French Property Lease backs

Iain-Le-Roi

It's 5% per year paid quarterly so if you buy a property for £200K then you get 10k per year in 4 instalments. Plus you would effectively be getting your mortgage pad off and own it our right after 20 years (hoping the value wild have ibcreased in that period).

The management company keep any rental profit on top of the 10K per year so you are missing out on profit but you don't need to do any management.

It is concerning that there doesn't seem to be any first hand experience out there. I thought there may be a couple of people who had experience or understanding in this area.

Cheers, ILR

Iain-Le-Roi

Iain-Le-Roi wrote: »

It's 5% per year paid quarterly so if you buy a property for £200K then you get 10k per year in 4 instalments. Plus you would effectively be getting your mortgage pad off and own it our right after 20 years (hoping the value wild have ibcreased in that period).

The management company keep any rental profit on top of the 10K per year so you are missing out on profit but you don't need to do any management.

It is concerning that there doesn't seem to be any first hand experience out there. I thought there may be a couple of people who had experience or understanding in this area.

Cheers, ILR

Excuse my spelling, it was written on a phone.

le_loup

What is more concerning than that there are no other punters, is your seeming determination to continue with this "investment".
Google "confirmation bias".

Malthusian

What happens to the mortgage if they can't keep the property occupied all year round, the money to pay the "guaranteed" 5% per annum runs out, and the company goes tits up? And the value of whatever's left to be repossessed doesn't cover the debt? Do you still have to pay the mortgage?

It is concerning that there doesn't seem to be any first hand experience out there. I thought there may be a couple of people who had experience or understanding in this area.

The reason there aren't many experienced investors in unregulated timeshare investments is because most of them lose their shirt and don't then have any reason to hang around investment forums because they don't have any money left.

The system isn't time share-ie at all.

It's an unregulated property investment, uses timeshare-y sales tactics including the promise of low risk (despite it being clearly much higher risk than any regulated investment), "guaranteed" yield and rising values, and it entices you with the prospect of being able to say to the Joneses "I've got a little place in the Alps" without having to fork out the full cost of one. How is it not timeshare?

If you're an experienced property investor, have other investments and can afford to invest part of your capital in something like this (and be prepared to kiss it goodbye), and you are happy with the levels of reward and risk on offer, then this may actually be appropriate for you. But you can surely understand why people on here are instinctively suspicious of something like this, because it has every single feature common to unregulated investments that usually causes people to reach for their bargepoles. Promises of low risk when it is anything but, "guaranteed" yield which isn't backed by any counterparty, incentives to invest which have nothing to do with the risk/reward equation, unregulated, foreign, and promoted in the Daily Telegraph. If you told us that a nice chap had rung you up out of the blue to tell you about this amazing offer, you'd have a full house.

Reaper

There is another consideration that has not been mentioned - inflation and interest rates.

With QE money sloshing about it is possible we may revert to a high inflation environment and when it happens it could happen very fast. For balance I should mention it has been predicated for a long time and has not occurred yet.

Inflation is both good and bad. Your 5% yield will start to look feeble if everybody else is getting 10% on their building society savings accounts. The management would rack up the amount it charges customers in line with inflation but my understanding (correct me if I am wrong) is you would see none of that increase.

You mortgage payments would rise with interest rates but you would have no additional income to pay for it.

However on the plus side inflation would effectively reduce the size of your mortgage.

Iain-Le-Roi

le_loup wrote: »

What is more concerning than that there are no other punters, is your seeming determination to continue with this "investment".
Google "confirmation bias".

I understand confirmation bias and can see why it is coming across as this. Its more a determination to find people with experience in the area though to be honest.

Cheers

Iain-Le-Roi

Malthusian wrote: »

What happens to the mortgage if they can't keep the property occupied all year round, the money to pay the "guaranteed" 5% per annum runs out, and the company goes tits up? And the value of whatever's left to be repossessed doesn't cover the debt? Do you still have to pay the mortgage?

The reason there aren't many experienced investors in unregulated timeshare investments is because most of them lose their shirt and don't then have any reason to hang around investment forums because they don't have any money left.

