French lease back

[Ahuizotl]

Would like to buy a French lease back property in Cap d'Agde, between Sete and Narbonne.

Proposing 39 m2  plus 7 m2 terrasse 84.000 Euro HT, with 5 % yield garanti for 9 years., with 5 weeks free each year. Your opinion about lease back properties in France will be appreciated.

Anybody having invested in lease back properties ? Thanks       

[Andyphilpott]

I too have been looking into this and for my purposes it looks like a good investment. I am sure that you have looked at the upsides but in essence you own an asset which should appreciate and at the same time you have a number of years where all the outgoings are covered (except Taxe Fonciere, certain service charges and perhaps insurance. These depend on the deal to some extent.

I will be buying purely as an investment; I will probably not stay at the property and will therefore release all the weeks for a higher return or retain them and let them myself. Note that your weeks will be spread - you probably cannot take 5 high season weeks. My initial reserach was in the alps but there were certain disadvantages which came to light with the particular development I looked at.

Downside of the leaseback arrangement is that selling could be difficult as you have a tenant for 9 years who cannot be removed. On the other hand a purchaser might welcome that. Most people I have asked reckon that the tenant would depress the price depending how long the tenancy had to run. You also have to repay some of the VAT saved if you sell within 20 years but that is merely a cash flow coinsideration.

You are also dependant on the status of the tenant but these are usually good quality management companies I believe.

Main benefit is the capital appreciation, especially if you gear up by borrowing part of the purchase price.

Andy

[Ahuizotl]

Hmmmm......I just read another opinion on a different forum called C4:  about lease back properties in France >

Be very careful.

I looked into this before the start of the current ski season and had all but booked flights to go and visit a couple of leaseback properties before the agent I was dealing with had some unexpected news. I had read a few horror stories about leaseback with people warning me that even at the end of the lease the property was never owned outright - I had asked the agent about this a number of times and he assured me this wasnt the case. He then came back to me and advised that this was actually the case - the initial term was I think for 10 years, and it was a condition for me to own the property that I must enter into another lease with the same people the terms of which would be negotiated at the time. This had to be a neverending arrangement, and I would never own the freehold. The agent tried to tell me that this wasnt a problem and that I could sell the property at any time. However, when I asked how many properties they had sold which were subject to a leaseback (not the original lease) he conceeded this was none. I therefore abandoned this as a bad idea. If I were you, I would not look at the leaseback as being an easy route to owning your own property. In addition, I believe the legal documents involved in a leaseback are quite complicated, and you will need these reviewed by a solicitor familar with this aspect of french law - this is much more expensive that a traditional resale property.

  another >

posted 14-02-05 20:00

lease back can be a real can of worms, be warned before opening. Works well for some on the coast though. 

The problems are..... how we can be sure we will get complete freehold of the property after 9 years lease.....if the management company, in this case ODALYS, wants to keep the business for another 9 years lease.... ???
I have read the proposal  commercial lease terms from  Odalys.... nothing mentioned.....??? !!!

[John Whitt]

I too am seriously on the road to purchasing a leaseback chalet in the Alps. It has 4.5 years to run on a 9 year leaseback arrangement. We are regular skiers but are looking at the arrangement on an investment basis rather than for family and friends as a cheap ski option because we would have to rent the property at 80% of the asking rental from the management company.

However, future financial aspects seem to work out very well but we still have some concern about the selling of the property after the 9 years (i.e in 4.5 years time)- is it best to renegotiate a leaseback, is this expected or stated in the legal jargon in the compris de vente, or can it be sold as a freehold without restrictions ? 

Whilst the French Government has been actively backing the scheme, I suppose there there is still a likelihood (albeit small) of the French Government revoking the scheme and affecting the whole market.

Any information would be gratefully received before I commit myself further. 

 

[frenchbuy2let.comwww.frenchbuy2let.com]

Firstly I should declare my hand - Im now director/owner of www.frenchbuy2let.com - about 3 years ago I discovered leaseback (Im a primary school teacher - I went part time in September, and now leaving completely this year). I bought in a great development called plan de la tour near st tropez. Its run by Odalys who have been great. I then set up a really amateur website as a meeting place for all those interested in leasebacks and a busines guy approached me and its turned into a  business  and we had it all redesigned.

 

I became a bit of an anorak and investiagted all the leaseback rental companies for financial strength history etc etc

 

Theres a forum there with hundreds of posts covering tax, capital gains , what to watch out for etc

 

I actually sold 15 cap dagde properties its a good one - odalys are the rental company who are great. Its was owned by a dutch firm.

 

Ive got a great bilingual mortgage brokers who can get 80 % mortgages so when you get youre rebate it equates to 96%

 

drop me an email if you need any advice  [email protected]