I write about Leasebacks in This Blog . Leasebacks were designed as a good investment for French tax payers and to encourage investment in tourism, low cost housing and historic monuments.
They are aggressively sold by some developers to overseas buyers – usually the management company operating the rentals is not the development company. In my opinion they are usually a safe investment giving a low return, but they are not a way of getting a free second home, a free holiday or a home to retire into – they are an investment.
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Hi Tony
Really enjoy your newsletters.
Just wondering if you have ever had any experience working with the Pierre et Vacance group on their lease back program. They have many properties and I have stayed at quite a few.
They have a “newish” program in Monflalnquin, an area I really enjoy that I am considering.
They want 10% down and allow you up to 4 and one half months a year for your personal occupancy. The rest of the time they rent it out for you, manage it and send you any outstanding money for the let. You must rent it out for 9 years, but that works out perfectly for us.
Sounds great, but you know what they say when it sounds too good to be true.
Would enjoy your view point of this.
Also…how bad are the Mistrals in the Provence area? Have read about them but can’t seem to get a handle on how bad they really are.
Keep up the great work and thanking you in advance
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Hello Miriam
Pierre et Vacances are a very large group with strong government connections. They have been marketing leaseback properties for many years.
Although the initial lease is for 9 years – you must assume with Pierre et Vacances that they will enforce their legal right to automatically renew this lease .
If for some reason a leaseback management company does not wish to enforce their legal right to renew, then the leaseback is not viable – it is said that French owners pray for a renewal and foreign owners expect to have the property released.
If for any reason the property is not retained on leaseback after nine years you will have to repay part of the value Added Tax compensation.
No matter what the sales literature “suggests” you must assume that you never have the right to use the property completely for your own personal use or occupation, it is solely an investment.
Leasebacks are designed to be attractive to French resident, high level, tax payers – other than this they are not a good investment offering lower returns than an average building society.
Any use you make of the property yourself must be declared as a benefit and you could end up paying tax on the theoretical rent you should have paid to occupy your own property.
Because of the locked in aspect of a leaseback, capital gains are more in line with tenanted property than with the same property in vacant possession. It is therefore strange that people pay the freehold vacant possession price and then receive effectively a tenanted property. As an investment this is very bad at present.
For an investor in property you should expect to get a return about 2 percent over that given by current government bonds (or about 8.5 percent today) – this suggests to me that most leasebacks are about 50 to 80 percent overvalued even allowing for the VAT refund.
The Mistral is a horrid wind that blows about 30 days a year, usually between September and March, it can appear out of nowhere at any time. I have experienced them and they are truly ghastly – like banging your head against a wall, they are wonderful when they stop and the sky seems deep blue after the yellow of dust an mud whipped up like something from the Wizard of Oz.
Hope this helps
Best wishes
Tony
On the whole the leaseback system works well, but the attitude of some of the staff at head office and at the resorts tends to almost owners as a ‘nuisance’. Rules and procedures seem to change annually and at the drop of a hat. It can be very frustrating trying to align booking requests and getting flights booked. There does not seem to be any recognition that owners need to have bookings confirmed so travel arrangements, often non-flexible flights, can be booked. Random extra charges seem to be introduced. Owners own apartments cannot always be used, despite the owner having availability of their entitlement and/or their apartment not having been booked by the general public. Decisions by the bookings departments can appear very abitrary.