French leasebacks – guaranteed rental income, VAT refund and personal usage Property purchase in a managed complex with guaranteed rental income indexed to increase each year - VAT of 19.6% refunded meaning low purchase price
Hassle free – furnished and managed by professional management company Good capital appreciation Little or no tax to pay on the income Personal usage included so you can enjoy your investment
France is the top tourist destination in the world with over 75 million foreign tourists visiting per year. That's almost twice as many as Spain and over double the visitors to the USA! Since the country doesn’t have enough hotels to cope with this vast number of visitors, the French leaseback scheme (also known as LMNP – loué meublé non professionnel) was introduced in the 1980s by the government in order to increase the amount of accommodation available to tourists meaning that investors can purchase a property within a particular complex at an advantageous price and receive a guaranteed rental income while often being able to use the property themselves for an agreed number of weeks per year. The French leaseback scheme has proven extremely popular with investors who are looking for low-risk, hassle-free, income-generating real estate investments with the added bonus of tax benefits and they are also much sought-after by individual buyers who want a hassle-free holiday home. French leasebacks also work extremely well as part of a low-risk property portfolio for investment and wealth managers creating real estate funds. The guaranteed rental income as well as the appreciation of your property means that a leaseback is an ideal way to invest towards your pension and to build up your property portfolio. French Leasebacks explained
French leaseback developments are a guaranteed rental scheme whereby the buyer purchases a property freehold within a designated residence which they then ‘lease back’ to a property management company for a fixed term, usually between 9 and 11 years - these contracts can be renewed (which is generally what happens) after the 9 or 11 years have expired. The rental management company is effectively your tenant and here at Attika International we take extreme care to choose only those residences that are backed by well-established and highly reliable, professional management companies running well-known holiday chains throughout France. Leaseback residences are located in holiday or urban areas where there is a need for tourist, business or student accommodation. The management company furnishes and lets the property for you, providing you with a guaranteed rental income and they supply visitors with hotel style services such as managed reception, breakfast and laundry facilities. Your leaseback property can be a serviced holiday, business, student or senior citizen's residence (Attika largely deals with holiday residences in sound locations so that the property should also show good capital appreciation over time) While some properties are for investment only (such as student residences or retirement homes), others such as holiday apartments often include a personal occupancy allowance so your investment can then also be used as your holiday home. In some cases, you can exchange your weeks of personal occupancy for use in another property run by the same management company, meaning that you can spend your holidays in a different location each year if you so wish.The leaseback scheme is a safe long term investment via which you own a professionally maintained property at a huge discount on its purchase price along with hassle-free rental income as well as personal use and the security of the strong and stable French tourism market. Why are leasebacks good investments ?
VAT refund. The French Government offers very attractive VAT concessions on French leaseback properties meaning that the 19.6% VAT on the property price is refunded so your leaseback property purchase costs a great deal less than a normal property purchase. Either the developer pays the VAT for you or you receive a refund a few months after completion. For example, if the price of your leaseback property is €100,000, the VAT saving means that you only pay €83,612. Normally speaking you can borrow at around 80% of the total cost, so with the refund this will mean that you can finance at close to 100%. Your Attika International representative will put you in touch with brokers who can offer you excellent deals. Some of the leaseback properties on our site are quoted at the full price including the VAT, you will have the VAT refunded after purchase so do bear this in mind when you are searching within your budget – the real price of the properties is generally 19.6% less than stated. We recommend that you take out a mortgage for the full amount that you are allowed ( normally 80%) when purchasing a leaseback and once you receive your VAT refund the property will have been almost 100% financed meaning that you’ll have had to make very little personal contribution to it. The VAT refund should be reinvested in order to contribute towards your mortgage costs or you could use it to invest in another leaseback thereby building up your property portfolio. Guaranteed rental income.
The guaranteed rental income tends to range from 2.5% up to 6% per year depending on the property, its location and whether or not you will be using it for personal occupation. If you plan to occupy the premises for some time of the year, the rental income will decrease accordingly. In general 'the less you use your property the higher your yield will be'. Different management companies offer different rental incomes and much depends on the location of the property. Holiday residences in top coastal locations will of course cost more at the initial outset compared to a holiday residence located inland in a less popular area. However the counterbalance on this is that these areas – coastal and ski resorts for example - are much prized and therefore the capital appreciation on them is first class.
Reduced Tax
Unless you are a French resident, you would usually pay income tax at the rate of 16% (French residents have to add NI contributions on top) on the rental income that you earn in France. However another advantage of leasebacks is that you can offset the property-related expenses (your furniture purchase, interest repayments, notaire fees, charges, Taxe fonciere etc) against the rental income generated by your leaseback meaning that you will pay very little income tax (if anything at all) making this scheme very attractive to investors. We have excellent local accountants (whose fees can also be deducted!) who will ensure that all your expenses are taken into account. With regard to Capital Gains Tax, the rate imposed to a non-French domiciled EU resident ( 2008) is also 16% and there is a tax allowance of 10% per year starting from year 5 through to year 15 so by keeping the property for 15 years or more, you benefit from the full allowance and effectively end up paying no tax on your gains!
Thanks to this, the income can be used almost in its entirety to repay the mortgage and once this is paid off, you will benefit from a supplementary income. Rental Income Indexed
The rental income for leasebacks is indexed (revised upwards on an annual basis in accordance with French inflation) by around 2.5% per annum (more in some cases). Consequently if you take out a fixed rate loan then your mortgage repayments will remain the same whilst your rental yield will be increasing on a yearly basis eventually resulting in a surplus income. Selling your leaseback
A leaseback property is generally thought of as a long-term investment designed to provide additional retirement income for its owner. It is possible however, to sell the property at any time and most developers have an in-house sales office that can help with this. If the property is well-located and run by a strong management company, you will have no trouble at all selling your property. You can rest assured that all of the leasebacks featured on our site are run by first-class management companies, thus ensuring maximum investment and resale potential.Since July 2007, the introduction of a new tax law (CGI article 257) means that should you sell your leaseback property on, you do not have to pay back any of the VAT as long as the new owner takes over the remainder of your lease. This makes the process of reselling your property even easier and enables you to sell it at the leaseback price which wasn’t previously the case. However if your new buyer wishes to use the property solely for themselves and not renew the lease with the management company you will be obliged to pay back the VAT to the Government. | 
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