An Introduction to French Leaseback
The Leaseback scheme has been in operation in France for over two decades and was introduced by the French government to increase the quantity of quality holiday accommodation available in areas capable of attracting more tourists, whilst also addressing the need for quality city centre accommodation for both mature students and businessmen.
The leaseback scheme enables you to purchase freehold a property in France which you then earn a guaranteed rental income from. When leaseback schemes are sold, there is a pre-selected property management company to whom you "leaseback" your property in France for a period which usually ranges between 9 and 12 years.
During the period you lease your property in France to the property management company, you have the peace of mind of owning property in France outright and benefiting from a guaranteed rental income, yet none of the worries related to letting out and maintaining the property in France. This is one of the reasons why the leaseback scheme is so popular and why there are not enough quality projects to meet demand.
Depending on the development you can usually use your property in France for a certain number of weeks per year for holidays (can be between 2-6) although this differs from development to development. Some developments will offer owners discounted use (usually ranging between 10-25%) instead of free weeks whereas others (usually those located in cities offering a higher yield) may not offer any use either free of charge or at a discount.
The guaranteed rental income tends to range between 2.5% and 6% per annum depending on the property in France, whether you will be taking your holidays in it and where it is located. Different property management firms offer different rental incomes, but in general the less you use your property in France the higher your yield will be.
What's more, the French government agrees to offset the payable VAT (TVA) on the purchase price against that charged to the short let customers of the rental management company. This means that you will receive back a sum equivalent to the VAT on the property in France at the rate of 19.6 % on new build property in France (renovated or refurbished properties do not normally qualify for a 19.6% VAT rebate but some still do have a VAT rebate element). This normally takes up to 4-6 months to come through, but some developers will advance the VAT for the government and reclaim it back directly.
Leaseback is extremely popular with French investors who account for the majority of all purchases. French residents benefit from a range of tax advantages beyond the VAT rebate hence the reason why many of them invest in these schemes.
One final point is that leaseback is not timeshare. Whilst owners are leasing back their property in France and may only have use of it at specified times of the year, the owner is the Freeholder of the property in France at all times.