Selling a tenanted property in France

[Bobdude]

I understand that if I wish to sell a tenanted property in France I am obliged to give the tenant first refusal, but I would like to know whether any of you have actually done this, and are their any agencies which specialise in selling tenanted properties? I would assume that the valuation would be lower on a tenanted house - do you know how much lower in percentage? There doesn't seem to be much info on Google. Perhaps it is uncommon to sell a tenanted property here? As a footnote - I don't wish to confuse the issue at all - but my post yesterday regarding repayment of rent received from CAF is absolutely nothing to do with the property I am considering selling. (That was an issue I was trying to find info on for friends!) Thanks a lot.

[Chancer]

I am not convinced that selling a tenanted property does mean a loss of value as it would in the UK dependant on the circumstances.

If it is being bought as a rental investment and has a good long term tenant who has never been behind with the rent it would sell for far more than an empty one where the seller has a bad history of tenants.

It is not at all uncommon assuming the property is marketted at the investment market, studios near universities etc, the valuations are done on the basis of its return on investment, if it has a good tenant of the right age and situation then its a good investment.

If its a dream like cottage in a rural area without employment then its only going to be of interest to an owner occupier, if the tenant is over a certain age, 60 or 70 I think then it would have little value other than speculative for when the tenant pops their clogs.

[NormanH]

I think it partly depends on the type of contract: for a non-meublé

2 - Mon bailleur souhaite que je parte pour vendre le logement qu’il me loue, ai-je un délai ?

 

Si

votre bailleur souhaite vous donner congé pour vendre, il doit vous en

aviser, par lettre recommandée ou acte d’huissier, au moins six mois

avant la fin du bail. A peine de nullité, il doit comprendre certaines mentions obligatoires.

 

Ce congé vous ouvre un droit de priorité pour acquérir le logement que vous louez.

 

on the other hand I have sold a house which was let but as it was let 'meublée' there is a

clause in the lease which stated that I could ask him to leave if I

wished to sell as long as that was in the normal time scale (he had the

right to 3 months notice I think I remember)

It also depends on the reasons for buying. If someone wishes to buy to let, and the rent is at a reasonable level there is no reason why the new owner would pay a lower price. It could even be see as an advantage, as it avoids having to find a tenant.

In any case a tenant who doesn't wish to buy has to leave if you wish to sell and abide by the rules

Si vous ne souhaitez pas acheter ce logement, vous devez avoir quitté les lieux au terme prévu par le bail.

So the fact that the place is let need not affect the price.

You might have to give 6 months notice and risk that it won't sell and you will be left with no rent either though.

(quotations from http://www.paris.notaires.fr/art.php?cID=283&nID=831 )

[Bobdude]

Oh, no, I wouldn't dream of asking the tenants to move out - I am considering selling as an investment with the tenants in situ. The tenants are a family with teenage children and have been absolutely no bother at all in the 5 years they have been in the house. The father is in very poor health, and therefore does not go out to work any longer. It brings in a very good income, and is in a popular small town for commuters into the nearby large town where the work is. It is actually very difficult to find rental properties in the town in question - it has never been vacant since we bought it in 2003. I am thinking in terms of our deteriorating health, issues in case we ever have to go back to the UK, problems for our grown-up children if, God forbid, they ever had to sort out inheritance issues over here! So, do you think I should go with an agency specialising in tenanted properties? Could anyone point me in the direction of a good one please?

[NormanH]

There are a couple of posters who are specialists in estate agency, and may see this thread.

Chancer and I don't live anywhere near your region, but common sense would suggest that an agency that has a thriving rental side to its business, rather than the sort that sells to British second home seekers would be better placed to find an investor.

In our area Foncia has almost more places to let than for sale, but please don't take that as personal recommendation.

I know it is nation-wide, but am not sure if it is a franchise.

It might also be worth speaking to a local Notaire.

They are very aware of what is happening in the market and who might be looking for what.

I was given a rule of thumb a few years ago about the price of houses sold as an investment.

If you take the annual rent (say 6000€) that gives the income. You can calculate from that how much someone might be prepared to invest, given the tax CSG etc that there is to pay.

Someone looking for a return of 10% gross might then be prepared to pay 60,000 €

This might be completely out of date, or out of the window, but was used as a formula to suggest a price for me.

[Chancer]

You know Norman for years the French so called experts have been using that formula but even more simplified, value = 10 times the gross annual rental which is stupid, it doesnt take into account costs and expenses and has no link at all to the current interest rate or mortgage rate at the time of the investment, just another reason why I was and am so dismissive of French immobiliers.

I know a guy with a very similar property to mine in the main town, he has 6 rental units, I will probably have a couple more, his was valued on that basis a few years ago and I said that it was stupid, a real investor would accept a much lower return and pay much more, why? Because at the time you could get a loan on the property at a really low interest rate and even a modest return would pay that and give a significant profit, for someone invsting their own capital the same return would be far better than any assuarance vie etc.

I saw him last week and he had once again had a valuation, this time the immobilier calculated it on net annual rental income after all costs multiplied by 20 giving a return of 5%, a step in the right direction but i still find it scary that most investors and sellers accept these valuations without ever using their own criteria like what is it worth to me, how much money does my investment currently bring me etc.

[suein56]

[quote user="NormanH"]If you take the annual rent (say 6000€) that gives the income. You can calculate from that how much someone might be prepared to invest, given the tax CSG etc that there is to pay.

