I wrote about Leaseback at www.Twiku.com recently. With interest rates and investment policies changing these comments need even more careful consideration.
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Hi Tony,
Have been reading your thoughts on leasebacks with interest.I cant agree with your comment “It is not something you should buy if you intend to use it yourself”.
I have two leasebacks in the south of France one has 6 weeks usage (three weeks in high season) the other, four weeks (two weeks in high season)They also pay 4.2% and 4.3% as a yield.
They are in fantastic locations which i used to visit about four times a year before buying these leasebacks.If you add the average cost (four hundred pounds) to the yield it makes it a great return as i will be happy to hold these for the next 11 years when my mortgage finishes.
I take your point on the lease issues and i was well aware of it prior to purchase in 2002 but due to the points mentioned Re: holidays,thought it was a risk worth taking.
on your point Re. Lease non renewal I have heard from two sources that they cannot penalise you anymore than one years rent. Have you heard this?.
John
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Hello John
Thank you for writing and I am delighted you are happy with your investment.
Your mail is important as it raises points I will try to clarify – I assume you bought your leaseback investments a couple of years ago – interest rates and property prices were much lower then and the return you are getting is, I assume, based on the investment you made at the time.
I do not say leasebacks are bad, they are usually a sound low risk investment, but the benefit is designed for high rate French tax payers who can in fact finance the property from money that would otherwise have been paid as tax.
There are a couple of points which need to be expanded –
If you make use of a leaseback property for a few weeks yourself, this will reduce the return you get on your capital plus you are taking a benefit which is taxable – so the rent you would have paid for using you own property must be declared as income.
The rumor you have heard about compensation being limited to a year is false – compensation for cancelling a lease is not limited and can be enforced for all commercial losses sustained if the lease is not renewed.
I am very keen to hear all feedback about leasebacks, successful re-sales etc – I am not knocking them, they are a good thing for buyers and for France, but some sellers are “economical” with the truth.
Best wishes
Tony