Leasebacks

Why buy a French Leaseback in 2009?

Everyone knows that the world is going through a financial crisis, but we also know that eventually things will improve again. French Leaseback Schemes have been popular investments for the nearly 40 years, but as a long term investment, the best time to buy is when interest rates are low. The interest rates on mortgages in France can be fixed for the term of the mortgage, say 20 or 25 years.

We can currently arrange mortgages in France with interest rates of between 2.5% - 3.5%. Whereas, the Guaranteed rental from the property starts at 3.5% - 4.5% in year 1 and increases every year with inflation.

Along with the attractive 19.6% VAT rebate that you receive up front, which acts as your deposit, French Leasebacks offer a low risk investment that virtually pays for itself.

On top of this, you can also have holidays in your investment. (The majority of people who own holiday homes in France, only actually live in them for a few weeks of the year.)

What is a Leaseback and how does it work?

Investors buy the freehold of an off-plan property outright, so you own the property. As with all new properties, the purchase price includes VAT, however with a Leaseback property the VAT is refunded back to you. As VAT in France is 19.6%, this either replaces, or significantly reduces your deposit.

The property is then leased back to a management company who specialise in the tourist management, maintenance and rental of these properties for a period of 9 - 11 years. In return owners receive a guaranteed annual return which increases with inflation, irrespective of occupancy of the property, NET of all communal charges, maintenance and running costs.

Why were leasebacks introduced?

In the late 1960s, following the increasingly large number of tourists visiting France which continues today as the most visited country in the world, the French government recognised the need to encourage investment in the construction of tourist residences, and offered an incentive to investors by refunding the VAT on the purchase price of properties built for leaseback purposes.

Main features of a leaseback property

• A freehold, fully furnished property
• Investor entitled to reclaim the 19.6% VAT rebate
• Property leased to a management company for an initial period of 9 - 11 years, with automatic renewal for a further 9 years
• Investors receive index-linked, guaranteed annual return with options for personal usage
• No running charges or maintenance costs
• Low risk, hands off long term investment
• The success of the French innovation has resulted in the introduction of similar investment models in other countries, most notable rental guarantees, although no countries match the generous tax rebates of the French Leaseback scheme.
• Properties sold under a leaseback scheme are normally located in popular resort areas such as golf, ski or coastal resorts. Leaseback schemes are available in many parts of France, including the Alps and PyrEnEes, Brittany, CUte d'Azur, the Atlantic coast, Normandy and Paris.