LEASEBACK PROPERTY IN FRANCE

Buy your ideal Investment Property under the French Leaseback Scheme

Leaseback search

  

If you are looking for a long term investment with a guaranteed yield, then the French leaseback property scheme may be a good option for you. 

It can be a great way to buy an off-plan / new build or newly refurbished property in France if getting a fixed rate of return on your investment is a high priority and you don’t mind restrictions on the amount of time you can use it.

Essentially what you are doing is buying a freehold property but granting its lease to a holiday company for a period of between 9 and 11 years. The rental return is fixed and guaranteed regardless of whether it is rented out or not.

Leaseback property in France is normally located in popular French holiday resorts. It is possible to get a higher return from renting the property during the summer months yourself - but this of course brings with it a risk and hassle factor.

Guaranteed Return On Investment

Your guaranteed investment return will typically be around 5% net of all costs tax-free as you benefit from “non-professional lessor of furnished property” status (LMNP). This in effect means that you will receive as much interest as you would in a high yielding savings account as well as the opportunity to gain from capital appreciation of the property.

Refunded VAT

One of the great bonuses of this scheme is that, as purchaser, you get a full refund of the TVA (VAT) of 19.6% if it is a new build property which is either refunded 6-9 months after the purchase  - or it is paid and reclaimed by the developer in which case you never have to pay it yourself.

When the Property Leaseback Ends

At the end of the initial lease period, the management company usually reserves the right to lease it again until the 20th year after its construction - but this is very rarely insisted upon if the client is not in agreement. If you choose not to lease your apartment out again or sell it, then you will have to pay a proportion of the TVA according to how many years are left outstanding from the first 20 years.

For example, if the property has been under lease contract for 11 years and there are therefore 9 years remaining, then the amount of TVA that must be paid back to the French government is 9/20ths of the TVA. After 20 years TVA is no longer payable.

Remember, if you sell the property during its lease contract then it must be sold with the contract intact to a like-minded individual who is prepared to see the contract through. 

Personal Use

French Property Leasebacks often allow the owner the option to occupy the property for a number of weeks a year.

The Management Company

An experienced management company will take care of the entire maintenance of the apartment or villa, usually with hotel services available such as reception, house linen, well-kept gardens, swimming pools and 24 hour security.

Furnishing

All furnishing, decoration and electrical appliances are supplied and taken care of by the management company.

Accounting Impacts During the Loan’s Term

  • Deductibility of the loan interest
  • Deductibility of miscellaneous expenses (property taxes)
  • Amortisation deductibility- 3.3% per year for 30 years, however they are deferred and not imputable in regard to the business income.

After the loan’s term the deferred amortisation can be imputed and set against the received net rents.

Notary Fees and Sales Process

The sales process follows the same routine as for all new build / off-plan properties with the same corresponding notary fees:

  • 3% for off-plan developments
  • For refurbished leaseback properties you will have to pay the usual 7-8% notary fees on the property before refurbishment - working out at between 4% and 6% of the purchase price. 

Better than Timeshare

Unlike timeshare schemes, the owner actually sees a return on his/her investment through annual rental yields and also appreciation in the value of the property which can be substantial - so it is not money down the drain.

The added bonus though with these schemes is that, like timeshare, the property will be well maintained by the management company with no responsibility for changing of linen and cleaning - you simply turn up during your chosen weeks and enjoy it!

Leaseback Investment Simulation

Below we simulate an investment in a residence of one to three bedroom apartments from 106,917 Euros in a stunning high quality residence at Mers Les Bains, Picardy, just 300m from the sea and right in the town centre, walking distance from all amenities. The guaranteed NET yield is 5.27% and we can secure 100% interest only finance (subject to status) at a fixed rate of just 5.1% (correct at time of writing). In this example the VAT of 19.6% is paid for in advance by the developer so you never have to pay it.

What this means is that you can invest in and excellent location in France that pays for itself and all you need to find are your bank and mortgage setup fees plus your legal fees (notaire fees). If you add all these together they add up to roughly 7% of the property price. For better understanding we have provided a simulation below of an investment in a 1 bedroom apartment:

Property Price: 102,027 Euros
VAT@ 19.6%: 18,738 Euros
Mortgage: 102,027 Euros

Deposit: 0 Euros
Notaire fees: 4881 Euros
Bank & mortgage fees: 2265 Euros

TOTAL personal contribution: 7,146 Euros

To view further details on the residence please click here

Search through our portfolio of French leaseback property yourself or, if you prefer, just call us for free advice and help on where and what to buy.