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From London to Paris: What to consider before investing in a buy-to-let apartment in France
Ever since Peter Mayle’s book ‘A Year in Provence’ hit the best-seller lists, a home in France has proved a big attraction for people from all over the world. Many followed Mayle to live the expat life in France, but, if that’s not for you, how about investing in a buy-to-let in the country?
You may not have to deal with the eccentricities of Mayle’s clarinet-playing plumber or absent builders if you buy a property to renovate, but there are many other factors to consider before taking the plunge.
First, some important post-Brexit news. You can continue to buy and own property in France after Brexit. Property ownership comes under French, not EU control and you will also be able to rent it out in the same way as before. In Paris, or other cities with a population over 200,000, that means you can rent it out for as little as a month at a time via a mobilité lease, or for longer periods of 9 months or a year at a time. In less populated areas you can rent it for as short a period as you would like.
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The French property market
It’s important to look at the value of property before considering an investment. France has seen consistent growth in property prices from 2015 – 2020, with an average rise over the period of 5.8 percent.
Although the pandemic disrupted the market, sales and prices are expected to rebound in 2021, with forecast price increases of around 3.5 percent in some parts of the country, and even more in others. Property sales reached the million mark, year over year, in April 2020 and are forecast to reach around 950,000 in 2021.
That doesn’t mean there are bargains waiting, but you can be reasonably confident that your buy-to-let property will hold its value in the longer term. And, with an expected upturn in the French economy following the pandemic, you may be able to benefit from increasing capital values if you invest now.
Seasonal rental patterns
France has two main ‘rental seasons’ – June to September for short-term lets in popular holiday destinations and October to May for longer-term lets. Corporate rentals, or those for a semester abroad or sabbaticals, occur year-round.
Commentators also point to the increasing popularity of France as a permanent or temporary retirement destination for Europe’s aging population (and beyond), due to the temperate weather all year long.
Short or long-term lets?
This seasonal variation can be important if you are trying to work out whether to focus on short or long-term lets.
A long-term let will provide a degree of income stability although average rental prices may be lower. It can also reduce your expenditure as you won’t have to cover the costs of frequent cleaning and other changes when new guests or tenants arrive to check in. If you use a property management company, their charges should reflect the lower level of work.
With a shorter-term let, you will be able to charge higher rents – as much as 30 percent above the long-let rate in popular areas. However, you will incur higher management charges or costs because of the frequent handovers and there may be greater wear and tear on the property, which could increase your maintenance, repair and replacement costs.
Short-term lets may not provide the same stability, particularly if your property is in a popular area with many competing holiday lets. So you need to allow for income gaps in your investment plans.
Additionally, short-term rentals may not be allowed in your preferred location.
Preparing and maintaining the property
Depending on the type of property and its condition, you will incur costs in getting it ready for rental. These should be factored into your investment plans.
If you buy an older property for renovation, building and decorating costs. Even if you receive an initial estimate, there may be additional costs that could appear as work progresses and problems emerge.
You may also have to furnish the property or replace existing furnishing and fittings if you want to upgrade the property to obtain a higher rent. If your property is let on a short-term basis, wear and tear may add to your furnishing and fitting costs.
Unless you plan to live in France, you will need to hire a property management company to take care of the regular maintenance and administration of your rental property. That could cost between 20 and 50 percent of your rental income, which has a significant impact on rental yields.
Photo by Anthony DELANOIX on Unsplash
Insurance and taxation
You need to take out building and contents insurance on the property in the normal way, but you must inform your insurer that the property will be rented out. This will increase the premium, but if you don’t declare it as a rental property your coverage may not be valid.
You should also take out liability insurance to protect yourself against potential claims from a tenant who had an accident. If you are planning to offer short-term lets, you should consider landlords’ insurance to cover loss of income during vacant periods.
London accountant Chris Barnard explains that as a landlord, you will be liable to pay income tax on the profit you make from rental. However, you can offset costs against profit, such as maintenance, property management fees, and utility bills, replacement of wear and tear items and mortgage interest, as well as essential travel to inspect or maintain the property.
You may also have to pay local property taxes, depending on your location. If you later sell the property, you will have to pay capital gains tax on any profit from the sale.
The next stage
If you are looking for an investment property to call your own in Paris, Paris Property Group can help. While other real estate agencies here can only show you their own listings, as a buyer’s agency, we can show you everything.
If you’re coming from London, you’ll be likely to experience significant language, cultural, legal and market structure challenges in the Paris real estate market. This makes it even more important to have a trusted advisor representing your interests and connecting you with the right resources.
Our full-time real estate agents and our expert knowledge of the Paris property market allows us to provide an unparalleled, end to end service. To find out more, get in contact with us today!