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Has anyone heard about Leaseback programs?
Old 08-21-2007, 09:53 PM   #1
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Has anyone heard about Leaseback programs?

I was perusing international real estate (always in search of a bargain) and came across something called "Leaseback programs". It looks like France is the country that seems to offer these deals.

I know when they use the word "Guaranteed investment" that you should normally run, but piqued my interest since you are actually buying a "tangible asset" I think.

From the website:

A lease-back plan is a plan where you buy a property then grant a management company the right to use it for short-term tourist rentals, this usually over a period of 9 years.

You receive in return major tax breaks from the French administration as well as a guaranteed rental income for the duration of the contract.
Anyone can buy a lease-back property -there are no restrictions for non residents.

The buyer pays the asking price for an apartment, in some cases less the VAT; In return for a lease-back contract to a management company the buyer gets a net guaranteed return. These returns are net during the term of the lease,which means net of the running and insurance costs, as well as index-linked. ..
Everything is covered, from management fees to city tax, water and electricity charges, heating and air conditioning , even down to replacing the furniture. In terms of returns, property price rises may seem modest against those occuring on the stock market on the short term, but when financing is used the return potential is much higher. A tourist property will come into its own over a medium to long-term period.

The lease-back programs are located in the best locations in terms of capital-gain potentials and mostly on the French Riviera, Central Paris and ski resorts.
You get access to the property for 2-4 weeks a year. And after the 5 year period, you own the property. The properties are in lovely places, like the Alps and French Riviera.

Is this some type of timeshare scam? Is it just bad timing due to the Euro? Anyone heard of these beasts?

Here is a link to the site that interested me:
A french real estate website for investment on the French Riviera

Also, on an unrelated note, has anyone heard of a print magazine called "International Living"? I know some of you guys have experimented with expat style Thai-living, so thought you might have read about it from there.


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Old 08-21-2007, 11:12 PM   #2
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Hum, the website looks suspicious. What I don't understand is why you can't do that yourself without using that "agency": Buy a condo in France (or wherever), rent it out (on a weekly basis) through an leasing agency, and use the rents to pay the mortgage. That way you can sell whenever you want without being bound by lease restrictions. In this case, the fact that the Euro is so strong right now only has an impact on your downpayment (which would likely come from an account denominated in $). After that, the rents are received in euros and used to repay the mortgage in euros, so the strength of the dollar should not be an issue. However, beware: 1) In France the real estate market has started to cool down in many areas (according to my sources). You are right to point out that Paris, the French Riviera and the Alps have been the best places for RE capital gains in the past 5 years, but it is doubtful that things will keep increasing at the same pace. 2) Taxes are pretty heavy, even though RE has traditionally been used as a tax shelter. 3) The condos that offer the best yield (highest rent/price ratio) are usually the smallest condos (studios and 1-bedroom apts).

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Old 08-22-2007, 01:44 AM   #3
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I only glanced at it. I could be wrong... but here is my take.

In theory (the agreement) The real estate management company wants to rent property and use your $ to buy the property. In return, they will manage it and and provide you with some benefits of use of the property and a return. But you are the property owner and probably owe all property taxes, maintenance, insurance, etc...

They provide the management for a fee. Essentially, they are taking a bit of a risk by guaranteeing you a return. You take the investment risk. Of course, it does not state if you are over paying for the property. There would be many traps.

IMHO - I would skip it. Invest the money elsewhere. If you want to own property in that country, consider buying it. If you only intend to be in that country for periods of time and not there permanently... You should consider being on the leasing side of the equation.

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