It's an unregulated property investment, uses timeshare-y sales tactics including the promise of low risk (despite it being clearly much higher risk than any regulated investment), "guaranteed" yield and rising values, and it entices you with the prospect of being able to say to the Joneses "I've got a little place in the Alps" without having to fork out the full cost of one. How is it not timeshare?

If you're an experienced property investor, have other investments and can afford to invest part of your capital in something like this (and be prepared to kiss it goodbye), and you are happy with the levels of reward and risk on offer, then this may actually be appropriate for you. But you can surely understand why people on here are instinctively suspicious of something like this, because it has every single feature common to unregulated investments that usually causes people to reach for their bargepoles. Promises of low risk when it is anything but, "guaranteed" yield which isn't backed by any counterparty, incentives to invest which have nothing to do with the risk/reward equation, unregulated, foreign, and promoted in the Daily Telegraph. If you told us that a nice chap had rung you up out of the blue to tell you about this amazing offer, you'd have a full house.

I completely agree and am sceptical myself, hence looking and then discussing on here.

Your first risk is the big and key one as I see it. You own the property and are tied in to the mortgage on it so if the management company goes bust then you are still responsible to pay the mortgage so would need to sort your own rent out to cover it - big risk as you say. The only mitigation to this is using a bigger company that has been around a long time but the risk still applies.

I still disagree with the timeshare piece though as you own the property and just lease it back to someone else to manage. Thats fine though, its good to have disagreements.

Iain-Le-Roi

Reaper wrote: »

There is another consideration that has not been mentioned - inflation and interest rates.

With QE money sloshing about it is possible we may revert to a high inflation environment and when it happens it could happen very fast. For balance I should mention it has been predicated for a long time and has not occurred yet.

Inflation is both good and bad. Your 5% yield will start to look feeble if everybody else is getting 10% on their building society savings accounts. The management would rack up the amount it charges customers in line with inflation but my understanding (correct me if I am wrong) is you would see none of that increase.

You mortgage payments would rise with interest rates but you would have no additional income to pay for it.

However on the plus side inflation would effectively reduce the size of your mortgage.

You can actually fix French mortgages for 20 years at a really low rate that would hopefully negate that somewhat.

Reading all this it's very unlikely I will touch this as there has been some really good advice on the forum and certainly enough to scare me away. Without the 20 year fix, I wouldn't have even considered it in the first place for fear of the rate going up to 10% plus.

Cheers ILR

droopsnoot

I suspect the issue is that this isn't really the kind of forum where you will find many who have taken on this kind of product. There are many with various investments, there are many with BTL or other let property, foreign property and so on, but this isn't the kind of place I'd go to look for leaseback owners. Perhaps something like the Propertytribe forum (if it's still going) might bring more success. I may be doing MSE-ers a disservice there, but it just doesn't fit with how I'd think most are - like going to the MrMoneyMoustache forum to discuss which new 4x4 to buy.

I did look at this some years ago, I used to subscribe to a propery-based investment newsletter and the numbers appealed to me. I must admit I was surprised it was still running after the various financial and property crises. It suited me as I have zero experience of owning or running property but could potentially benefit from the financial aspect of it, but my over-cautious and apathetic nature towards these things scuppered it for me.

Iain-Le-Roi

droopsnoot wrote: »

I suspect the issue is that this isn't really the kind of forum where you will find many who have taken on this kind of product. There are many with various investments, there are many with BTL or other let property, foreign property and so on, but this isn't the kind of place I'd go to look for leaseback owners. Perhaps something like the Propertytribe forum (if it's still going) might bring more success. I may be doing MSE-ers a disservice there, but it just doesn't fit with how I'd think most are - like going to the MrMoneyMoustache forum to discuss which new 4x4 to buy.

I did look at this some years ago, I used to subscribe to a propery-based investment newsletter and the numbers appealed to me. I must admit I was surprised it was still running after the various financial and property crises. It suited me as I have zero experience of owning or running property but could potentially benefit from the financial aspect of it, but my over-cautious and apathetic nature towards these things scuppered it for me.

Snap!

I agree that this forum probably isn't the right place but didn't know where else to look. I may try some expat forums or property tribe to see if there is any first hand experience. Just for balance of course as there is no substitute for experience.