Leaseback property in France
French leaseback properties offer long term investment with a guaranteed yield
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 from French leaseback properties will typically be around 4% 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.
One of the great bonuses of the French leaseback property 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 your French 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 your 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 your 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.
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.
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 for French leaseback properties 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.
Completely different to 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 leaseback property in France 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!
Have a look at our selection of leaseback property in France.
Email or call us on 00 44 (0) 203 59 77 030 with any questions.