Property Development

[Nick Trollope]

Hello all

We have just bought the house next door, with the specific intention of extending it, adding a garden from our land and selling it for a profit. Real Sarah Beeny stuff.

From what I remember of the old forum, tout le monde said that property development was impossible in France, because of the CGT rules and various other reasons. The impetus for this posting is to state my intention to prove these members wrong. Any comments?

Would any registered builders within spitting distance of Broons care to contact me?

[Jirac18]

Nick it is a straight forward mathematic equation.

Price you sell at minus (cost of purchase + cost of renovation + CGT) = profit or loss.

I can't recall exactly the rates of CGT off the top of my head but at worst its about 22% of net profit. Therefore if you sell it for more than it cost you will inevitably make a profit.

Good luck, I am sure you will make some people eat their words! 

 

 

 

 

[Miki]

"From what I remember of the old forum, tout le monde said that property development was impossible in France.........."

Nick you state "everybody". I certainly have made a couple of bob on every house I have sold. I don't remember too many saying that it was not possible?

Buying one house such as you propose, is hardly "property development" it's more like "doing a house up" and selling it on but one would expect, that with careful planning and getting a few devis in and comparing them in detail plus the ability to do a fair bit yourself, one would certainly expect to make a few quid. You will of course suffer CGT but hopefully your profit will be sufficient to leave you with a neat profit.

Do more than one house up mind you and eventually, Monsieur ou Madame Impots may well want to know what your'e playing at!! That was maybe what people were insinuating perhaps? 

Jirac, I think for a resident the CGT is now around 26% on net profit for residents (16% plus the 10% tax for the good old national debt !!) only 16% for non residents not obliged to pay the other tax.

[Bobdude]

The ones who seem to be intent on discouraging anyone from having a go at it seem to forget that CGT tax exists along similar lines in the UK. There are a lot of allowances you can clain to offset against your profit, and if it seems like you are likely to be clobbered for too much CGT there are always other things you can consider - like renting out the second property for a couple of years before selling. This is what we are doing. Of course - you will still be liable to pay tax on the rental income, but might still come out on top as the price of the property should increase in two years.

[Nick Trollope]

[quote]"From what I remember of the old forum, tout le monde said that property development was impossible in France.........." Nick you state "everybody". I certainly have made a couple of bob on every ho...[/quote]

I think the concensus (from those from whom you would expect such comments at least.......) was in the anti... Perhaps you took my tout le monde too literally!

Interested in your definition of property development. I would have thought that if you take an unsaleable property, buy it cheap, make it saleable, then sell it, all with the intention of selling it, then that is "property development". If it isn't, what is?

Don't give a toss about the (yes, you are right, 26%) taxes, as has been pointed out, one pays tax in the UK (40% without allowances, IIRC).

If one continues to develop properties (or whatever it is), what will Monsieur ou Madame Impots complain about, if I am paying my taxes (difficult to avoid, really)?

[Miki]

Firstly, if anyone says to me "everybody" that to me, is what it means, if they say "nearly everybody", then that to, is what it means to me.

Property development is a rather grander term than doing up a house next door, sorry if you think differently. It is not nit picking but to builders or developers (or perhaps, they are one and the same) what you are doing, is not exactly what the trade would call it but if you want to, call it property development if it makes you feel grander !

Now OK, fair enough you probably are not au fait with things to do with working in France yet but I can tell you, that if you want to buy houses and "property develop" you WILL have to go to the Ch de Met and register yourself either as a Marchand de Biens or as an artisan of some kind.

You probably (certainly in 99% of cases) would be allowed to buy and sell one restored house other than your own, as you might have a good excuse as to why you no longer want the second house but do it again and the likelihood is that questions may well be asked as to what you are actually doing.

Profits in the UK, although being taxed at 40% are related to the higher profits that are gained in re-sales of well restored houses. In general terms, 40% on a good UK profit, will, in the high majority of cases, still find one ending up with a much better profit than a French profit on what looks to be a low CGT of 26% in France.

CGT or Taxes as you call it, I am afraid is not relevant. It will be personal tax that they will want. Everyone, whether or not they pay income tax, are liable for CGT on certain sales, don't ever  think the Impot will simply be happy to take the CGT on a house sale and ignore as to how you earned the right to pay CGT.

If the name Trollope pops up against CGT on more than one occasion, then it's akin to playing Russian Roullette with the Hotel des Impots.

If you wish to ignore all this as rubbish, fair enough but it was neither made up nor meant to antagonise but then nor was the first one, still..........................

[Nick Trollope]

[quote]Firstly, if anyone says to me "everybody" that to me, is what it means, if they say "nearly everybody", then that to, is what it means to me. Property development is a rather grander term than doing ...[/quote]

Hello again,

Thanks for this. Please be assured that I am not interested in self-engrandisment. I am trying to make money. without breaking the law.

I am also well aware of the rules about registration (although my accountant couldn't tell me what I should register for, nor did letters, from him, to the USSARF or The Ch de M illicit any response). I am also aware of the personal tax rules.

One small point, why must you act so sensitively to postings of this nature? I don't need to get into an argument about your take on the French tax system, nor do I need comments like CGT or Taxes as you call it which has no relevance to the discussion. Your input is valuable to me (I can talk to my accountant about Marchand de Biens now), I certainly don't reagrd it as rubbish, but please stick to the point.

