French Buy to Let Mortgages apply to French property let under the provisions of a standard French tenancy agreement.
French law protects tenants and tenancy agreements normally run for a minimum of 1 year. Most tenants will renew their tenancy for a further period: this is at the tenant’s discretion.
The French normally use buy to let property as part of their pension planning.
You should consider a buy to let mortgage as a long-term investment.
Typical rental returns are between 3 to 5% per year.
To purchase a French leaseback property, you should go to our page on French Leaseback Mortgages.
You can choose any of the standard French Mortgage Products for short-term letting, such as holiday rentals.
The Advantages of French Buy to Let Mortgages
- French buy to let mortgages facilitate property purchase the in sought-after areas of France, such as Paris and the Cote D’Azur, so capital appreciation is likely.
- French law protects landlords by defining criteria for acceptable tenants.
- You can increase the rent annually based on the INSEE Cost of Construction Index.
- You will normally let unfurnished so you do not need to provide furniture.
- It is possible to offset the interest payments on French buy to let mortgages against tax.
- You will have stability because the tenancy agreement can run for 3 years.
- You can arrange insurance cover for unpaid rent, legal assistance to pursue arrears, wear and tear, and compensation for voids.
- The management company will make good any damage caused by the tenant and be responsible for repairs to plumbing, electricity etc.
- You will use a French agent or intermediary, so your rental income will be secure because a French agent must be licensed.
The Disadvantages of French Buy To Let Mortgages
- Owners have no occupation rights during the rental lease period(s).
- Rental levels which qualify for tax incentive schemes are restricted to below open market rates.
- Letting agency fees and insurances account for between 11% and 12% of the rental income earned.
- No VAT reimbursement.
- 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.
Glossary of Relevant Terms
- Bail – (Rental) contract
- Dépôt de garantie (DDG) – Damages deposit, also called “caution”, maximum 2 months rental
- De Robien “recentrée” – This is a tax incentive scheme introduced in September 2006. It applies to new buy to let properties made available for unfurnished rental for 9 years. It reduces taxable revenue by 6% of the investment per year for the first 7 years, then 4% for the next 2 years. You can deduct other expenses such as mortgage interest and management fees from your rental income.
- Dispositif Borloo Populaire – This is a tax incentive scheme applied to buy to let properties (new or old) rented unfurnished to people on restricted income for 9 years. It reduces taxable revenue will be 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. You will also deduct other expenses (mortgage interest, management fees) from taxable income.
- 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.