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Leaseback

Posted by tomtootles - Created: 14 years ago
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I'd love to get people's opinions/experiences of the "Leaseback" method of purchasing an apartment on The Cote d'Azur.

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10 replies (Showing replies: 1 to 10)

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Posted by Ghene - 13 years ago

There is risk in every investment. If you know one with no risk at all, tell us!The banks offer investors different solutions to finance the purchase. But before hand, they (some of them) also investigate on the development and the developper. There is the interest only loan for example, where you put your money in a locked account (an example- part plays on the stock market and other part goes to gov investments), so it earns at least 4.5% per year. You pay an interest of 3.56% per year on the mortgage. And at the end of the mortgage, once the whole amount is paid full, you get your money back, if their is something left of the earned interests it goes back to you too plus the property you bought. If you still owe the bank something, of course you have to pay it with a part of your capital. A financial advisor can give you more details on this. Anyway, I think the base interest rate in France is 2.21% and all the banks just add their mark-up..- The Sexy Little Mushroom -

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Posted by Ghene - 13 years ago

The rental of the leaseback scheme is calculated from the total excluding VAT price and this includes the furniture. So the net return you will receive is 4.5% on the Sophia development or 5.1% on the student services building.This is net of taxes and the 4.5% is net of management fee as well. However, there will be a forfait for the student residence with 5.1% and it is for longer period. This scheme is a long term investment. The companies cannot sell a leaseback and buy for their own use, that would be unconventional and the administration would not give permits. Also, this is to give oppurtunities to investors and privite individuals to add something to there portfolio.Please note that there are other developments whose rental is calculated in a different manner, it is always a good idea to ask..- The Sexy Little Mushroom -

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Posted by LaCremedelaCreme - 13 years ago

Another thing.

If these leaseback schemes are so good why don't the companies operate the rentals themselves instead of selling to private investors? They too could get the TVA refund. The answer is that they get money cheaper from private investors than they can from the banks and let the private investor take all the risks.

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Posted by rosetta-185721 - 13 years ago

The real estate market has peaked - interesting - is that your opinion or is from some official source? Looking at the rise in apartment prices in Nice over the last year I would have to disagree. I couldn't afford to buy my apartment now - happy I grabbed it while the tiny window of opportunity was open!

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Posted by LaCremedelaCreme - 13 years ago

I looked at a leaseback scheme in Sophia Antipolis where they were offering 4,5% annual return. However you have to buy their furniture package for about 8000 euro and pay tax fonciere so the real return is more like 3,5%. Given that your money is effectively locked up for 10 years (it would be very costly to get out), this doesn't seem like a good investment especially when the real estate market appears to have peaked. There are better 10 year investments.

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Posted by Ghene - 13 years ago

Leaseback is not timeshare. You own it on the day you signed the deed (acte de vente). The success of your investments will depend on your choices, on where it is, the quality of the developpers and the price. Also it depends on what you want. If want to have a holiday home where you can stay as long as you like, then this scheme is not for you if you just want to forget about it for a while and let it make money, then this might be interesting for you. The advantage is that you do not have anything to spend xcept the taxe fonciere, the accountants fee (around 250 every 2 years), and the insurance. The rest is taken cared of by the management company (you have to pay a forfait if you buy in a residence de service for the charges but none in the residence de tourisme)Always ask the banks what they think of the developper or the program. Some sellers hide the fact that the development in not-agreed by the banks.It is your money to spend, spend it wisely.- The Sexy Little Mushroom -

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Posted by worldim-198828 - 13 years ago

Leasebacks are simple.

At the same moment that you purchase an apartment in a Leaseback scheme you sign a fully repairing and maintaining headlease with a management company, usually 9 years.

This company will pay you a nominal net return (guaranteed of say 5% per annum) quarterly in arrears. They are contractually bound to return your property to you in its original state, fair wear and tear allowed for. You are only responsible taxe fonciere ( the management company pays taxe d'habitation, insurance, syndic charges, repairs and maintenance ). They are going try to maximise the rentals they charge for your property to their clients.

The benefit of a Leaseback is that you get 19.6% of the purchase price refunded to you ( the Vat ) ; you can write the off the cost of the Investment against your income from the property over 20 years; you can write off your notiares and other entry costs against your income from the property ; you can write off the cost of the furniture against your income from the property , you can write off the interest on your mortgage against your income from the property as well.

So if you can raise finance at 3.5% per annum and you are receiving a net income of 5% per annum; ( notwithstanding the capital growth on a property on the Riviera ), it seems like a fair deal.

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Posted by Des-191259 - 13 years ago

I think it's a great way to get on the property ladder - remember other regions in France are so much cheaper, once it's paid off then you can sell it and buy elsewhere. (10 years is very short from an investment point of view)

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Posted by Kath Davies-196916 - 13 years ago

Hi

I live in Manchester and have recently bought an apartment in Lorgues. I looked into the leaseback schemes and decided that they seemed ok if you wanted to purchase a property and keep it for at least 10 years, but if you sell before that period you have to pay the Vat back or sell it on with the lease to your buyer.

Kath

Kath Davies

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Posted by Carolebay-180697 - 14 years ago

You're right - a nice title.

It seems that a lot of people wanting to buy property at the moment are talking of the leaseback scheme - and not fully undestanding what it means. Maybe they think they'll own a holiday/rental place without having the hassle of arranging lets.

Beware of as well, there are domestic/residential schemes plus commercial ventures which help to line others pockets.

Carolebay