Thanks again.

[Miki]

[quote]Hello again, Thanks for this. Please be assured that I am not interested in self-engrandisment. I am trying to make money. without breaking the law. I am also well aware of the rules about registrat...[/quote]

Oh well, if you didn't see it as the help it was meant to be, then beg your pardon.

I take it you have asked your accountant to ask whoever all about doing more than one house? For one place, just get on and do it. Are you telling the whole story? As I can't see that the Ch de M cannot advise you on your predicament on wanting to "do up" houses for re-sale. 

A complication can arise, due to someone having other work that they are registered for in France, perhaps that is what you have?

As far as sticking to the point, it was all bang on the point. You asked for comments about your "property development" and I gave them from a French stand, simple. Sensitive ? well no actually, it's how you see it but not as I saw it. It was all very much to the point so much so, that you are asking your accountant about a Marchand de Biens now. Who the heck was trying to get you in to an argument about taxes? It was meant to help you but you seem to want to pick and choose what is useful and accuse me of going off point for other advice you prefer to ignore, that's nice.

Good luck with the restoration and let's now call it a day, I thought I was giving some advice you see it as being some what sensitive? so let's leave it there. 

[Will]

Miki's perfectly correct in that property development is definitely not discouraged in France as long as you go the right way about it, and Marchand de Biens is the way to go if you are doing it seriously. It's also true that for individuals there is little incentive to act as a property developer, though with a comparatively low CGT rate now it's a bit more attractive.

However, I think it unlikely that if you are just buying, improving and selling one house that it will be worth registering a business to do it. Marchands de Biens still have to pay plus value (CGT), though it's possible, through good accountancy, to offset your own input as well as those of other businesses. There are other advantages and disadvantages, both fiscal and logistic - I believe one disadvantage for the individual spare-time developer is that the work has to be completed and the house re-sold within quite a tight timescale, but I don't know for sure about that.

The thing to do is to make sure that taxes (as well as agency and legal fees) are factored into the equation when considering if the exercise is worthwhile. I know that normally the buyer pays the fees, but they still affect the eventual selling price.

[Boiling a frog]

I dont know whether anyone has ever said it is not possible to buy a property renovate it and sell it on .Since the recent change in CGT as Will said it is more attractive.

As a private individual you pay 16% on the gain made if you sell a maison secondare within 5 years of purchase.If you are a French tax payer you pay an additional 9%.If it is your principal residence (which you have to declare at the time of purchase) you do not pay CGT.Just how you would do that if you already own a house in France which is your principal residence  I am not sure. 

So if you are liable to pay CGT it is only 25% of the profit.You are allowed to deduct the notaires fees and the cost of the renovation provided you produce properly completed receipts from a French registered artisan which have been completed in detail in French .You are no longer allowed to offset any work or material you do yourself.

 The problem is that if you spend too much on the renovation you may not even make a profit or very little as house prices in France do not increase in value as much as in the UK so you may end up with only a small profit.

The notaire is the person who you have to convince when you come to sell as he will deduct the CGT due.

If you go down route of Marchand de Biens be aware that any renovation work will be charged at 19.9% not the 5.5% available to private individuals and the CGT is 50% .

Having said all that the best of luck   

[Miki]

BAF, Good points but the plus value is a little more than 25%.

From the Govt pages :

Avec son taux de 26.3 %, la taxe sur les plus-values est l’impôt le plus « sympathique » de l’Hexagone.

Vous êtes résident français : l'impôt a payer est de 26,3 % de la plus-value nette imposable soit

Vous êtes résident d'un pays de l'UE : l'impôt a payer est de 16 % de la
plus-value nette imposable soit

Vous n' êtes pas résident d'un pays de l'UE : l'impôt a payer est de 33.33% de la plus-value nette imposable soit

To be honest, if you have ever seen a demand for plus value, once it has been through a notaire, unless you are an extremely capable mathematician or accountant, it is practically impossible to fathom. The make up to 26.3% is made up in a calculationary (new word?) method to frighten even scrooge himself !

To add to others who are not residents and who sell their property, the CGT is now stopped at source and you can occasionally expect a delay  on being offered the sale proceeds.

The 5.5 % you talk about for private individuals, so that no one mistakes this and thinks that they can go and purchase at this reduced figure, it is only available if the work is done by registered tradesmen and the factures are billed from them. I am sure you knew that but it is just to clarify it, for people who might be reading this thread.

By the way, there are excellent sites that can help anyone calculate their expected plus value (CGT) 

[Nick Trollope]

[quote]I dont know whether anyone has ever said it is not possible to buy a property renovate it and sell it on .Since the recent change in CGT as Will said it is more attractive. As a private individual yo...[/quote]

Thank you for this (and Will)

What amazes me is that this information is available here, but my accountant seems in the dark! Perhaps I need a new accountant!

My major concern is the "bit I do myself" costs. Perhaps I should find something to register as, so as to make my labour deductible. I am actually adding value to a unsellable house, because we own the "ransom land" that surrounds the house next door. I will need to factor in the cost/value of the land we are adding to the package, when we come to sell.

I really do need a new accountant!