A “LEASEBACK” investment is an arrangement where you buy a house or a flat and then grant a company the right to use it for short-term tourist rentals. This is usually for a fixed period of 7, 9, or 11 years, but can sometimes be more or less. In return, you receive major tax breaks from the French government and a contractually GUARANTEED income for the duration of the contract.

Companies offering leaseback programs are usually substantial corporations, which means that the guarantee from them is, therefore, worth having. The details for these programs will vary from property to property, but typically, the contract will state that the management company pays all expenses in relation to the property – rates, water, and electricity charges, community fees, repairs and replacements, etc. They are also required to return the property to you in the same condition in which you purchased it.

The contract will also often provide for you to occupy the property yourself at no additional charge for a duration of 2 to 6 weeks per year. If you do not wish to occupy the property, you can allow others to occupy the property on your behalf or, you can surrender this right in return for a higher rental payment from the company.

Leaseback has nothing to do with timeshare. You own the property 100% from day one. It is registered in your name in the French land registry. You are merely allowing someone else to use your property for all or part of the year in return for a cash payment (rent). Think of this as a hotel where accommodation consists of small apartments instead of bedrooms. You own one of the apartments, which you rent to the hotel operator, who, in turn, rents it to guests.

At the end of the Leaseback contract the property is yours to do with as you please. You can continue to rent it out, use it yourself, or sell it, possibly to start on a new Leaseback project.

Why has the leaseback developed?

THE French have more tourists than any other country in the world. The French themselves often occupy rented property for extended periods of time – especially in the summer months. The government has had to make arrangements for all of these people to have somewhere to stay.

In order to accomplish this and protect their enormous tourist industry, they created the Leaseback to give incentives to people ready to invest in good quality rental property.

Why think of leaseback?

THE government allows you to buy the property free of VAT. VAT on a new build property is normally 19.6%, therefore this is a major savings. This means, for example, a €100 000 property will only cost you about €80 000.

The guaranteed annual return (rent) will typically be about 5 - 6% of the price you paid. This is AFTER deduction of all the expenses of running the property. This rent is usually index linked so that, as the years progress, the amount you receive will increase in line with inflation. In addition, depending on your circumstances, the rent can be completely free of French tax.

The risks associated with renting are passed to the management company. For example, if a tenant wrecks the place, this is the problem of the leasing company — not yours. In addition, you receive a fixed income from the rent that they are paying, regardless of actual occupancy.

Mortgage finance is available, in many cases for up to 95% of the price paid, at about a 5.2% fixed rate or 4% variable rate. A 95% mortgage will not be covered in full (capital and interest) by the rent received, but a 60 – 70% mortgage probably will be.

You can usually occupy the property yourself for the holidays free of charge. The amount of time allocated to you will vary from program to program but is typically 2, 3, or 4 weeks per year. Additional time can often be arranged with the company.

Leasebacks are often available in places where there is likely to be considerable growth in property values over the next 9 years. Furthermore, the properties themselves – like most 4 or 5 star hotels – are usually in good locations, which tend to grow in value faster than most.

How much does a leaseback property cost?

TheMoveChannel.com currently offer leaseback developments that start as low as 40,000 Euros (less than £30,000) for a studio, with the maximum price around half a million pounds for a large villa in an exclusive development.

Where is leaseback available?

LEASEBACK is only available on new or totally renovated properties. It is available in many parts of France including Paris, Normandy, the Atlantic Coast, French Alps, Mediterranean Coast, and Southern France. In addition, other European countries are starting to jump on the bandwagon, where you a few Leaseback developments are appearing.

Multiple investments?

IT is possible to buy Leaseback properties in several locations, giving your family and friends the possibility of vacations in, for
example, Paris, Normandy, Nice, and the Alps at varying times during the year. This also spreads the risk of a local downturn
in property demand (and so less growth in property values).

Who is leaseback right for?

Here’s the scenario:

Step 1: You buy an apartment in Nice – list price €200 000 including furniture.
Step 2: The price you pay is about €160 000.
Step 3: The cost of acquisition (legal fees, notaries’ fees, etc) is about €6 000.
Step 4: Your total investment is therefore about €166 000.
Step 5: If you fund 75% of the price you paid (say about €120 000) by mortgage at 4%, your monthly payments, over 10 years, will be about €1 214. These payments can be reduced by taking the mortgage over 15 years (€887 per month) or 20 years (€727 per month). Or, more cautiously, you could fund 60% of what you paid (€96 000). This would result in monthly mortgage payments of about €971 (10 years), €710 (15 years), or €581 (20 years).
Step 6: Your guaranteed rental income (at 6% of what you paid) will be €9 600 per year or €800 per month. It is likely (depending on your contract) to increase annually with inflation.

All of your interest and a large part of your capital repayments can, therefore, be covered by the rental income received.
Also, the mortgage interest can be set against your French tax liabilities, usually making the income tax free in France for most of the Leaseback period.

If this sounds like a sound investment, than the Leaseback is right for you.

Finding leaseback properties

TheMoveChannel.com has a selection of several dozen different leaseback developments on the site, which is updated several times per week, to add new projects and remove those that have sold out. These properties are currently being offered in partnership with Imoinvest, a French company who specialise in servicing overseas investors.

For further information on the available properties, please see:

http://www.themovechannel.com/property/1/leaseback.htm