French Mortgages for Buy to Let Investment

Buy to let French Property Investment mortgages are available to fund the purchase of a buy and let property to be let on a French rental contract.

A French buy to let property investment is the purchase of a French property (usually an urban apartment) with the intention of renting all year. Buy to let leases run for a minimum of 3 years; 9 years (with triennial revisions) is common.

Buy to let is used by the French as part of their pension planning and the French government has introduced various “defiscalisation” measures to encourage this type of investment, such as the Dispositif Borloo Populaire and Dispositif De Robien. Typical rental returns are between 3 to 5% per year and rental income is paid by the letting agency quarterly in arrears.

French buy to let investments should not be confused with French leaseback nor with short-term lets, such as holiday home rental and buy to let should be considered as buy to let is a long term investment.

Advantages of French Buy to Let.

Buy to let schemes exist in sought-after areas of France, such as Paris and the Cote D’Azur so capital appreciation is likely.

It is possible to deduct mortgage interest payments from any income tax due.

Rental income is reviewed annually based on the INSEE Cost of Construction Index.

The management company will make good any damage caused by the tenant and be responsible for repairs to plumbing, electricity etc.
Apartments are let unfurnished so there is no furniture to buy.

In France an agent or intermediary who rents out property for a living has to be licensed.

French law protects landlords by defining criteria for acceptable tenants.

In France, insurance policies generally include cover for unpaid rent, legal assistance to pursue arrears, wear and tear, and compensation for voids.

Exit points come up every 3 years when the lease is renewed.

Disadvantages of French Buy to Let.

Owners have no occupation rights during the rental lease period(s).

No VAT reimbursement.

Letting agency fees and insurances account for between 11 and 12% of the rental income earned.

The owner is responsible for paying taxe foncière and copropriete (co-ownership) charges on the building, such as management administration expenses, building insurance, external decoration and upkeep of the common parts.

Rental levels which qualify for tax incentive schemes are restricted below open market rates.

Glossary of Buy to Let terms

Bail - (Rental) contract

Dépôt de garantie (DDG) - Damages deposit, also called “caution”, maximum 2 months rental

De Robien "recentrée" - Tax incentive scheme introduced in September 2006 applied to new buy to let properties made available for unfurnished rental for 9 years. Taxable revenue is reduced by 6% of the investment per year for the first 7 years, then 4% for the next 2 years. Other expenses (mortgage interest, management fees) may also be deducted from taxable income from rental.

Dispositif Borloo Populaire - Tax incentive scheme applied to buy to let properties (new or old) made available to people on restricted income for 9 years unfurnished rental. Taxable revenue is reduced by 6% of the investment per year for the first 7 years, 4% for the next 2 years and 2.5% for the next 6 years. Other expenses (mortgage interest, management fees) may also be deducted from taxable income from rental.

Location - Rental. The physical location of a property may be described by “située“ , “dans”,  “en”, “proche”.

Loyer - Rent, generally expressed Euros per month, net of charges such as communal lighting and security.