Here are some of the common questions...

you can always call to check anything with us!

Is a leaseback similar to a time-share?

No. Not at all...

With a leaseback, you own the freehold to your property and are merely allowing others to use it for a set period.

Just how ‘hands-off’ is a French leaseback

Leasebacks are probably the easiest, cheapest and safest ways to own property abroad. It’s a fully managed, fully serviced solution which requires no input from you. Of course as with any property purchase there are few paperwork hoops to jump through initially, however we have an excellent bilingual team to help you smoothly through it all. 

Once your purchase is complete, you will receive the usual letters etc from France. We are on hand to help with all of this as part of the ‘Leaseback Service’. Your apartment is fully furnished and fully managed, so in effect there is nothing for you to do.

The word ‘yield’ is used a lot, what does this mean?

In broad terms this means the ‘rental return’ each year and is shown as a percentage of your purchase price. For example, if you paid 100,000 euros (net) for your apartment and the yield was quoted as 5%, then you would receive 5000 euros per year in rent.

How long is a typical lease?

Normally between 9 and 11 years. After that you can renew or opt out.

What type of investment is it?

It is a medium to long term investment, and is an excellent 'pension' style investment.

Why does the government waive the VAT?

The French government has given tax breaks to developers in order to encourage them to build 'Residence de Tourisme' developments, Student developments or Business Residences. By allowing your property to be used for year round rentals you are greatly contributing to the French tourist economy. It is only fair that you receive a benefit for this.

When do I get the VAT back?

Normally 3 months after the property is complete. The vat claim is normally made by the accountant on your behalf when construction is finished and it usually takes a few months to come back through the French tax system.

Can I visit whenever I like?

Yes. Depending on availability. Some leasebacks come with a built in 'free' allowance for the owner. However many also simply allow you to go whenever you like at a discount from the public price.

How should I finance my investment apartment.

For many years leasebacks have been financed with repayment mortgages so that you would be left with a fully paid asset at the end of your mortgage term. As an example if it ran over a fifteen year period, your apartment would be fully paid for and your capital gains bill would be zero. Your annual accounts are provided for you and you have no maintenance or tenants to worry about. You would also of course benefit from 15 years capital growth. A repayment mortgage would mean that you would probably have to ‘top up’ on a monthly basis, however your mortgage would be paid at the end of the term.

In recent times, ‘interest-only’ mortgages have come on to the market. An interest-only mortgage would mean that in cash flwo terms you would probably be equal on a monthly basis, however you would need to repay the loan at the end of the term.

What amount of finance is available?

Leasebacks are normally financed between 10 – 25 years. As a non resident in a good financial position you can expect to qualify from 80% - 100% mortgage.

Who’s buying leasebacks?

They are very popular indeed with both seasoned and new investors a like. This is because they are very easy to buy, and very easy to manage afterwards due to the fact that somebody else looks after it for you! They are a great low risk addition to your pension.

Can I sell whenever I like?

Yes. You own the freehold to the property. Bear in mind though, that you are in a lease contract that runs for a minimum of 9 years. If you wanted to sell after say 5 years, the new owner would remain in contract for the rest of the 9 year term.

Is my rent guaranteed?

Yes it is, for the term of your initial lease. After that you can either renew another lease (normally at an increased rate considering we are 9-11 years further on). Or you have the option to exit the lease and manage the property yourself.

Who will look after my property during the Leaseback period?

A reputable specialist management company.

How do I know the management companies are reputable?

In the first instance all companies which Leaseback Investments Ltd deals with have been thoroughly checked and their financial background and stability verified. We especially make sure that the lease contracts which we deal with are favourable and fair to the owners, and because of this there are some developments which we would not take on as they may have clauses in their contracts which we feel would not be beneficial to the owners.

Would I get more rental yield if I managed it myself?

