rates over up to over 20 years.
The key to this type of tourist property investment is control. In the
case of an investment property, a management company takes care of the
whole maintenance and letting and it is therefore quite a hassle-free
purchase for the investors living overseas.
The guaranteed return of the tourist properties in Superdevoluy will
be 4.76 % net during 10 years. After 10 years you can either live in
it or continue to rent it.
Mortgage finance is available, up to 95 % of the purchase price of the property, at around 4.7 % for a fixed rate .
The French government allows you to buy the property free of the 19,6 % VAT.
Lease- back programs are always available in locations where the capital gain potential is excellent.
Information provide by Malpen Investments