Your French Property Specialist in Ireland

Key tO fRANCE

Leaseback explained

Phone Irl: + (353) 1 8430958

E-mail: info@keytofrance.com

One of the best ways to invest in French properties is the French government's Leaseback Program.  This program was created to encourage development and investment in France and guarantees an income from the property you buy, at very low up-front costs to you. Virtually all maintenance costs are covered, and you can use the property a couple of times a year yourself.

What does ‘Leaseback’ means?

You buy the property outright but you agree to turn it over to a property management group for rental for a fixed number of years (typically nine). In return, you obtain a rental return of 4% to 6% of the property price after most or all management and operating expenses have been deducted. This return can be free of French tax and is indexed to the cost of construction. In other words, the return should increase over the term of the lease.

During the nine years that the management company is renting your property for you, you may, in some cases,  use it for up to eight weeks of any given year.

Why was it introduced?

Because of the shortage of tourist accommodation in France, the French government introduced this program in order to encourage people to invest in tourist property.

What are the benefits?

Ø VAT Refund           

           The French government will refund the VAT at 19.6%.  In other words, you are buying a property at 80% of its asking price.

Ø Low risk      

Annual rental returns of up to 6% guaranteed by a commercial lease agreement.

Ø Choice         

           The qualifying apartments are all over France.

Ø More than one way to profit

· Potential capital appreciation

           France is one of the last countries within Western Europe which was spared by the property hype and hike.

· Potential rental increase

           The rent perceived being linked to the construction cost index, you may get a yearly increase in your rental income (as an indication, the construction cost index has increased by an average of 6% per year over the last 6 years).

· Practically no tax on rental income

           The combination of the mortgage interests deduction and the property amortising (depreciation relief) will, in most cases, relieve you from paying rental income tax in France.  

· Turn up and enjoy it

           Enjoy or sublet your apartment during your selected weeks of use at no cost.

Ø Easy financing        

           Based on the fact that you will get a VAT refund, French financial institutions will lend you up to 80% to 100% of the VAT excluded price.

 

What if I want to sell within the lease period?

Since you own your apartment outright, you can sell at anytime within the lease period. You will, however, sell the apartment with the lease agreement for the remaining period of the lease.

 

NB – If you sell your property before 20 years of ownership, the French government will not require you to reimburse the VAT as long as the buyer takes on the lease for the remaining period.

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