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Why Invest in Property in France?
France remains one of the favourite locations for the Irish for holiday and also investment locations.A major interest to Irish investors is the French Leaseback type of investment which will be explained later on.
Owner occupancy levels is average at approximately 56% which would indicate that there would be a reasonable rental market on a domestic level and would not primarily be holiday lets.
A French property investment offers a lower risk investment as France is a very well established economy. Property owners may purchase property freely and on a freehold basis, property rights are well protected and restrictions do not apply. France also offers foreign buyers cheap financing options .
FACTS
Part of the EU
Location: Western Europe, bordering Belgium, Luxembourg, Germany, Spain, Italy and Switzerland
Capital: Paris
Population: 60,876,136 (July 2006 EST.)
Area: 547,030 sq km
Time Zone: 1 hour ahead (UTC/GMT +1 hour)
Flights from Ireland/UK: 2 1/2 hours, direct flights available to various French airports
Languages: French (some regional dialects also used)
Religion: 86% Roman Catholic, 8% Muslim, 2% Protestant, 1% Jewish,
3% unaffiliated
Currency: Euros
Taxation: Double taxation with Ireland
Weather: The weather in France can vary enormously. France is divided into four climatic zones:
1. Oceanic and humid climate with often cool summers in the west from Bayonne to Lille;
2. Semi-continental climate with harsh winters and hot summers in Alsace, Lorraine, along the Rhône corridor and in the mountainous massifs (Alps, Pyrenees and Massif Central);
3. Intermediate climate with cold winters and hot summers in the north, and in the Paris and central regions;
4. Mediterranean climate with mild winters and very hot summers in the south of France.
Electricity: 230V 50HzHz (European plug with two circular metal pins)
International Codes: Ireland to France 00 + 33 + Area Code + Tel #
France to Ireland 00 + 353 + Area Code + Tel #
Entry Regulations: No visas are required for nationals of EU countries. Visas are required for all others.
INVESTMENT
•French law is very protective for the buyer
•France is secure and political stable
•Guaranteed rental schemes in place – long term and leaseback schemes
•Building guarantees for 10 years - Very strict building regulations
RENTALS
•Rent & after sales service available
•Long term, Short term, Lease back System
•High season is 5 months May to September
What is a French Leaseback?
The French leaseback has been in practice for a while in France; however it is only recently that it has caught on with the Irish market. It is a scheme by the government to create higher quality tourist accommodation with the idea of creating higher revenues from the tourism market. A French leaseback is an opportunity for investors and holiday home buyers to purchase a property on a freehold basis which in turn is rented out for a guaranteed return of approximately 4-7% for a period of 9 years. What makes the French leaseback even more attractive is that owners may use the property for a few weeks which will normally be pre-determined at the beginning of the year. A major benefit of the French leaseback property is the VAT refund of 19.6% of the property value.
Many leaseback schemes require an initial deposit of 20% as a down payment and most buyers would then arrange for a mortgage of 80%. The VAT refund can then be used to reduce the mortgage amount substantially and thereby insuring that the rental income covers the mortgage repayment.
French leaseback properties also have the added benefit that they come fully furnished and are maintained during the rental period. There are leaseback schemes that are also designed for pure investment and do not offer the added benefit of own usage. These types of leasebacks will be based in the major cities like Paris and will guarantee a higher guaranteed return of 6-7%.
France rental market:
Typical rental contracts vary in the terms of 1-3 years, however, if it is a leaseback arrangement this period can be much longer. The term of the contract will also be determined by whether the property is fully furnished or not. A furnished property generally would have a term of approximately 12 months whereas an unfurnished property typically would have a term of 3 years. It is important to note that French tenancy laws are very strongly pro-tenant and many constraints exist in relation to increasing rents.
French property can be rented out on a short term basis to the domestic holiday market or foreign market. The location in tourist locations is extremely imported and the closer the proximity to the attractions and amenities the higher the rent chargeable. As in all markets the size and the finish also affects the rental income to a certain extent. 2 bedroom apartments in the South of France in the upper end of the tourism market can be rented out for as a high as €1200 per week during the months of July and August. After this period the rental incomes can drop substantially to around €500-€600 in April and October. This type of property will cost approximately €200,000. The season in France is late June to the end of September, early October, and lasts for around 12 weeks. Typical rental and management costs vary, but generally are 20%-25% of the gross rental income.
Guide to France
France is one of the most visited countries in the world. Whether taking a romantic break in the capital or enjoying the countryside and beautiful coastline, France has something to offer everyone.
Normandy
Normandy is a beautiful area to visit, with its quiet rustic villages, unspoilt countryside and beautiful coastline. Famed for its many apple orchards, sea food and Celtic traditions, Normandy remains untouched and beautifully old fashioned.
Brittany
Brittany is a very distinct area of France. This popular holiday destination offers a wonderful coast line with magnificent views, with the inland providing a wealth of prehistoric sites, such as Vitrė, Dinan and St. Malo.
Loire Valley
This area known as the ‘Garden of France’ illustrates the great variety in the French landscape. The Loire Valley has some of the finest chateaux’s in Europe, lush countryside, rolling vineyards and the magnificent Loire River.
Limousin / Auvergne
This central region is stepped in landmarks from amazing castles to Romanesque churches. Still relatively unknown these two quiet and deeply rural provinces have beautiful wooded reservoirs offering all kinds of outdoor activities.
