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How can rental income be guaranteed?
How will my French rental income be taxed and where?
Income received is supposedly net, what exactly does this mean?
Is insurance obligatory?
To make a reservation how much deposit needs to be initially put down?
What are the advantages of purchasing property with the leaseback scheme as opposed to buying outright residential property and renting out?
What are the disadvantages of purchasing property with the leaseback scheme as opposed to buying outright residential property and renting out?
What happens at the end of the lease? Can I live in my property, etc?
What if the management company is unable to respect its financial obligations towards you or goes into liquidation?
What percentage of the net sale price can I borrow from a French bank?
What rental income could one expect to receive?
Which is more advantageous, a mortgage in my own country or one in France, and why?
Who is the notaire and what does he do?
Will my French leaseback income cover my mortgage payments?
Will my French mortgage lender take into account the income from my French leaseback property, as a UK lender would for a buy-to-let mortgage in England?
Would the property actually be freehold or leasehold?
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| How can rental income be guaranteed? |
| This is an integral and essential part of the commercial lease and totally independent of rental results. |
| How will my French rental income be taxed and where? |
| THIS IS BLANK |
| Income received is supposedly net, what exactly does this mean? |
| This means that all expenses surrounding the maintenance, insurance, etc, of the residence will have been paid at the time you receive your return, usually quarterly. The only additional and ongoing expenses you will have are your annual accounts fees (for taking care of your tax declaration and V.A.T. reimbursement) and your annual land tax. |
| Is insurance obligatory? |
| Yes |
| To make a reservation how much deposit needs to be initially put down? |
| 5% of the purchase price including V.A.T. |
| What are the advantages of purchasing property with the leaseback scheme as opposed to buying outright residential property and renting out? |
| Apart from the tax benefits (V.A.T. exoneration) there are the added advantages of not having to worry about any of the administration involved in letting (Finding clients, assuring rental payments, checking clients in and out, tat des lieux, damage indemnity, cleaning, maintenance, tax declarations etc. etc. The list is long.) Also your property is purchased fully furnished which eliminates the hassle of choosing, buying and constructing flat-packs.
Instead of this unwanted workload you have a guaranteed annual return of between 4 & 6 % of your net investment depending on the development. |
| What are the disadvantages of purchasing property with the leaseback scheme as opposed to buying outright residential property and renting out? |
| You are bound to a commercial lease with a management company for a minimum period of nine years during which time you only have personal use of the property you own during pre-established weeks which, frequently and for obvious reasons, will not be in the most attractive parts of the year (e.g. school holidays, peak season). In certain developments you may be expected to pay for the use of your property, albeit at discounted rates. |
| What happens at the end of the lease? Can I live in my property, etc? |
| At the end of the lease you will have the option of either renewing the commercial lease for a further period of 9 years or terminating it and taking full possession of your property. In the event of more than 30% of the co-owners of your residence wishing to terminate their contracts, an indemnity may be claimed by the management company due to the considerable loss of income this would cause for them. This indemnity would be equivalent to the turnover generated by your property during the previous year.
If you wish to terminate the lease then it is imperative that you write a registered letter to the management company six months prior to the end of your lease stating this. If you do not take this action, the lease will automatically be renewed for a further nine years and you will have no possibility to terminate. |
| What if the management company is unable to respect its financial obligations towards you or goes into liquidation? |
| Although this eventuality cannot be totally dismissed (theoretically another management company would step in and take over should this occur), we are very careful in our choice of management companies, working only with those with a long-standing and solid history. |
| What percentage of the net sale price can I borrow from a French bank? |
| Up to 80% including the furniture and parking. The banks will not however finance the notary fees. |
| What rental income could one expect to receive? |
| Between 4 & 6% of your initial net investment p.a. depending on the development, its location and target clientele etc. I.e. If the property is the Alps the return is likely to be lower as the rental season is shorter. Also the higher the altitude the higher the purchase prices! |
| Which is more advantageous, a mortgage in my own country or one in France, and why? |
| A French uro mortgage is the more advantageous as the interest rates are generally lower than in the United Kingdom and they can be offset against your profits in order to firstly delay the moment when you will be obliged to pay tax on your rental income, and secondly to keep this tax a low as possible. |
| Who is the notaire and what does he do? |
| The notaire(notary) is a neutral governmental officer through whom any property or estate related documents have to pass in order to become official. His job includes the drafting of the final deeds and all other documents inherent to your purchase and ensuring that they are registered with the land registration office, registering your mortgage with the bureau des hypothques, handling and overseeing the transfer of funds during the operation (from reservation to completion), and drafting the rules and regulations surrounding the running of the residence in which the property is situated. |
| Will my French leaseback income cover my mortgage payments? |
| This would depend on the percentage of the purchase price you intend to borrow, the length and interest rate of the mortgage. Should you borrow 80% over a period of ten years it is unlikely that your return will cover the mortgage repayments. This, however, becomes a possibility if, for instance, you borrow 50% over a period of 20 years.
Also remember that in most cases your return will be paid quarterly in arrears whereas mortgage repayments are monthly!!
However French bank offer a good solution to this problem offering you the possibility to delay the mortgage payments until the delivery (ie the rental income is starting to be paid)
This is ideal to avoid minor cash flow problems. |
| Will my French mortgage lender take into account the income from my French leaseback property, as a UK lender would for a buy-to-let mortgage in England? |
| Only as secondary income. It would not swing the balance in favour of a mortgage you would otherwise have been unable to obtain. |
| Would the property actually be freehold or leasehold? |
| Freehold. You are the owner from the day of completion, which will often take place up to a year before delivery. |
leasebacks 
