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.
You can view our latest Leaseback properties in France here:
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.
Investment
You can use 2 differents methods to finance your investment: Interest only mortgage or a classic monthly repayment. The figures below give you a clear idea of the cost of each solution. Please note that it was calculated with a 40% deposit. If you give a higher deposit then you will not need to add money every month pay the mortgage.
If you take an interest only mortgage you will have a mimum cost every month and start to earn money from the first year (based on €125,000 investment with 5% return and a 5% interest rate mortgage). After 15 years you can decide to sell it and to make a profit on the sale as the price of the property is most likely to increase. If you are more looking for an extra income in the near future then the monthly repayment is a better solution, as soon as the mortgage is paid back (for example 15 years) you will enjoy an income in euros. You can also decide to sell it and keep the full amount of the sale. For more advice do not hesitate to contact us.
Capital gain tax
You should not forget that the value of your property will also increase and it is a potential capital gain. Note that if you keep the property in France for more than 15 years then you will not pay any capital gain taxes.
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 +44 (0)20 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%)
You can view our latest Leaseback properties in France here:
We do not charge you any commission for our service as we get paid by the developer.
Leaseback properties in France
