Selling leasebacks

Seamus

If you sell your leaseback after the second term(min.18 years),obviously the vat refund is not an issue.

You have said your stategy(and mine) is to refuse renewal after the first lease period and sell as a classic.

Therefore you would have to repay the outstanding vat.

I can't see that the French goverment would encourage owners to break there leases early so that didn't have to repay the vat.

Seamus,

The way I feel about leasebacks at the moment I'd probably sell it even if it meant only 'breaking even'.

It seems that although you don't have to repay the VAT to the government, it seems that you have to pass the tax benefits on to the purchaser by reducing the sale price of the property by the appropriate portion of the VAT. So you still have to pay it....but to the purchaser instead of the government.

rcummings39578.5136574074

I have a leaseback in Pantin- Le Beaumerchais which I want to sell on. It is in it's third year of a 9 year lease. Anybody know how one goes about re-selling leasebacks?

much appreciated

sitarist

The prospect of selling a leaseback for a profit in it's first lease period is practically nil.

The price of property in the area that i have a leaseback has doublled since 2002.

So a fellow owner who is fed up with the constant co-op bills and hassle has contacted the management company(Odalys the 2nd biggest in the business).They have offered 69% of the 2002 price not including the 5000 euros furniture package,

If thats not taking the "mick" i don't know what is! &nb sp;

If your in you will have to take it on the chin and hope you can get out at the first renewal.

For those that are thinking about a leaseback,be warned!

Regards

John

Seamus

To update you on my last post,included in that 31% reduction on the 2002 buying price,was 12000 euros plus fee for odalys to sell it!

When asked why the offer was so low they responded by saying they would have to offer a yield of 4.4% to the new buyer.

Which tells us that the value of your appartment within the leaseback period is governed by your rent yield.Which in turn makes the insee increase very important.(with odalys mine capped at 2%).

This leaseback in Plan de la tour(nr.St.Tropez)is in one of the best villages in the Cote d'zur,its well managed by Odalys in lovely surrounding.So after 5 years(according to Odalys) you cant make a profit on it with or without the lease,i cant see much hope for these less well located and poor yield leasebacks.

At least i have a yield of 4.2% and 6 weeks personal use.I used to spend 4-6 weeks in this region every year,so the saving every year is considerable.

As an investment the figures definateley dont add up.Why would buy on a 2-3% yield with all the uncertanty of the lease,and then subsidise a mortgage for 15-20 years.Its bonkers!

Regards

John

Just to clarify a few points regarding my leaseback and Odalys's offer.

Although the first stage of purchasing our apartment was towards the end of 2003, it wasn't completed until 2004 and I believe we were probably one of the last one's to buy. In that respect, we probably paid over the odds for our property and the furniture. The lease has another 5 years to run.

Also, we were badly advised - I didn't appreciate all the implications of selling at the time. The marketing people emphasised the fact that there was excellent capital appreciation in the area and that you are free to sell your property at any time - what they don't tell you is that the selling price of a leaseback is dependent on the yield from the rental income. I don't think I am the only one to realise this late in the day!

I would like to ask Seamus if he has yet managed to sell a resale leaseback at all and if so, was it for more than the original purchase price. Assetz have two resales on their books and when I contacted them to enquire if they would like to market mine, they said they were not taking on any more as the two they already had were not selling.

Sheridan

Seamus

These selling prices are in effect made from the Agent i.e.Odalys or someone like yourself i would guess that the owners would,nt have a clue what they are worth.

Secondly these prices are asking prices,could well be lower!

The nett price would be considerably lower after agents commission!

We have already agreed the sale during lease period would be dependant on the yield.

So if you paid 150,000 euros at a yield of 4.2% that would give you 6300 euros p.a .

After the capped insee increase at 2% after 3 years i now have 6426 euros p.a.

Based on my yield of 4.2% i now have a selling price of 153,00 euros,pretty pathetic i'd say.