Rhône Valley
The Rhône Valley is a spectacular region. The landscape changes from level plains scattered with ponds, to beautiful vineyards in the foothills. The region holds area of great interest and is home to Lyon the second largest city in France. The Rhône Valley also has the distinguished reputation as being home to France's finest food.
Vendée / Charente
The Vendee and Charente regions are among the most popular areas in France. This area boasts beautiful beaches, traditional fishing villages and excellent golf courses. With a good climate this area is a popular holiday destination.
Atlantic Coast
The Atlantic Coast is very much influenced by Spain and reaches south from Brittany to the Basque country on the Spanish border. With over 100 miles long of appealing coastline this is a popular location. With beautiful architecture and countryside this is a very charming location.
Dordogne / Aveyron
At the heart of this region are the beautiful valleys of the Dordogne and the Vezere. This area is steeped in history and boasts some magnificent villages such as Racomadour and Dome. This region is surrounded by grasslands and dense forests.
Midi-Pyrénées
The Midi-Pyrénées is the largest French region but is still relatively unknown. Even though this region is located between the Atlantic and the Mediterranean it does not boast a coastline, however it does have a number of great lakes and rivers. The area is also blessed with diverse scenery including rolling fields of yellow sunflowers, mountains and valleys as well as a remarkable Natural Park.
Provence
While there is much to see in France, many say that Provence is one of its most charming and romantic regions. Located on the Mediterranean Sea adjacent to the Italian border Provence is a region of beautiful scenery, rich history, great food and wine.
Savoy / Dauphiné Alps
The French Alps, the most westerly and the highest part of the great arc of the Alps occupy the old provinces of Savoy and Dauphiné and extend also into Provence. This region offers spectacular scenery and is a popular destination for winter sports and outdoor activities in the summer.
Burgundy
The Middle Ages bequeathed to Burgundy a cluster of towns of amazing beauty. Located in the rich heartland of France this area is historically and culturally rich, with a number of beautiful vineyards and the rivers Yonne and Saone, this area will not disappoint.
Franche-Comté
Franche-Comté is a traditional Provence of Eastern France. Its culture is influenced by its location, on the border of Switzerland and close to Germany. This Provence is best known for its thrilling scenery from dramatic mountains to dense woodlands and beautiful valleys.
Mediterranean
This is one of France’s most sought-after destinations with the French Riviera being one of the world’s most fashionable resorts. The region has a number of cosmopolitan towns including Monte Carlo, Nice, and Cannes as well as a very popular coastline, famed for its golden sandy beaches and fantastic weather.
Northern France
This is a region where you will find many historic battlefields. Northern France is predominately rural with wooded landscapes and elegant market towns. This is a peaceful region, famous for its vineyards and champagne estates.
Paris / Ile de France
Paris is situated on the River Seine, in Northern France, at the heart of the Île-de-France region. This is a cosmopolitan city with lots to offer with its tree lined boulevards, pavement cafes and endless sightseeing spots like the Arc de Triomphe and of course the famous Eiffel Tower.
The French Property Market
Different regions of France, and different parts of those regions, will have varying price structures for similar properties. Many local and national factors come into play in deciding the price of property across France, as in any country. Determine your Budget first of all and if you are obtaining a mortgage from an Irish financial institution, make yourself aware of the sum available to you and any terms and conditions applying.
The Legal Issues
The French legal system is very different to that in Ireland. It is based on the Napoleonic Code. In France, the lawyer in property transactions is generally referred to as the Notaire. His or her role is different to that of the Irish Solicitor as he / she is a public official whose duty is to the State and to ensure that the entire transaction is carried out legally.
The type of property you purchase will determine the law applicable. For example, buying a farm or vineyard will be subject to different procedures. You should consult legal advice in such circumstances. Most buyers in France, however, are looking at either an apartment or a small country or seaside house.
The Initial Agreement
Sous-seing Prive or Compromis de Vente
The initial contract is agreed between the buyer and seller. This is called the Sous-seing Privé, if drawn up by a French Estate Agent, or a Compromis de Vente, if prepared by the Notaire. Once it is signed by both the buyer and seller, it becomes a legal document. The buyer will then pay a deposit of 10% (minimum) into a special account and the property is taken off the market. In some circumstances, a Promesse de Vente may be agreed. Here, the sellers commit not to sell to anyone else within a specified period and a deposit is also paid. There is a seven day cooling off period after the initial contract is signed. To enable the Compromis de Vente to be compiled you will need to supply various pieces of personal information (birth certifications, marriage certificates, divorce or death certificates, passports) together with any information on financing the purchase, especially mortgages. You should note that the deposit may be forfeited if you decide not to proceed with the purchase within the agreed time frame.
Final Contract
After the searches are completed, the final contract, the Acte de Vente is signed at the Notaire's office and the property passes to the buyer, who must pay the balance of the purchase price to the Notaire who then pays the vendor. It should be noted that the balance must be in the Notaire's possession before the contract is signed. It will also be necessary to provide to the Notaire before completion a copy of your birth certificate translated into French and, if applicable, a copy of a Marriage Certificate also in French.
Insurance
From the signing of the final contract the buyer is responsible for the insurance of all the buildings on the property. It is a criminal offence in France not to have your property insured.
Fees and Charges
The buyer pays all legal fees, costs and registration taxes which average 7.5% of the purchase price. These fees are paid to the Notaire when signing the Acte de Vente and are paid together with the balance of the purchase price. Estate agents fees that form part of those costs can range from 4 to 10% - always ask! All fees are subject to 19.6% VAT.
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