News: Brits in flight of fancy warning

Mon, 17 Sep 07

One of the great things about going away on holiday is the chance to leave all your cares and troubles behind, firmly attached to the ground as you rise up and away into the wild blue yonder...

There are probably few people who have not had a foreign holiday they have really enjoyed, and at least entertained the passing thought of acquiring a property there or even relocating altogether.

Of course for most, this is just a flight of fancy and once back in the UK such pipe dreams are quickly extinguished by the drizzle. Some people will not let go of their dream, however, and they will begin looking at taking their first steps in the foreign property market.

At this point, it is important to realise that the holiday is over. When buying a property abroad, the fine beaches, superb nightlife and fantastic weather cannot be allowed to disabuse the investor of the notion that the trip and transaction are strictly business.

Understanding income potential

So says Bill Jackson, of property brokers Jackson International. Most people going abroad are affected by "the sunshine and the wine and whatever, and their heart goes to their brain and they go ahead because it is such a lovely area," ", he says.

"Providing you can service the mortgage, there is no difficulty," he explains, cautioning investors to have a full understanding of the kind of income they can expect to make from their overseas buy-to-let investment.

In particular, he warns prospective investors against "the belief that they can rent for holiday rents for 30 weeks in the year; that will not happen - the average is ten to 15". However, if the investor takes advantage of any local leaseback scheme - such as the one that operates in France - they will have added security.

Leaseback schemes

Under the leaseback scheme, the buyer pays for the property then immediately lets it out to a property management firm. They guarantee a steady year-round income which, although below full market value at peak times, offsets the potential downturns of the off-season by guaranteeing a fixed rental income.

In addition, the investor can take advantage of a tax break offered by the French government. By holding on to the property for 11 years, the owner can avoid paying any VAT on resale.

If the investor should sell within that period, the amount of VAT written off will be proportionate to the length of time that the owner has held the property.

Source: http://www.assetz.co.uk (Press release)


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