| Buying
France Property for Investment
Buy to Let
The main
investment strategy currently used in France is based on buying-to-let
with a medium to long term model, with a minimum of 5 years;
however 10 to 15 years would be best. This strategy allows
for monthly cash flow (through rent) and/or capital appreciation
(through the increase value of your property). The reason
for the longer term is that when you sell the fees and taxes
can amount to as much as 40% and you’ll need time (relying
on capital appreciation) to be able to recoup your costs.
Where to Invest?
It is
important to constantly keep your ear to the ground for the
latest developments so please do email me for stop press news!
(Alexis@overseasguidescompany.com)
However, for good tourist rental, Provence/Cote d’Azur
and the French Alps are firm favourites. Paris is always an
option too with rental yields consistently around the 5-6%
mark for long term rental and possibly higher for short term
rental. It has an extremely strong rental market. Lyon and
Marseille follow suit. Another spot to watch out for is Reims
which is now only 45 minutes from Paris with the new high
speed TGV Est train service
The Leaseback Scheme
Another
investment opportunity is to make use of a leaseback scheme
where you are the freehold owner of the property and enter
into a lease agreement with a management company. The management
company takes care of the letting, bills, and overall upkeep
of the property. The leaseback scheme is a very popular option
in France and is uniquely French. The company offers a guaranteed
rental income for the term of the lease which is typically
9 years and is renewable. The return can be anything from
3% to 6% of the initial asking price. The French government
refunds the TVA (on VAT) of 19.6% that is included in the
asking price.
Currently you will find leasebacks in coastal and mountain
resorts and big cities but, as I said, the scheme is popular
and I am sure will see an increase in the more rural areas
of France in the coming few years.
The scheme was set up originally to help France's tourism
industry. It is a safe option: you have a capital investment
and own the freehold with guaranteed rental income but it
is very much a long term investment and, if you do use the
property yourself for a few weeks a year, this will reduce
the rental yield slightly. The advantage is that it is a marvelous
way of having a regular income plus you can still have use
of the property. Many people only want to use their French
holiday home for a few weeks a year anyway! If this applies
to you, I would seriously consider it.
If you opt to use the property for 3 weeks or so a year your
rental income would be slightly less but you would still be
looking at a return of well over 3%, probably more and the
company you have bought it from must deal with all repairs/management
and maintenance. It is low risk and enables many people to
get into the market at a relatively low price. You can get
greater yields of course depending on the period you chose
to use the property yourself.
After
this agreement ends, the property is still yours to do with
as you wish.There are various advantages and disadvantages
of this leaseback strategy, one disadvantage being that you
only have specific times you can use the property during the
9 years. HOWEVER two advantages are; not having to pay VAT
and getting a guaranteed rental income.
The leaseback
scheme makes for a very attractive proposition if you are
only anticipating using your property for a few weeks a year.
If you are simply looking at a decent investment, relatively
hassle free, it is something very well worth looking at and,
in my view, is destined to become an ever more popular option
for investors in the coming years.
For more
information on investing, buying-to-let, lease-backs, renting
a property in France and much more, get the France
Buying Guide!
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