What Are Leasebacks?

This unique plan enables anyone to buy their dream holiday home or overseas investment property and cover a lot or all of the mortgage costs with a guaranteed rental income (typically 3 to 7%). The rental income is guaranteed by a large management company that rents the property on your behalf for typically 9 years. You also don’t have to pay VAT on the property which saves you the 19.6% that would normally apply – a nice discount!

As owner, you usually have use of the property for up to 6 weeks of the year (if you wish). There are also the added benefits of purchasing the property fully furnished and fitted with kitchen and bathroom appliances, knowing that your property is not left empty and unattended for weeks or months at a time, and that the maintenance and upkeep is paid for by the management company! Too good to be true? Well there are only a limited amount of properties available at any time under this scheme – that’s the catch!

The majority of people who own holiday homes in France, actually only live in them for a few weeks of the year. In addition, French inheritance laws mean that many properties are owned by many family members who cannot agree what to do with the property - this also leaves many properties empty. This is why the French government has introduced 'Residence de Tourisme', or 'Leaseback' schemes to increase the quantity of holiday accommodation available in tourist hot-spots and increase foreign investor revenues in France! Basically you get a holiday home you own outright, usually with use of it for several weeks of the year with a fixed rental income guaranteed for the rest of the year and a discount to market value of the property represented by a 19.6% VAT refund on the whole property from the French government (all new property has VAT in the total price, this refund represents a 16.4% discount to market value).

HOW IT WORKS

Some new properties for sale in France have negotiated a 'Residence de Tourisme' status. This means that a purchaser can buy the freehold of the property with or without a mortgage and then lease it back to the developer or a rentals company for a pre-determined period (usually around 9 years) at a fixed rental percentage. At the end of the lease period, the property will be returned to the owner in perfect condition. Most of these properties include pools, workout rooms, reception, breakfast, linen, and housekeeping services, as well as being fully furnished with appliances and furniture.

Each property purchased in this way usually has options for the purchaser to make use of the property for a few weeks of the year at no cost. Each development has its own definition of Very High, High, and Low season weeks and at the time of your purchase you would define how many of each weeks you wanted to keep for your own use, normally none to six weeks dependant upon each scheme. The owner of each property has first choice of which weeks to spend at the property, and would be sent a form at the beginning of each year to request their preferred weeks.

In order for the rentals company to guarantee the rent for 9 years it is vital the development is in a high demand location with good facilities - the same attributes that tend to drive a good capital gain in a property.