Many of our compatriots can open a window to Paris today
Thirty-three pleasures plus income
Let us note right away that not all buyers of foreign housing seek to earn from it. As Elena Yurgeneva, head of the foreign real estate department at Knight Frank, attests, clients of agencies specializing in luxury housing are not interested in this issue. The restrictions that the leaseback scheme imposes on the homeowner do not suit wealthy buyers. They prefer to manage their property and depend on no one. Therefore, leaseback is the lot of more modest consumers, those who think primarily about earnings and secondarily about their own comfortable vacation.
The leaseback scheme is currently the most sophisticated of all similar existing schemes. It appeared in 1976 in France – at a time when the French tourism industry was in dire need of money, and the state decided to encourage investors with this unconventional method.
The main "highlight" of the French leaseback is state support and state guarantees. "Construction (and under this program only new properties are purchased, and at the construction stage) is insured, and there is simply no risk that the building being erected will not be completed," says Igor Indriksons, director of the foreign investment department at IntermarkSavills. "Second point: significant tax benefits. Generally, VAT on the purchase of a new building in France is one of the highest in Europe: 19.6%. But when purchasing under the leaseback program, it is fully refunded to you. More precisely, the scheme is trickier: each year 1% of VAT is written off, and in the end it is fully refunded over about 20 years. But if the owner wants to exit the program before that – no problem. You just have to pay the remaining part of the tax."
Another pleasant feature is that all figures are known in advance. "The contract under which the buyer leases the property to a management company is usually concluded for a period of 5 to 11 years," notes Stanislav Zingel, president of the international real estate agency Gordon Rock. "The yield under the contract is guaranteed," clarifies Denis Evseev, managing partner of Kingsland. "It does not depend on how long the property was rented out. In addition, the management company assumes all expenses and bears all risks associated with the rental: if the property is damaged, the manager will compensate."
Also a highly favorable circumstance for the buyer is that he can use the property himself. A standard leaseback contract allocates four weeks per year for this – typically one week in "high season" and three in others. If desired (if there is no need for money, but on the contrary, you want to live longer in your French apartment), you can draw up a so-called "special contract" (mandat de gestion), under which the property is leased to the management company for only six months and one day annually. "But this option is not applicable in all cases," warns Denis Evseev. "The management company's lawyer will have to prove to the tax authorities that the leaseback is applied legally and not solely for tax avoidance."
And about the main thing – money. Worldwide, real estate is usually purchased with a mortgage – and leaseback is no exception. Under standard conditions (a loan for 20 years, for 60-70% of the property value), it turns out that rental income covers all loan payments. The buyer even comes out ahead: on the invested own funds, he receives a return – usually 3-6% per annum.
Charity? No, calculation
One might assume that the "portrait of a lady in pink" painted in the previous chapter arouses suspicion in readers. Everything is too good: state protection, guaranteed yield, the possibility of independent living... Our compatriots, who over the past two decades have received many "inoculations against illusions," cannot help but find this strange. Therefore, we will explain what benefits the other participants have here.
The state. As mentioned above, it is interested in the development of the tourism industry. "Under the leaseback scheme, an investor can only buy a new apartment or house, and only of a high level (residence high-end tourism or business)," reminds Andrey Kuchin, general director of Prime Time Realty. Every traveler visiting the country and capable of renting such apartments is truly a "goose that lays golden eggs": he will buy souvenirs, dine in expensive restaurants, and use various services. "Actually, for the sake of tourism development, the state made such 'tax sacrifices' in favor of investors," says Irina Dupor, co-founder of IMMOCONCEPT (France). "And this policy has justified the state's hopes."
Management companies. Charity is also not involved here. First, firms working with leaseback themselves receive tax benefits. Second, they get first-class properties under management for many years to come. When calculating profitability, managers naturally count both their own expenses and future income. So there is no need to worry that these companies will operate at a loss.
However, a potential buyer should be careful and not be tempted by overly attractive offers. "Ten years ago, one could get 7% per annum, now an honest program is 4.5-5.5%," notes Irina Dupor. "If more than 6% is offered, one should be very wary of the viability of the project. There are offers at 3%, but this only makes sense with four weeks of personal use."
Substitutes – quality and not so much
Here we speak only about France. And not without reason: only there is leaseback a state program. "Attempts to implement something similar are being made in a number of other countries – Switzerland, Germany, Great Britain," says Elena Nekrytova, head of the resort real estate department of the company "Novoye Kachestvo". "But only in France is the process controlled by the state. Each approved property is insured, and in case of developer bankruptcy, the state takes on the obligation to find a new one. And only in France do leaseback clients receive tax benefits and deductions."
Everything that exists in other countries is essentially just an agreement between the property buyer and the management company. "There is no legislative framework, so only trust management can be obtained there," says Denis Evseev (Kingsland). "Management companies can be found everywhere, but there will be no legislative guarantees."
The question, accordingly, moves to the plane of the market's civility in a given country, the presence of proven managers who value their reputation. In Western Europe, all this exists. In Eastern Europe, to a much lesser extent. Therefore, buying an apartment, for example, in Bulgaria with the hope of a stable rental income is at least naive. It should be clearly understood that ultimately the tenants will have to pay. And if there are none (meaning, the market is oversupplied both for purchase and rental), then there is no source for rental income. No matter what the sweet-tongued sales agents tell you...
In Israel, says Mikhail Aronov, a real estate agent at Re/Max Blue-White (Israel), the income from apartment rentals is 4-8% per annum, and from office buildings and other large properties – an average of 8% per annum. Often, properties are sold with existing long-term rental agreements. But this "celebration of life" is explained solely by the fact that the Israeli market continues to grow – even in these times when the rest of the world is in crisis. Accordingly, there is a shortage of rental spaces, and tenants are happy to "hold on" to them for years to come. But should the situation change, not a trace will remain of all the "guarantees."
About prospects
For the classic (i.e., French) leaseback, they are the brightest: new properties are being built, tourist flows are growing, etc. As for other countries, the situation is less clear. Since leaseback, we recall, is based primarily on state guarantees, its emergence requires the desire of that very state. For the government, realizing the need, to find the strength to curb itself – to reduce taxes. History shows that those in power are always very reluctant to reduce their own appetites. For them to decide on such a step, something extraordinary must happen.
Vladimir ABGAFOROV.
Metrinfo.Ru