If you’re relocating to France, you may be looking to finance your new life. The pound is currently weak, which means that collecting a monthly income in euros is extra appealing for property owners. Purchasing a buy-to-let property can provide an additional income stream, but you want to make sure you know the ins and outs of buying and managing this type of property.
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Buy-to-Let Property in France’s Popular Areas
At the moment, there’s an increasing demand for buy-to-let property in Paris, as many speculate that financial companies could relocate to Europe following Brexit. The French Riviera is another prime spot for buy-to-let property, particularly during the Cannes Film Festival and the MIPIM conferences. The type of renters will vary in these areas, ranging from long-term renters to those just on a short holiday.
Emerging Markets in Small Towns and Villages
Approximately 40% of French residents rent their homes. In major cities, the most common buy-to-let properties are apartments that are usually rented for 10 years or longer. In these major cities and towns, it can be difficult for people to find quality rentals because demand is high and supply is low. This has driven the luxury rental market in smaller towns and villages, so long as there’s still easy access to major cities.
Management Agents Can Help Streamline the Process
Many estate agents in France will also act as management agents, meaning they’ll advise you throughout the buying process. They’ll discuss your options, including the value of purchasing a luxury property that’s furnished versus one that’s unfurnished. They can also help you if you plan to only rent out your property for guests on holiday. Typically, the management fee is slightly under 10% of the property’s rental income. This fee also covers an insurance policy in case your renters don’t pay their rent. Additionally, management agents can help you find a tenant as well as assist with any administrative tasks you’ll have to handle.
Consider Buying Through an SCI for More Inheritance Options
If you have any concerns regarding inheritance, consider purchasing the property through an SCI, which stands for société civile immobilière. This gives the property owner extra flexibility because British nationals can opt to apply UK law to the estate instead of French inheritance laws. If you’re not worried about any inheritance issues arising, it’s fine to purchase the property personally.
Unfurnished vs. Furnished Buy-to-Let Property
Unfurnished property requires a three-year lease for the tenant. However, within the three years the tenant can give notice if they decide to move out. If you opt to sell the property, you need to tell your tenant six months in advance. At that point, they will have the option to purchase the property, which works out well for the property owner because they won’t have to continue searching for a buyer. For shorter rental terms, consider renting out a furnished property. Rental terms can range from one to two weeks for those on holiday to up to one year for people who’d like to stay for longer.
Your Mortgage Application Will Include Income from Buy-to-Let Property
If you work with a management agent, they can show the bank an official tenancy agreement that proves there will be a three-year rental. This tenancy agreement will be considered a guarantee to the bank, which means that when they go through the process of deciding whether you can afford the mortgage or not, they will take your secured rental income into consideration. This will become part of the mortgage application.
A note about commercial properties: Unlike buy-to-let properties, if you’re purchasing property that you want to turn into a commercial business, like a B&B, the bank is not likely to add projected future income to your mortgage application. The income you may get from a commercial property is less secured than what you plan to get from a rental property; banks won’t let unsecured future income be part of the mortgage application.
Be Prepared to Provide Property Reports
Buy-to-let property owners are required to provide a number of property reports. This includes lead levels, particularly in older properties, as well as energy performance. If you opt to improve the property, like by updating the water system, upgrading electrical components or enhancing the insulation, these updates may be tax deductible against your rental income. At Home Hunts, we have a variety of luxury properties for sale that have been updated and renovated with the latest technology and modern materials.
HOMEHUNTS estate agents are able to select high-end, luxury property based on your search criteria. Use the search bar above to browse our selection of homes. You can also speak directly to one of our consultants by calling +33 (0)970 44 66 43.
