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leaseback I


Lessons in


LEASEBACK IS DEEMED A SAFE WAY OF COMBINING A FRENCH HOLIDAY HOME WITH A GUARANTEED SOURCE OF HASSLE-FREE RENTAL INCOME. THAT SAID, THE HARSH ECONOMIC CLIMATE HAS PUT PRESSURE ON DEVELOPERS SO IT’S WORTH BEING CHOOSY ABOUT WHAT YOU BUY


WORDS ZOE DARE HALL IMAGES THINKSTOCK


n a climate where property buyers want long-term security and rental income to cover the costs, many are looking to


leaseback as the solution. In France, Government-backed leaseback developments, or ‘residences de tourisme’, have existed for over 20 years as a way to boost tourism in certain areas – notably the Alps, the Mediterranean coast, the Atlantic coast and Paris – and to ensure holiday homes are kept busy throughout the year. “Leaseback is defi nitely becoming more popular as a way to invest. People want to know their rental income is really guaranteed and they want to know that their property will be looked after out of season when they aren’t there,” comments Richard Deans from MGM French Property, which has 15 leaseback projects in the French Alps. Although a familiar, and popular,


way of buying holiday homes to the French – who can offset 20 per cent of the value of their leaseback property against income tax – leaseback is still unknown to many British investors. The way it works is that the buyer


36 A PLACE IN THE SUN APRIL 2011


purchases the freehold of a furnished property then leases it back to the management company for 9-11 years initially. The buyer receives a 19.6 per cent VAT rebate and a guaranteed rental return, usually around 3-4 per cent a year. After the initial lease period is up, they can either renew for a further 9-11 years or they can break the lease arrangement – which means they will have to pay back a proportion of their tax rebate. In most leaseback arrangements,


the owner can use the property for a few weeks a year – although some choose not to, particularly in city properties, to maximise their rental yield. It is a concept that most buyers and agents say works well. It is a relatively safe, long-term option and, if done properly, the guaranteed income should cover most or all of the outgoings and the property should have appreciated in value by the time the lease is up. Mortgages are widely available


too and they take into account lease payments on the property as part of the affordability assessment. “These types of mortgage are attractive as they require the smallest


APRIL 2011 A PLACE IN THE SUN 36


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