By signing for a French leaseback scheme, you can become the freehold owner of a furnished property. The length of the leaseback is usually between 9 and 11 years (renewable). You will get a fix rental normally linked to the inflation rate. So that every year you will see your rent rising according to the construction cost (INSEE Index of Construction Cost). The rent will be pay by the property management company whether it is occupied or not. This is the reason why the percentage can only be up to 5% of the cost of the property. If you decide to rent the property by yourself you could easily manage to make an average 8% return but you will not be sure to rent it all the time during the year. Furthermore you will have to deal with all the repairing work, refurbishment, bills, taxes and so on.
A property management company will take care of your home and for all maintenance and hassle (bills…) and usually guarantee you up to 5% net return on your property. You will have no extra cost as they will be pay by the holiday company (refurbishment…) during the length of the leaseback as it is in their interest to keep the place in good order so that they can rent it more easily.
VAT
If you decide to go through a French Leaseback purchase, then you will be entitled to get the VAT back (19.6% in France).
It can be paid and reclaimed by the developer in which case you will pay less for your property. If you do it by yourself, it can take up to 9 months to get the VAT back. Most of the time the developer will provide assistance to reclaim the VAT and he might charge you a small commission for that.
In order to get a full VAT refund you will need to rent out your property for at least 20 years. You can also decide to do a leaseback of only 9 years, in that case you will repay 11/20ths of the amount of the VAT.
Capital gain
You should not forget that the value of your property will also increase and it is a potential capital gain. The property market in France has increased by an average of 15% during the last 5 years.
Taxes
You are required to declare your income in France, however as there is a tax treaty between France and the UK you will not be asked to pay your taxes twice.If you take a Leaseback there is a method that allow you to not pay income taxes (the rent). To find out how call us on 020 7428 4910.
Checking list
The amount of the rental percentage
The cost of the furniture included in the price or not
Notary’s fees (2.5 to 4%)
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Leaseback properties in France
