Buying property in Paris? What the...?

Hi there

I have been a member for a while, but rarely post since i dont feel that you guys can learn much from me! By way of background, i have PPOR and IP (both in Melb) and am sitting on around 60-65% LVR and looking to make another IP purchase before year's end (also looking to buy some bluechips when mkt gets some confidence back).

Anyway, the present issue: my wife and i have a medium term goal of buying a small apartment in Paris as part of our portfolio. The plan would be to rent it out (fully furnished) as short stay accommodation to travellers, with it being available every year or two for us to use.

I am about to embark on the research/planning etc, but thought that this forum might be a good place to start (and hopefully also provide the rest of you all with some stimulating ideas).

I'm not concerned (at this stage) about how to get tenants etc, nor about locations etc. I am currently interested in financials. What banks will loan for this? What conditions? How to account for FX? What happens as AUD moves up/down againd Euro? etc etc

Any thoughts would be appreciated.
thanks
s

 

shasta,

Have you ever been to Paris?.
Why would you like to invest in there?

 

I think the answer is to get some Frenchman to pay off an apartment for them. Not so much the financial return.

Which is fine, just have to work out if you're better of investing elsewhere, and using those procedures to buy a place out right (or use the recurring income to cover rental).

 

Do you read and speak French?
Do you have family living in France?
Do you know the French tax system?
Do you know the French tenancy regulations?
Do you realise AUD is falling vs EUR?
Do you realise Paris real estate has trippled in value in 10 years?
Do you realise Paris is a very long way from Melbourne?

________________________

I think you should do it. Buy with cash.

Then report back in a year or so with how things have progressed for you.

 

"I think the answer is to get some Frenchman to pay off an apartment for them. Not so much the financial return".


Well... that may be a good idea...but it’s not as easy as you think it is.


O2bsure,

- You don’t need to know French if you live in Paris – but knowing the language is a very big advantage.
- You don’t need to have a family in France. A few good looking girlfriends will do.
- Tax system and a tenancy regulation may not be a problem if you hire right people for a job.
- Yep...EUR/AUD is a very volatile pair.
- That is why investing in real estate in Paris is a good idea, if you can afford it (small apartment very close to Notre Dame costs approx. 1 mil Euro.).
- Approx. 18 000km from Melbourne.

“..... Buy with cash.”

Good advice.

 

Hi there

Thanks so far for your great feedback. It seems that i need to provide more info! The driver behind this idea is that my wife and I love France and would like to have the ability to visit as often as possible - buying there might assist with that goal as well as assisting with our long-term investing strategy (ie buy/hold quality property). The whole idea is to have access to very cheap accommodation on our travells, as well as hold an asset that appreciates and becomes at least cashflow neutral over time.

We've been to Paris 6 times between us, and my wife is fluent in French. Dont have family (but some French friends in Paris), dont know the tax system, dont know the tenancy regulations in detail, do know about AUD/EUR movements, do know that Paris property has has strong growth. Not a chance in hell of buying with cash!!

I'm keen to think more about AUD vs EUR, presumably the ideal scenario is to buy when AUD is strong and then hope that cross-rate depreciates while i earn the income stream that is converted back to AUD.

Do i get a loan in AUD and convert to EUR, or do i get a loan in EUR from a French bank? Does it matter either way?? Can i create an effective hedge to assist in the medium term when currency movement might hurt cashflows a lot??

s

 

Hi Sim

Wise words...i hadnt considered the impact of FX movements on the value of the property, only on the income stream. The impact on value is actually the bigger issue i suppose.

You've all given me some good food for thought. I'll contact my mortgage broker and see what he says.

I'll keep you all posted.

s

 

Leaseback in France

You may investigate a leaseback in France. The latest French government initiative.

• A net return will be typically of around 4,5% net of all costs. From this return you could deduct the interest and depreciate the building and furnitures in order to minimize the french taxes.
• Mortgage finance is available from major french banks, up to 80% of the purchase price of the property, at around 5,5 % for a fixed rate.
• You can use the property yourself for your holidays free of any charge. Additional time can often be rented back from the company.
• The French administration allows you to buy the property free of the 19,6 % VAT
• Leaseback programs are available in locations where the capital gain potential is excellent.
• Anyone can buy a leaseback property, there are no restrictions for non residents.

Check some sites as well:

french property investment property france, leaseback in france, buy to let paris : french investments

Barclays - How to buy a property in France

Paris Investment Properties

Overseas Financing: 1% - 3% Interest? | PropertyInvesting.com

A french real estate website for investment on the French Riviera

 

Hi Shasta,

From mid-July, the EUR/AUD has moved from about 1.62 to 1.71.
This means that you would have lost 5% in the last 6 weeks

Good luck!

Dan

 

"This means that you would have lost 5% in the last 6 weeks "

Shasta,

Yep.... Dan is correct.

Unfortunately if you are dealing with foreign currency, at one stage you’ll become a currency trader.
There is NO option left.
Relation between EUR and AUD is NOT enough.
You must be almost ‘fluent’ at least in major pairs and crosses....
Also any geo-political, economical etc...knowledge is essential if you are willing to stay in this business.
If you are not familiar with it I would suggest .... spend the next at least two years and educate yourself.
Without a basic knowledge on this subject you’ll not succeed.

 

Hi Shasta.

It appears that you basically want an IP in Paris that you can use every now and then.

Personally, I would say that it would be major hassle to go through with just to have that holiday place.

Realistically, how many times would you get to use it? Would it not be a better idea to get an IP somewhere where you know the economy etc (like Australia), and try to get that IP to (over time) provide the funds required to pay for occassional trips to Paris. That way you could stay at a number of different places (or the same place every time if you desire).

Maybe I'm just lazy, or try to keep things simplistic, but I think it would be a headache trying to do something like this.

Either way, if you go ahead, I wish you well. Just do a lot of research before proceeding.

 

Seems like alot of effort for 2-4 weeks a year

Are you really really really sure you don't just want to rent a hotel for this period each year?

 

Hi Shasta - have just googled the same query & have landed on your blog query. We are thinking of doing the same thing - buy Paris apartment & stay there a few months of the year! Are we MAD? It sounds very glam on paper - but was interesteing reading the sensible comments back from the invested site. We are not put off yet and would like to hear from you if you get any further success or tips! We are Interior Architects - so think we could have a lot of fun/trouble getting something to renovate!

 

Paris is the best place to invest in France as there will always be people wanting and needing to rent property. It is the world's 5th largest economy and has been one of the top host countries of foreign investment for many years. The house and property prices have seen dramatic declines lately in some countries, prices have been steady in France. Paris is still being referred to as one of the most secure property markets in the world, now would be an excellent time to see what types of property are available in the most visited capital of the world.



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