Talking up French Leaseback !


A recent article in the Indo on 5 Alternative Ways to Invest your Savings suggests that we could look at buying a French Leaseback. One contributor from a prestige investments company admits that French banks have been ruthless with indebted Irish investors,  but believes that

leaseback is an investment that can represent good value in the long term

Perhaps it can, but you don’t hear much about that. You do hear a great deal about how you can’t sell them at all for anything close to what you paid for them.

I would strongly encourage anyone thinking of investing in a French leaseback property to have a look at the 1,500 or so posts on forum to see the feedback of others and take a critical look at how that ‘good value’ might be realised – even in the long run.

The same contributor is pushing the same old marketing tics of 1) VAT savings and 2) ‘guaranteed’ rental returns.

It gives you the right to use the property for short-term tourist rentals over a period of nine, 11 or 18 years. You receive in return, major tax breaks from the French administration (19.6pc VAT) as well as a guaranteed rental income for the duration of the contract from the management company which varies between 3-4.5pc depending on the development.

VAT Tax Breaks

You could equally argue that there is no VAT saving whatsoever for the owner as the ‘saving’ is factored into the selling price the developer pitches the properties at. Many leaseback developments are designed to be sold as leasebacks. The the ‘leaseback’ status is awarded only if at least 70% of the properties in the Résidence du Tourisme are leased to an operator for short tourist stays. This promotion of the provision of tourist accommodation is the purpose of the government leaseback initiative.

Guaranteed Rental Returns

As we have seen, many operators have gone into receivership, or have pressured owners to sign lease amendments agreeing to half the rental returns originally ‘guaranteed’. Instances are numerous. The pain for Irish owners is on-going.

Even if you do receive the 4.5%, there will be costs to pay out of that. For example, for a €200k property at 3% you would get €6k. Out of this you might have to pay €1k for Taxe Fonciere, €2k for maintenance/syndic charges, €350 for a French accountant. That’s before you start to pay back a mortgage.

The media needs to be taken with a grain of salt, wherever someone is put forward as some kind of expert on a property investment you will often find someone with a financial stake in the flogging of said investment.

I’d like to suggest a 6th alternative  – take your hard-earned savings and buy some bricks and mortar and then throw them down the nearest bog hole..

(though of course I don’t mean that, as I’m environmentally responsible, and I like bogs!)

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