I wanted to know if leaseback properties are artificially inflated because of the VAT reclaim? I’ve scouted various websites and it seems a freehold property generally seems cheaper by comparison?
If for, argument sake, my property was purchased for 119600 Euros (100,000 Euros for the property and 19,600 Euros - 19.6% VAT). If after 10 years its market value has doubled. Would I receive:
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239,200 Euros - half the VAT rebate) OR?
200,000 Euros - half the VAT rebate)?
I’m trying the work out how the VAT affects the final sale price.
The main reason why leaseback prices are inflated is because of the commerical lease that is sold with the properties for it to qualify for the VAT refund.
If you was to claim a miss sale for your leaseback the starting figure is 30% off the purchase price.
EVERYBODY on here seems to forget that you have not purchased a property so much as entered into a lease agreement with guarenteed returns and that is the true value. The property is just the vehicle to sell the product.
You have to think of these leasebacks as a financial product guarenteeing you a return over a set ammount of years and the property is the vehicle for doing that. STOP thinking of this as a property that is rented.
That is why the true value of any leaseback is in the lease and if the lease does not exist the resale value is seriously affected. This is a commercial matter more than a civil matter.
Think of this as a product rather than an attachment, if it does not exist it was miss sold and if it was miss sold you are due compensation or quite simply dig your heals in and don't pay for it.
I have done some research and also posing as a potential leaseback purchaser on developments where management companies have failed and the banks are swerve balling them big time. The reason is, if you have bought a financial product with guarenteed rental and yield and it fails to exist the banks are going to have one hell of a job making you pay up through the courts. The only way they or somebody can get out of this is by you signing a new lease with a new management company. That way you are accepting your loss and entering into a new commercial lease under and at your own risk.
That is why you should be giving any "friend" arranging a new management company for you free of charge a wide berth and that is why on a new thread all of a sudden the management company is paying the rents. If they don't pay the rents the banks will not lend and not sell the rest of the development. Catch 22. The danger is when the development is sold out and completed.
I do agree with you that leasebacks should thought more as a long term investment.
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Unfortunately, my management company when into receivership in November 2010 so it’s still early days in finding a new management company and ultimately, for me, still no rent after 7 months.
I’m not sure what you mean by ‘if it was miss sold you are due compensation’. Compensation from who and how do you go about compensation?
You also mentioned ‘quite simply dig your heals in and don't pay for it’. If you refer not paying your mortgage, then I don’t see how the banks will take any legal ownership over the lease. The lease is between the freehold owner and the management company. Is that not right?
Pboyles<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
I don’t think renting it out yourself is an option as I would have to pay back nearly all the VAT. Then comes the problem of renting it and not forgetting the issues with the management company running the rest of the site.
Mutley
I’m still interested to hear your views regarding the compensation & not to continue paying.
I would say that while a property is in a lease, it's value is absolutely determined by the return or rent on that property.Hence if owners are forced to accept a reduced rent, then the value of the property would also reduce.
However if at the end of the lease, you manage to get the property lease free, then its value would be comparable to other freehold property
Personally, I believe, the success of any investment is when you cash in. This would determine ‘the real value of leasebacks’ for me. <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
However, when you can cash in is another major hurdle with leasebacks. Presently, my management company are in receivership so there is no chance to sell up (not that I would at this stage). What’s also sad is that people are still finding it difficult (or impossible) to sell even with a lease in place. So would the best time to sell up be just after the lease finishes and not to renew your lease? Again, I assume management companies will make that difficult.
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Yes, I think a lot of them are.Always compare the cost to the price of freehold classic property
If for, argument sake, my property was purchased for 119600 Euros (100,000 Euros for the property and 19,600 Euros - 19.6% VAT). If after 10 years its market value has doubled. Would I receive:
<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
239,200 Euros - half the VAT rebate) OR?
200,000 Euros - half the VAT rebate)?
I’m trying the work out how the VAT affects the final sale price.
Josh
The main reason why leaseback prices are inflated is because of the commerical lease that is sold with the properties for it to qualify for the VAT refund.
If you was to claim a miss sale for your leaseback the starting figure is 30% off the purchase price.
EVERYBODY on here seems to forget that you have not purchased a property so much as entered into a lease agreement with guarenteed returns and that is the true value. The property is just the vehicle to sell the product.
You have to think of these leasebacks as a financial product guarenteeing you a return over a set ammount of years and the property is the vehicle for doing that. STOP thinking of this as a property that is rented.
That is why the true value of any leaseback is in the lease and if the lease does not exist the resale value is seriously affected. This is a commercial matter more than a civil matter.
Think of this as a product rather than an attachment, if it does not exist it was miss sold and if it was miss sold you are due compensation or quite simply dig your heals in and don't pay for it.
I have done some research and also posing as a potential leaseback purchaser on developments where management companies have failed and the banks are swerve balling them big time. The reason is, if you have bought a financial product with guarenteed rental and yield and it fails to exist the banks are going to have one hell of a job making you pay up through the courts. The only way they or somebody can get out of this is by you signing a new lease with a new management company. That way you are accepting your loss and entering into a new commercial lease under and at your own risk.
That is why you should be giving any "friend" arranging a new management company for you free of charge a wide berth and that is why on a new thread all of a sudden the management company is paying the rents. If they don't pay the rents the banks will not lend and not sell the rest of the development. Catch 22. The danger is when the development is sold out and completed.
Hope this helps.
Mutley
I do agree with you that leasebacks should thought more as a long term investment.
<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Unfortunately, my management company when into receivership in November 2010 so it’s still early days in finding a new management company and ultimately, for me, still no rent after 7 months.
I’m not sure what you mean by ‘if it was miss sold you are due compensation’. Compensation from who and how do you go about compensation?
You also mentioned ‘quite simply dig your heals in and don't pay for it’. If you refer not paying your mortgage, then I don’t see how the banks will take any legal ownership over the lease. The lease is between the freehold owner and the management company. Is that not right?
If you were to follow that argument then a leaseback with no
guaranteed income would be worth nothing. Quite a few leasebacks
were sold with extra occupancy but no income. You can of course rent
it out yourself and receive income. I'm not saying the whole thing isn't
a massive fraud though, I'm just not sure that the resale value is only
determined by the income.
Pboyles<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
I don’t think renting it out yourself is an option as I would have to pay back nearly all the VAT. Then comes the problem of renting it and not forgetting the issues with the management company running the rest of the site.
Mutley
I’m still interested to hear your views regarding the compensation & not to continue paying.
I have rented out some of my occupancy weeks in the past. It went
quite well
I assume you were referring to renting it out yourself if you break the
lease. You would be liable to pay back the tax when you break the
lease, not when you rent it out. The problem is these companies are
doing all they can to prevent you not renewing the lease.
pboyles.
I would say that while a property is in a lease, it's value is absolutely determined by the return or rent on that property.Hence if owners are forced to accept a reduced rent, then the value of the property would also reduce.
However if at the end of the lease, you manage to get the property lease free, then its value would be comparable to other freehold property
I should of course have added that every estate agency I
have approached has refused to sell it due to the
uncertainty about the lease renewal. I suppose in the
circumstances the resale value is rather irrelevant.
Olly you are exactly right.
Personally, I believe, the success of any investment is when you cash in. This would determine ‘the real value of leasebacks’ for me. <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
However, when you can cash in is another major hurdle with leasebacks. Presently, my management company are in receivership so there is no chance to sell up (not that I would at this stage). What’s also sad is that people are still finding it difficult (or impossible) to sell even with a lease in place. So would the best time to sell up be just after the lease finishes and not to renew your lease? Again, I assume management companies will make that difficult.