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Introduction to French Leaseback

France - Introduction to French Leaseback

The properties are usually located in a “Residence de Tourisme” (Tourist Residence) or “Residence avec Services” (Residence with Services) which cater for short term lets and provide a variety of services usually to include reception, breakfast (by prior arrangement), laundry and linen services, swimming pool, Jacuzzi, sauna, steam room, etc.

The leaseback scheme enables you to purchase freehold a property which you then earn a guaranteed rental income from. When leaseback schemes are sold, there is a pre-selected property management company to whom you "leaseback" your property for a period which usually ranges between 9 and 12 years.

During the period you leaseback your property to the property management company you have the peace of mind of owning property and benefiting from a guaranteed income, yet none of the hassle related to letting out and maintaining the property! This is one of the reasons why the leaseback scheme is so popular and there is not enough supply to meet demand.

Depending on the development you can usually use your property for a certain number of weeks per year for holidays although this differs from development to development. Some developments will offer owners discounted use (usually ranging between 10–25%) instead of free weeks whereas others (usually those located in cities offering a higher yield) may not offer any use either free of charge or at a discount.

The guaranteed rental income tends to range between 2.5% and 6% per annum depending on the property, whether you will be taking your holidays in it and where it is located. Different property management firms offer different rental incomes, but in general the less you use your property the higher your yield will be.

Furthermore, the French government agrees to offset the payable VAT (TVA) on the purchase price against that charged to the short let customers of the rental management company. This means that you will receive back a sum equivalent to the VAT on the property at the rate of 19.6% on new build property (renovated or refurbished properties do not normally qualify for a 19.6% VAT rebate but some still do have a VAT rebate element). This normally takes some months to come through, but some developers will advance the VAT for the government and reclaim it back directly.

Leaseback is extremely popular with French investors who account for the majority of all purchases (French residents benefit from a range of tax advantages beyond the VAT rebate).

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