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French Leaseback As A Successful Property Investment Scheme

Jan 16, 2008
What exactly is a leaseback property? Any property that is fully fitted and furnished, let out on a temporary basis and which provides hotel type services such as managed reception, breakfast and laundry facilities is a leaseback property. It can be a holiday, business, student or senior citizen's residence.

Leaseback is the English translation of 'LMNP' (non professional lessor of furnished accommodation) and refers to a tax status rather than to the property itself.

A property purchased under the LMNP tax status is a small business and as such, will fall under French commercial law, with a special provision made by the government to encourage this type of investment by rendering the income from the property tax-free.

Why is a leaseback property such a good investment? Because you can offset all the property related-expenses against the rental income generated by your leaseback property, the income will generally be tax-free and this is what makes the scheme so attractive to French and foreign investors alike.

Thanks to this, the income can be used in its entirety to repay the mortgage and once this is paid off, investors will benefit from a supplementary income. For a (deductible) fee, your French accountant will ensure that all your expenses are taken into account.

Don't forget also that you'll be receiving a full refund of the 19.6% VAT, which effectively amounts to a 16.4% discount on the value of the property.

Why does the French government offer so many incentives to purchase this type of property?
Some of the most exquisitely beautiful and picturesque areas of France, where it would have been impossible to find suitable holiday accommodation for a family only a few years ago, now offer a variety of quality lodgings with top class facilities.

In cities where it was extremely difficult to find short term rentals for business travellers or individuals who don't wish to stay in a hotel, the demand for this type of housing well exceeds the offer - and the government estimates that 200, 000 beds will be required in senior citizens' residences and an additional 200, 000 in student lodgings in the coming 20 years.

Thanks to the French leaseback scheme, the majority of the accommodation on offer in French ski and coastal resorts is owned by French citizens and tax-payers.

When considering a property investment, it is very important to consult a qualified professional who will be able to advise you on all the aspects of your purchase, including the careful choice of location and management company. To protect your statutory rights, it is advisable to purchase through a licensed French agent who holds professional liability insurance.

A leaseback property is generally thought of as a long-term investment designed to provide additional retirement income for its owner. It is possible however, to sell the property at any time and most developers have an in-house sales office that can help with this. If the property is well-located, run by a strong management company and the asking price is fair, you will have no trouble at all selling your property.

Capital growth is steady and regular throughout France, particularly in the coastal and ski resorts and the property market remains secure in this country. Just beware of extravagant promises: 20% yearly capital appreciation is not realistic.

A French leaseback property without personal occupancy hovers around 5%, in addition to the constant appreciation of your invested capital: an ideal way to invest now towards your pension and to build up your family's property portfolio.

While some properties are for investment only, others will include a personal occupancy allowance and your investment can double up as a holiday home. In most cases, you will be able to exchange your weeks of personal use for use of any other property run by the same management company, effectively enabling you to spend your holidays in a different area of the country every year, without any additional expense.
About the Author
Property expert Catherine Harvey looks at the purchase of French leaseback as a wise investment. To find out more please visit http://www.premierfrenchleaseback.com/
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