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Buying property in Paris? What the...?

Discussion in 'Real Estate' started by shasta, 28th Aug, 2008.

  1. shasta

    shasta Member

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    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
     
  2. Tropo

    Tropo Well-Known Member

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    shasta,

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

    samaka Well-Known Member

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    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).
     
  4. 02bsure

    02bsure Well-Known Member

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    Location:
    cologne
    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.
     
  5. Tropo

    Tropo Well-Known Member

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    "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. :p
    - 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. :D
    - 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. ;)
     
    Last edited by a moderator: 28th Aug, 2008
  6. shasta

    shasta Member

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    Location:
    Melbourne, Vic
    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
     
  7. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Unless you have a lot of equity available in your existing portfolio such that you can just draw it out and effectively pay cash for the property in France, you'll possibly have difficulty getting an Australian bank to lend against a foreign property.

    There are two main issues:

    1. if your default on the loan, it may be difficult for them to recover their losses from a foreign property

    2. due to currency fluctuations, they are potentially more exposed than to an Australian property - the effective value of the property (in AUD) may well drop significantly due to currency movements, even if the value of the property goes up in EUR terms.

    I'm not saying it can't be done - I have no experience with buying OS - but you certainly won't be looking at a "normal" loan.

    The problem you may find in getting a loan from a foreign bank is similar - if you are not a resident or a tax payer in that country, they may not like to lend to you. It can be done - I know plenty of people who have bought OS (mostly in the US) - but lending policies would typically vary from country to country.

    Good luck - and please keep us informed ... it would be very interesting to hear how you end up going about it.
     
  8. shasta

    shasta Member

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    Melbourne, Vic
    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
     
  9. Tropo

    Tropo Well-Known Member

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    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
     
  10. AsxBroker

    AsxBroker Well-Known Member

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    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
     
  11. Tropo

    Tropo Well-Known Member

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    "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. :cool:
     
  12. Smartypants

    Smartypants Well-Known Member

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    Location:
    NSW
    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.
     
  13. Glebe

    Glebe Well-Known Member

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

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

    Cass New Member

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    18th Oct, 2010
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    Location:
    Melbourne
    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!
     
  15. florencia2010

    florencia2010 New Member

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    22nd Oct, 2010
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    Location:
    madurai
    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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