French LEASEBACKS IMPORTANT INFO

[linda huff]

Hi again Paddy,
Your statement that no property purchase is risk free is incorrect, if you buy a property at the right price and in a safe country that has proper checks and balances for buyers, like France, your property purchase is risk free, it is if you try to get into get rich quick schemes, and it is not the leaseback purchaser that will get rich, the idea of buying a property, is to be able to do
with it,as you wish, when you wish, so that if your circumstances change, you are free to liquidate your asset as your need dictates, with a leaseback
there are so many restrictions and hypotheticals, you are stuck.
Also not everybody on this site is a sales agent, broker,or commission agent,
I have nothing to do with "property deals", but I have had friends burned by such deals and I hate to see it continue to happen to unsuspecting people.
Some property sales are straight forward and uncomlicated, but anywhere
that gives you the HARD SELL in my view, should put up red flags, the only person that makes out in those deals is the salesman, not the purchaser.

[geordie]

Linda,

I have to disagree with you and believe Paddy G is correct when he says no property investment is risk free because it is not and nor can it be. Property investment and particularly overseas property investment is by its nature is a risky type of investment. The overseas property market is not regulated and it involves investors investing large amounts of money often in a country that they have very little knowledge of. The market is completely open to exploitation by unscrupulous agents who make claims that can often be very far from the truth. This happens in the more mature markets such as France and the UK as often as it does in more riskier emerging markets. Even when one does a great deal of research and due diligence, shops around, and uses a independent local solicitor or good property sourcer, there are still risks and you cannot remove all risks no matter how much care you take. Of course you can reduced risks and it is very important to do this but nobody has a crystal ball and you cannot predict the market or be absolutely sure at what stage in the cycle one has bought, so it is just a possible to lose money in France as anywhere else.

Geord

[PaddyG]

Morning all,

As I said everyone has different priorities, unusually my driver isn't to make money per se but to find something more interesting to do with my money than leave it in a building society but I don't want to take big risks with it and the risks in Leaseback are, I think, manageable. In the case of the one I have chosen the developer is also the service provider so there's an incentive to build well and take a long term view.
I have no worries about voids, leaking pipes, out of control gardens and I have a choice of attractive places to spend 6 to 8 weeks a year, which I can increase to 12 if I so wish.
It has been very useful to have some of the pitfalls pointed out and I'm grateful for that and will ensure I am well advised and am clear about the risks and can accept them.
PaddyG

[davidbrett]

Nice information here

Thanks
david

[ChrisParry]

There seems to be a lot of discussion about Leasebacks at the moment, and it seems to stem from bad agents jumping on the bandwagon of Leasebacks, making an easy sale without fully explaining to the customer how the concept works and how it may be of benefit or not.

Some of the quotes I have seen from people slowly realising what they have invested in is totally different from their expectations is frightening.

Leasebacks can be a good investment. There are 3 types of leaseback;
1. Residence de Tourism
2. Residence d'Etudiant
3. Residence D'Affaire

Most people in these discussions have been referring to Residence de Tourism, in glamorous places, with offers of 2 weeks usage sometime more. This type of Leaseback is the one which has been truly mis-sold. Most people I have spoken to think that when they buy into one of these, their property will grow in value in the same way a classic property might.

This can't be true, as the true value of the Leaseback is its ability to rent out and the yield / revenue stream offered. Looking at the resell market????? There isn't one. You are advised to HOLD onto to your leaseback FOREVER. This is the only way you'll realise any true benefits.

If you decide to resell, who can you sell to. NOT owner occupiers as Leasebacks were never designed for this, that only leaves INVESTORS. Why would an investor want a secondhand leaseback, after the majority of the VAT refund has been taken, and if you try and sell it above its true value, it will reduce the yields!!!

Therefore the other main point is that there ISN'T really any capital growth. The growth is linked to the rental amounts, i.e. if the rental amount your leaseback can generate increases by 1.5% or 2.5% per year then so will your property value.

The VAT refund and occupation is a smoke screen. Forget about using a leaseback, don't buy it because its in a place that you like otherwise you'll start making decisions based on your heart and not your head. Leasebacks are investments that should be made with the head not the heart - your ideal holiday home is more about making a decision with your heart and less with your head.

In summary the basic concept behind a leaseback is getting someone else (through the commercial lease) to pay off your mortgage, leaving you with a debt free asset which is a revenue stream in later life for you or for the children - leasebacks can be passed onto family members.

Look at Residence D'Etudiant or Residence D'Affaire - here the demand for this type of residence is REAL - no glamour just real demand. No usage in these, but the demand makes the longevity of your investment Low Risk.

[PaddyG]

Chris, the VAT rebate is depreciated over a 20 year period, since 2006 the unexpired portion of the rebate is available to a subsequent purchaser who continues with the lease agreement. A buyer for a second hand leaseback property will make that choice for the same reasons that attract initial buyers, i.e. that they have a hassle free investment which almost certainly won't experience the fluctuations in value of a traditional holiday home or buy-to-let property. I was being advised a couple of years ago to invest in a buy-to-let apartment in the north of England. Some of these are now being sold at discounts of up to 40% (yesterdays Daily Telegraph) by investors desperate to cut their losses. Similar experiences are occurring in Spain and soon will in Eastern Europe, independent of the crashing market in the States or that grinding to a halt in the UK. Leaseback in certainly not one for someone hoping to make a fast buck from an over hyped property market but it should never have been so and the media have their hands deep in the blood by encouraging the fast buck mentality and exploiting the greed that's within us all. Property is a long term investment and sure lots of people have made money but that shouldn't blind anyone to the risks and in my admittedly inexpert view the property bubble is deflating fast but people will still want to have holidays in nice locations.

[Goldberg Global]

Chris, you say there are 3 types of leaseback
Tourist
Student
Residence d'affair - which is what.

Do these leasebacks ever convert back to Freehold residential stock.
Yearly yield pays between 3 to 6%, why are these a good investment, you would get more money from the bank? in a high interest account. Plus you have to pay the upkeep charges, taxes, account charges etc.

Please explain why these are such a good investment, with a limited resale market?

[CECIM]

Good to see u here chris

[sextant]

I agree with Chris, French Leaseback are very good if you are looking to make a long term safe investment. It is ideal if you want to build your own pension because most stte pensions are not very sure nowadays or they will pay very low. So it is better to capitalise like that.
I work as property consultant and offer French leasebacks in France so if you have any question do not hesitate to PM me.

Mat

[Goldberg Global]

But there are different products.
1. Leasebacks
2. Buy to Let
3. Holiday home products.

Each have different characteristics and are different. They are different investment products. I go with consensus, but agree it is good to hear all sides to things.