Property investment in France is now one of the best financial decisions in the 21st Century - InvestmentProperty.net

Buying an investment property abroad is an attractive option for many reasons, not least the prospect of near guaranteed rental income if the property is purchased in a heavily touristic area, or the satisfaction to be gained from simply owning ones own holiday or retirement home.

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France is an especially popular country for overseas property investors. In the UK, it is normal for the majority of citizens to take steps to purchase their own property and there are many solutions and schemes to help people to do so. The situation is different in France however, where the main demand is not to buy property but to rent it. There is a huge need for good quality rental homes, and the returns on property investments are usually in the region of 6.5% NET P/A, in addition to gains that are made on capital growth.

On a buy to let basis, it is essential that the right property is selected in order to make a healthy return. There are many properties on the market which are not really suitable for rental, and which will not make the investor any money. The majority of suitable properties are located in the main cities and large towns of France, including Lille, Lyon, Marseille, and of course, Paris. Buying in more rural areas is not usually such a wise choice, as the demand is far lower.

There are two main types of property for investment in France.

Reversion Property

The popularity of Reversion Properties is largely due to the French social and economic situation. Those living in France on a pension are finding it harder and harder to live comfortably off a pension alone, and are therefore using their properties as an additional source of income. Recent research suggests that over 10,000 reversionary transactions are made annually, on a whole variety of properties, from apartments to studio flats to villas, usually in attractive and prestigious locations like Paris and the French Riviera.

Reversion properties are targeted at institutional investors, and those looking for retirement or holiday homes. Some properties are vacant, but 95% are tenanted, meaning that the vendor lives in the property until he or she passes into a care home, or dies. Around 30% of properties are vacated before the vendor dies however, becoming available for the buyer to move in or rent it out.

Leaseback Property

The French Government introduced Leaseback property around 20 years ago in order to increase the number of good quality holiday accommodation, thereby improving tourism. Most of these properties tend to be located in a “Residence de Tourisme” or a “Residence avec Services”, catering for those holidaymakers looking for short term lets.

The scheme allows the purchaser to buy the property as a freehold, but ties in to a pre-selected management company who will lease out the property and a guarantee rent for a fixed period, usually between 9 and 12 years. This effectively means that the purchaser is able to have the satisfaction of owning a property and receiving rental income without the responsibility and concerns connected to finding tenants and maintaining property. Needless to say, the scheme is highly popular and the supply of leaseback properties on the market rarely meets demand.

“Sur Plan” or Off Plan

Most new developments in France are sold “sur plan” meaning that potential investors are able to peruse detailed plans and building specifications before they purchase a plot. There are usually extensive discounts for buying property Off Plan, but the decision to buy should be made only after as much research as possible.

Mortgages

There are several French mortgages available to overseas investors, many of which have lower interest rates than those of UK banks. However, obtaining a French mortgage can be a complicated and lengthy process, so it is highly recommended that an overseas Purchaser use a well connected French broker in order to achieve the best arrangement possible.