Quite possibly. However, the management company do an enormous amount of work on your behalf. If you managed it yourself you would be responsible for all the maintenance for your property, including emergencies, change-overs, finding tenants etc etc. Unless you were a full time landlord then you simply wouldn’t have time. Also remember, your rental yield would not be guaranteed.

What additional costs are there when buying a leaseback?

Normally around 5% costs (legals/finance) for a new build leaseback. For a renovation project, the costs can be higher, sometimes nearer 8%.

Where do I sign?

You can sign by 'proxy' in your country of residence so that no trips to France are necessary. When you are ready to sign, we will provide you with a list of authorized notaries near your home. Simply make an appointment and they will do the rest. You can of course go to France and sign your deeds in the Notaires office.

A leaseback sounds fantastic, is there a downside?

Yes there is. Good leasebacks in good locations with favourable contracts are very popular indeed, and often sell out within a matter of hours. Therefore you must be quick.

Why should I buy a leaseback through Leaseback Investments Limited?

We are a specialist and we really know what we are doing! We were one of the first companies to bring leasebacks out of France over five years ago and we have an excellent team here to help you.

After choosing a development that you like, we will take you through the buying process step by step. From organizing your deposit transfer, to arranging your mortgage, even setting up your bank accounts in which to receive your rents. We are always at the end of the phone, and we mediate the entire process between you and France.

We have also built great relationships with our French partners and only work with the best suppliers. When it comes to property abroad, it pays to know who you're dealing with.

What happens if the leaseback company goes bankrupt?

When buying any properties there are always associated risks. However it must be stressed that in this case the risks are minimal as all the major management companies we deal with are established, some of them managing well over 100 developments. Also the worst case scenario is that you still own the property and can sell it or appoint another management company.

It is always recommended to carry out your own checks before entering into a contract.

Can you tell me how the rent is calculated?

It is calculated on the ex-VAT price (which is normal, as you are not paying the VAT). Some management companies pay this quarterly, others annually and it is always in arrears. When looking at the yields offered by each different development it is important to remember that it is not always the highest yield that will offer you the best long term investment. For example an apartment sold in an 'up and coming' part of Paris with a yield of 3.5% may be a better investment than lets say an apartment in Normandy at 4.5% as the capital appreciation of the first outweighs the second considerably. You must not forget that this is a real estate investment that one-day you may want to sell.

Why should I buy through an agent such as yourselves?

Developers tend not to deal with the public directly and in almost 100% of cases work through specialist agents such as ourselves. Also, the price list that we use is exactly the same as the developer’s price list. An agent is by far the best person to work with as we take care of the whole purchase process for you, from the UK: from translating documents, to dealing with the Notaries etc and this service is absolutely free. Also it is worth taking into consideration that many leaseback programs are sold out before construction has even started, in which case there's no site office for you to go to. In most cases the developers will not want to deal with individual buyers so they will quite often appoint an agent to do all the selling on their behalf.

Is the Management Company entitled to automatically renew the lease after the initial lease period is over?

Very often this is the case. However you can normally exit the lease after the term by writing 6 months before hand. It’s wise to remember though that renewing is normally a good idea. You can imagine how difficult and unworkable it would be if each client were managing their own apartment. We do a great deal of work to make sure that we only deal with companies who have favourable contracts that are fair to both parties. It’s always better to seek independent council before you sign something just to make sure you are happy.
Each leaseback contract is different so it is important to look at the individual clauses of each contract.
Typically, the leaseback company pays all management costs, repairs, maintenance charges, taxe d'habitation, electricity, water etc. Apart from the 'Taxe Foncière' (rates) and the frais de syndic.

What's the difference between 'investment' and 'pure investment'?

A 'pure investment' property is one which you will buy with no intention of ever spending time in it, for example a student or business residence. This property represents a pure investment and is not somewhere you would probably consider going on holiday. These properties tend to be in city centres where there is a shortage of long term lease apartments and also tend to have higher yields.
An 'investment' property is one in which you could spend a few weeks per year, or perhaps has a contract which would give you a large discount on the published catalogue prices, so that you could stay in your property at a reduced price.

