What is leaseback?
Leaseback is a unique method developed by the French government more than 15 years ago to encourage quality development in tourist areas. Investors buy a freehold property and at the same time sign a lease contract with a property management company who will rent it for short term rentals for a renewable period generally 11 years.
In return, investors receive major tax breaks (no VAT on purchase price) as well as a guaranteed return for the duration of the contract. A guaranteed return is typically between 4,5 and 5,5% and is linked to an official index. The management company takes care of the running costs and maintenance. Thanks to tax breaks the income is not taxed during the first 10 years.
You can get 80% finance from local banks with rates on French mortgages of between 3.5 and 4% on 20-25 years with a down payment of a minimum 20%.
Importance of fixed guarantee
These last few years of poor equity market performance have made it abundantly clear how important guaranteed income investments can be.
Leaseback schemes are ideal for people who want a complete hassle free investment. This is a complete hands off investment.
As long as the sourcing is well undertaken (sourcing of properties in areas with potential for resale) and verification of the management company is done properly then the risk for this type of investment is minimum
My Investment In France is a fully licensed English speaking real estate agency located in Paris. My Investment In France has many quality leaseback schemes available.