Regards

John

hi,

Another owner from Odalys Plan de la tour here....I think we are all agreed that not renewing the lease is probably the best exit mechanism...has anyone figured out how to do this..........I've also heard that you will need individual electricity and water meters before you can exit.....I know its still a few years away and of course Odalys could make a great offer rent for the next term.....and we might decide not to exit.....but no harm to start making a plan and maybe sharing some legal costs...

woody

ps rent was late last period and I am considering getting a letter written by a notaire to put it on the record....surely if they dont pay the rent we can effectively serve them notice and evist them..

woody

I would imagine that the "Great offer! that Odalys will make after the expiry of the first lease,will be like the derisory offer they made to another owner to purchase there appartment!.A discount to the original purchase of over 30%!

Whats the point in staying in? The insee is capped at 2% every year and the yield is going nowhere.

Having said that i can't see Odalys letting you go easily!If everybody"done the maths" they wouldn't have any investors!.

Regards

John

John,

Another point about Odalys's offer - they don't just take the property off your hands, it depends on them being able to find a buyer like any other estate agent.

Seamus,

Thanks very much for your frank reply - I agree that now is not the best time to be selling property anywhere!

Sheridan

Wayne

I believe that if you succeed in changing your leaseback to a freehold property you would have to repay all the outstanding vat.

These leaseback are definatley HIGH RISK and not the highly regulated,gauranteed rent investment that was sold to me.

Every week there is a new development popping up on these forums that the owners are not getting paid there rent.

I think some of the well located leasebacks could make considerable capital growth after say 9,18 or 27 years,if you can successfully exit the lease.

However i think these could be eroded by the poor returns of the same period.(my rent is capped at 2% every 3 years).

I don't believe this nonsense about the French useing leasebacks as there pension.There not that stupid!

Why would have an investment increasing by only 2% for the next 9,18 or 27 years and risk not getting paid your rent,when you could probably get double or treble in a decent pension fund.

Added to the fact that unless you put a very large deposit(which you would be earning 6.5% on ) or take a 10 year repayment mortgage you be subsidising by say 300-400 euros per month.

Regards

John

Wayne,

You don't mention the compensation that you would have to pay to your management company for terminating the lease early. Have you taken this into account and do you have any idea how much it would be? Has your lawyer advised you on this point?

Regards

Sheridan

Good luck with your proceedings!

I look forward to hearing your news.

Regards

Sheridan

Seamus,

I don't want to publish the details of my finances on this forum and will email you privately. I don't have time at the moment - very busy at work!

Regards

Sheridan

Seamus

I beg to differ on your assessment of average yeilds of 5.5% in 2005.

I first viewed leasebacks in 2002 with Consiel Patrimone in Nice area.

I viewed 4 leasebacks in Nice,2 in Canne la Bocca,les Orchids in Les Issambres,Bastides de Grimaud(which is run by Odalys) and several Pierre Vacance developments.Finally i bought in Plan de la tour and St.Maxime.

None of these were offered at yields above 4.6%.Towards 2006-7 there were Student Accomadation leasebacks with no personal use,being offered at yields of 5% and over.

The issue of personal use clouds the situation with regards to yeilds.

There were 4 formulas at Plan de la tour ranging from,highest,at 4.6% with no personal use to lowest,3.8% with 6 weeks personal use.The insee is capped at 2% per year.

The actual buying price of my appartment was 149,000 euros( £99,000 at the time) and i cose 3.8% with 6 weeks personal use.

But what ever figures we use it dosen't alter Odalys offer of 30% below the buying price!

Regards

John

Seamus

On a like for like basis the four developments at 5% yeilds that you have posted are not very different from the 4.6% yield with no occupation, at plan de la tour.

Bearing in mind,as nice as they are,they are not in the cote.dzur,paris or the ski resorts,where you would expect to get a lesser yeild.

So you have got my buying price and yeild,what do think the going rate for my appartment is?

Regards

John

Noel

My apoligies for misleading you.It is as Seamus says 2% per year applied every 3rd year.

Rgards

John