There are many types of guaranteed rental schemes within the international property arena, but the French leaseback scheme which dates back to the 1980’s, could be described as the ‘mother’ of all schemes.
It is not simply a short-term developers’ subsidy as seen in some emerging markets, but is a genuine guaranteed rental scheme.
It is positively encouraged by the French government to meet the huge demand for rental property in quality holiday destinations and who reward purchasers entering into the system by offering them a 19.6% VAT refund.
Over the years the market has evolved and now attracts different types of buyers with different reasons for buying.
Some years ago, then the typical foreign purchaser of a leaseback was more often than not an ‘armchair investor’.
Investors were buying off plan and unseen, delighted by a low-risk ‘hands-off’, fully managed investment property – whilst more seasoned professionals looked to diversify their existing portfolio into overseas markets and were equally attracted by the leaseback proposition.
While the current economic climate is considerably different, there are equally good reasons to look at leaseback – albeit from a different angle.
Whilst still offering the upfront tax break from the VAT refund and a fully managed rental solution, if you see a rental yield quoted today at a rate that looks too good to be true, then it probably.
However, when the reality of owning a holiday home is considered, things like who will look after your cottage or apartment when you’re not there, and you do not wish to cut the grass when you are in residence, then leaseback could be an interesting option.
For example, if you consider the rental income more as a ‘mortgage subsidy’ to offset some of your running costs, let your seasonal tenants pay your taxe d’habitation and wish to leave ongoing maintenance worries to someone else whilst you enjoy your holidays in your own property, then leaseback offers a perfect lock-up and leave solution.
Another added bonus of course is that major management companies let you swap your property for weeks in other resorts so you don’t have to spend the next few years in the same place if you do not wish to do so.
This is ideal if you can’t decide between a winter or summer holiday or between a coastal or mountain resort.
So, leaseback is still popular but now appeals more to the life-style purchaser than to the pure investor.