 Buy to Let Properties
 The buy to let sector has been very successful in the UK over the last 10 years. With the recent economic crisis however, and the effect this has had on the property market, investors and individuals alike are increasingly looking to invest in the French property market, widely recognized as one of the safest in the world.
The principle of Leverage Buyout (LBO)
With Leverage Buyout (LBO), investors pay 30% of the property price and borrow the remaining 70%, usually with an interest-only mortgage. As long as the property is rented out all the time, this option does not cost the buyer anything as the mortgage repayments and maintenance costs are covered by the rent. At the end of the mortgage (usually 10 to 20 years) the property value will be higher compared to the initial cost (prices have increased by between 5 and 10% a year over the last decade except during 2009). The difference is your capital gain. You can then decide to sell it and pay back the mortgage with the capital gain as your profit. In order to maximize this profit, buyers need to get the lowest interest rate possible. We generally advise our customers to take out a euro mortgage so that both the rent and the mortgage repayments are in the same currency, the Euro, thereby protecting the customer from currency fluctuations. Differences between Leaseback and Buy to Let: Buy to let
| French Leaseback
| The purchaser must pay the VAT.
| The purchaser receives a VAT Tax Refund of 19.6% of the purchase price | Low notary fees: 2.5% to 3% for a New Build in France
| Low notary fees: 2.5% to 3% for a New Build in France | | The property is let out to permanent residents | The property is let out to holiday makers under the Leaseback scheme
| | No personal use possible during the lease term | Possible to use the property several weeks per year
| Buy to let contract terms are more flexible than leaseback contract terms with the possibility of breaking the contract with the management company at any time
| The contract with the management company is usually for 9 or 11 years. It is possible to renew this at the end of the lease period. | Buy to let properties can be anywhere in France
| Leaseback properties are usually located in holiday resort and business locations |
Taxes:
The taxes buy to let owners pay can vary greatly depending on how the property is let out, for example whether or not the property is furnished and the type of letting contract. To avoid getting lost in the French Tax system which can be a maze for foreigners we strongly advise our customers to talk to a tax expert or a French accountant in order to minimize costs and improve the return on their investment.
Don’t forget that if you sell your French property before you have had it for 15 years and you have made a capital gain you will be liable for capital gains tax. |
