the period that the property is let out. This is on an understanding that the property will be let out to tourists for a period of 20 years. If the lease contract is terminated, or the property sold before this time, a part of the VAT would have to be repaid the French authorities on a pro-rata basis. This works out to 1/20th per year. As of January 2008, however, if you choose to sell your property with a renewed lease contract you will no longer be obligated to pay this. On refurbished or renovated properties, the 19.6% VAT rebate is not normally applicable and the VAT that will be reimbursed, if any, varies according to the development. This should be established before purchasing. Hassle-free Leaseback Period When leaseback schemes are sold, there is a pre-selected property management company to which the owner leases back the property for a period normally ranging from 9 and 12 years (it can be longer). Remember: the VAT rebate is based on a 20-year leaseback period. During this period, investors have the peace of mind of owning the property and benefiting from a guaranteed income, without the hassle of letting out and maintaining the property themselves. Personal use Depending on the development, investors can usually use their property for a certain number of weeks per year. Personal use of the property is limited, because the property must be available to rent, As the management company has an obligation to pay a guaranteed return, it is in everybody’s interest to maximise yields.
erty, whether you will be using it personally and where it is located. Different property management firms offer different rental incomes, but in general, the less the personal use, the higher the yield will be.
Many French banks are now creating finance packages specific for leasebacks, so buyers won’t be repaying the mortgage until the property is generating an income The rental income is nearly always calculated on the ex-VAT price of the property, excluding notary and other fees, and is normally paid to owners quarterly in arrears, although this differs between developments and should be checked prior to reserving. When construction of the development is completed, there is normally a period of a couple of months during which no rental income is earned. This grace period allows the property management firm to set up and start to advertise the properties. Where this is applicable, it is written into the lease contract. The rental income will also be index linked, often using the INSEE (French statistical institute) Cost of Construction Index as a reference. Want to know more? To get a free copy of the full report about the French Leaseback Scheme, contact International Luxury Real Estate, www.ilre.com +44 (0)20 7095 8701
Rental Income - “Guaranteed by Contract” Rental income varies according to the propwww.theaddressmagazine.com
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