What are the drawbacks of buying a leaseback property?

Firstly, there are a limited amount of leasebacks being built at any one time, also the French market has been buying leasebacks for the last 20 years and so are already very aware of what an interesting investment this is. To reserve a top quality leaseback apartment, one has to be ready to move very quickly
It is important to realize that although the property is yours and you are the free hold owner, you will be bound by the terms of the contract.

How is my property managed during the Leaseback period?

The management company is responsible for finding tenants for your property, and even if your property is not rented out they are obliged by contract to pay you your guaranteed rental income. They are also responsible for all the maintenance of the property, wear and tear and upkeep of the furniture. They will contact you if there are any problems which arise, and your accountant will also act as a liaison between you and them on all financial matters.

Why shouldn't I rent out my leaseback property myself?

The management company does an enormous amount of work on your behalf, which take a lot of time and effort. If you managed it yourself you would be responsible for all the maintenance for your property, including emergencies, change-overs, finding tenants etc. Yes, you could potentially earn a high yield however this would not be a guaranteed rental income.

When can I sell my property?

Leaseback Investments Ltd makes it a policy to only work with reputable management companies which will allow the owner the freedom to choose what they wish to do with the property once the initial lease period is over. You are always the owner of the property, and as such own the freehold, however bear in mind that you are in a lease contract that runs for a minimum of 9 years (for leasebacks). If you wanted to sell before this time had elapsed, the new owner would have to take over your contract and see out the remaining years of the initial lease period. You may be asked to pay a penalty although this is normally equal to 6 months rents.

Is there a limit to how many I can buy?

Not at all, many people build up portfolios of leaseback or buy-to-let properties as this is an excellent investment. We would advise you to keep your portfolio diverse if you were in fact going to do this, which means choosing properties which are in different location (ski, south coast, city centre, Atlantic coast, Brittany / Normandy) as this will minimize any risk should the property market take a down turn in one of the sectors.

Am I responsible for paying all the bills or maintenance costs during the Leaseback period?

No, the upkeep and general maintenance is the responsibility of the management company. They are responsible for any wear and tear or damage to the property and are obliged by law to return the property to you in a 'reasonable state' which is defined in the strictest terms by the 'code of construction & Habitation' Unless the leaseback contract states otherwise the owner is only responsible for substantial damage to the roof and repair to the boiler.

All the utility bills etc are paid for by the management company, and your rents are paid net of all these charges. The only extra charges are usually what is called a 'tax foncière' (local rates) and annual accountancy fees as well as the insurance which is covered by the co-ownership syndicate and is mandatory in most cases as it is the building insurance. The tax foncière is usually not payable for the first two years depending on the commune and only represents a small annual tax, normally around 200-400 euros per year for a studio. By law an accountant must be appointed to fill in your annual tax return, normally fees are between 300-400 euros per annum.

What type of investment is it?

It is a medium to long term investment, and this can seem somewhat daunting to some investors. To make full use of the refundable Vat and to wait until your investment is fully paid off you should really look at investing for the full 20 year period. However you can withdraw from this agreement after the initial lease period is up, (initial lease periods last anywhere between 9 - 11 years) This means you can sell the property on the open market, use it as a holiday home, second home or your can rent it out locally when you are not using it. In this instance you would have to pay back half of your refunded VAT (if you withdrew after 10 years for example) but this may be a negligible cost if you chose to sell it as your capital appreciation would balance this out.

Why do you get 19.6% VAT back on leaseback purchases?

The French government has given tax breaks to developers in order to encourage them to build 'Residence de Tourisme' developments. By allowing your property to be used for year round rentals you are greatly contributing the French tourist economy. This only applies to new build properties, however if a property has been renovated or refurbished then you would still receive a VAT rebate however it would be a percentage less than 19.6% and unfortunately this deal does not apply to any properties in Corsica where the VAT is 8%.

 

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