|
|
 What does ‘Leaseback’ mean?
You buy a property FREEHOLD and agree to lease it to a property management group (typically a hotel chain or similar) for rental for a fixed number of years (minimum nine). In return, you are guaranteed a net rental return of between 4.25% and 5.25% after all management and operating expenses have been deducted (but before financing costs and local authority taxes). This return can be free of French income tax and is index linked. In other words, the return should increase over the term of the lease.
Why was it introduced?
Due to the shortage of tourist accommodation in France, the French government introduced this program in order to encourage people to invest in tourist property. It is around since the 1960s and is likely to remain in place for some time to come. As an incentive the French Government allow the purchaser to recoup the VAT.
The purchaser can also write off the cost of the property against the rental income in France.
What are the benefits?
- VAT Refund - The French government will refund the VAT at 19.6%. In other words, you are buying a property at approx. 80% of its asking price.
- Low risk - Guaranteed rentals of between 4.25% and 5.25% per year, index linked (average 3% per annum over last 5 years)
- Choice – Leaseback properties are all over France, but principally in attractive areas for tourism.
- Potential capital appreciation - Growth over the past 20 years has been a steady rise. Under the new Nicolas Sarkozy led government economic reforms have kindled increased economic growth.
- Practically no French tax on rental income - The combination of the mortgage interest deduction and the property amortisation will, in most cases, relieve you from paying French income tax on the rental income.
- Easy financing - Subject to some income level criteria a French bank will lend up to 95% of the Vat exclusive price.
 What if I want to sell within the lease period?
As you own your apartment outright, you can sell at any time within the lease period. You will be selling the apartment with the lease agreement for the remaining period of the lease. This is an advantage and there is much demand for this type of property.
Let Oui Can Do, the French property experts help you purchase a Leaseback property. Call today.
|
|