Someone looking for a return of 10% gross might then be prepared to pay 60,000 €

This might be completely out of date, or out of the window, but was used as a formula to suggest a price for me. [/quote]

We rent our home; when we wanted to ask the proprietors if we could buy it I asked an estate agent to value it. It is 88 m2 plus garage and large terrace on a plot of 702 m2, with a minute view of the Gulf Of Morbihan - slightly better in winter with no leaves on the trees. His valuation was approx 45 times the annual rental we pay; so I do think location can be very important in determining value.

Sue

[NormanH]

Location is undoubtedly a huge factor, but theoretically it should partly be accounted for in the different prices of rentals. There are so many other things to take into consideration too, such as condition etc.

I am sure that the sort of property sue is talking about would fetch a much higher price than most, but again I don't think it is a typical 'rental' ...most people who had the money for a place like that would want to live in it.

I am talking more about the 'bog-standard' town building, in  a sound enough condition to attract a tenant, and respecting the basic 'norms' of the CAF.

Most people on this Forum would expect something much better, and the prices and market are much different.

The prices per sq metre  for different towns and regions are regularly published in magazines such as Le Point

http://immobilier.lepoint.fr/159242/argus,barometre.htm

That is for the Atlantic side, but if you click on 'choissisez une région' you can select yours...

http://lepoint.seloger.net/159246/argus,barometre.htm

is for Vannes Le Mans etc

[Bobdude]

The house is actually in the Indre (36) Norman, and not where we live in the Limousin. But at 10 x the gross rental it would be impossible to offer it at that price. (€78000) It's a sizeable detached fermette, with 4 bedrooms, two bathrooms, huge garden and barn, and that is not far from the price we paid in 2003, when it was a two-room cottage with no toilet facilities. There must be a different way of calculating it? By the same reckoning - 20 x the gross rental minus expenses seems a bit complicated too - the expenses vary from year to year.

[NormanH]

I did say that "I am talking more about the 'bog-standard' town building, in  a sound

enough condition to attract a tenant, and respecting the basic 'norms'

of the CAF."[:)]

I have no idea of the price of property in your area, and the type you talk about isn't in my experience either.

I did a quick search to see what I could find for you to compare to:

http://www.leboncoin.fr/ventes_immobilieres/287961280.htm?ca=7_s

http://www.leboncoin.fr/ventes_immobilieres/287845241.htm?ca=7_s

http://www.leboncoin.fr/ventes_immobilieres/287636531.htm?ca=7_s

[Chancer]

Looking at the prices per square metre for rental (which are monthly) compared to the sales price per square metre, all in my area would suggest a sales price of between 14 and 18 times gross annual rental income.

I am a more than little suspicious though as for several of the main towns listed it worked out to be spot on 18 in every case.

You would need to do the same exercise using the data for your own area.

Be aware that it is probably not comparing eggs with eggs.

[suein56]

[quote user="Bobdude"]The house is actually in the Indre (36),  and not where we live in the Limousin. [/quote]

Is it not possible to ask an estate agent to do a valuation for you ?

In my area all verbal valuations are free, though there is a fee if you want a written valuation.

Hereabouts there are many properties rented out à l'année as properties are expensive to buy and many people who need to work here cannot afford such high purchase prices. Perhaps because of this the local estate agences seem to cater for tenanted or non-tenanted sales.

There also doesn't seem to be much difference in the sale price either; especially not in appartments, perhaps a tad more when the tenanted property is a house.

Sue

[NormanH]

I'm sure you are right Sue. As I have said before other people here are much more professional than I am, and obviously an estate agents valuation is essential.

However I have always liked  to try my hand at estimating myself just to see and compare.

It is not unknown for an agent to give a low estimate just to get a sale, calculating that taking the loss of commission on a lower sale price is preferable to having it on the books for ages.

I have even heard of one who had an 'exclusivité'  giving a very low price and then coming up with a buyer 'just like that'.

The seller had to accept the offer as it was at the asking price...or pay the lost commission (I believe)

It pays at least to compare with other places on the market.

[Bobdude]

Thanks all of you - those links are a good idea. I think in the absence of agencies specialising in tenanted properties, I am going to have to consider a valuation from a local agent or Notaire perhaps.

[Bobdude]

I've just found this on Google - and it turns out to be actually from this site! 

 

''Sitting tenants: There are several advantages to buying tenanted property: first and foremost, you know that the property is rentable. This will help considerably with your mortgage application; banks love a sure thing. What’s more, you won’t have to go to the trouble of advertising the property to find a tenant and the tenant will come pre-vetted, with references.

However, the single biggest advantage of buying property with a tenant in situ, is the price. Typically property with a sitting tenant is 10-20% cheaper than its unoccupied equivalent.''

Now in theory I just have to find it's unoccupied equivalent!

 

 

[Pickles]

The value of a investment property, as has been indicated earlier by others, is not easily calculated by a simple multiple of the rental value. The multiple method is fine if the property is not otherwise expected to gain in value, or if because of its location and type it would only be of interest to an investor, but if for example the property would be of interest to owner-occupiers because of its location and type (or it has development potential), then it should be valued as if there were no tenants, at least as a starting point. Pure investment property prices ought to vary according to the prevailing interest rates - if interest rates are high then the value of investment property ought to fall. Although this happens to a certain extent in the UK, in France it seems anecdotally to be less so.

From your description, it looks to me that your starting point for a valuation should be its value to an owner-occupier.

[Bobdude]

Thanks very much. Now just to consider how to broach the subject with the tenants without alarming them.