House Hunter: 'Is leaseback abroad a money maker?'

THE PROBLEM

THE PROBLEM

Peter Silver writes: "Having spent many years as 'the golden boy of clubs', I've had a long and hard life, working all the hours God gave, running a private members' club. I'm now finally selling my interest in it and will be in the fortunate position of having more time and a sum of money to invest.

"I already own several properties in the UK where I do a bit of buy-to-let. I've got my own little hideaway which I don't let out, and have dabbled a bit in stocks and shares, but so far I have seen little return on any of my investments.

"This has led me to think that perhaps investing abroad is a better idea. Some time ago I visited an overseas property show where I heard about leaseback schemes, which sounded very interesting. I'm at the very beginning of thinking about all of this, but I would definitely like to know more. From what I recall, you buy somewhere but simply hand over the running of it to someone else and this takes away all the worry about owning a property overseas. After all, it's easy in the UK if something goes wrong; you can sort it out. But abroad it's more of a hassle.

"From my understanding, these schemes are only available in France and I don't think that you can use them yourself; they are merely for investment. This doesn't worry me, as I don't want anywhere to use for my own holidays. France definitely appeals. If they exist elsewhere, then I might be interested. But I prefer to invest in the EU as I think this is safer. I've got a budget of £200,000; but if I can get three for £50,000 each and spend the rest, this would suit me."

THE ADVICE

Lynne Williams replies: "The concept of leaseback came about in 1979 in France to provide enough tourist accommodation, but it's now been rolled out everywhere. We sell in France, which is the world's most visited country, Spain and Italy.

"The concept is simple. A buyer purchases a freehold property and they have the title deeds, then Pierre & Vacances enters into a contract whereby we leaseback the property, initially for nine years with an automatic renewal for a further nine years. We guarantee the owner a rental income, which is index linked and up to 4.5 per cent. We cover all costs, such as maintenance and utilities, and the only extra charges the buyer pays are the rates, which they have to do by law.

"There are many advantages for buyers. They get a secure long-term income and there are options to use the property themselves if they wish or they can exchange their time and stay in other developments, which are also in the scheme. However I must stress that this is nothing like timeshare as a buyer retains the title and freehold.

"But the major incentive is that the management company handles everything. I've known of owners who've had years of fun and games handling the rentals themselves but it's hard popping back and forth when you're in a different country.

"There are also major tax incentives. Under this scheme buyers are entitled to reclaim VAT, now at 19.6% in France. If they sell before the term ends they don't get this benefit. All properties are sold furnished, are in a refurbishment programme, and all properties must be of a certain standard.

"Anyone who is considering leaseback should use a reputable company who have been operating for a long time. In France we've had cases of companies who've offered higher returns but who have only been able to sustain them for a few years and then have gone bust, leaving the buyers without any guaranteed rental income.

"My advice to Peter would be to get a fixed-rate mortgage - cheap in the Euro zone. If he's guaranteed an income of 4.5 per cent and his mortgage is 4.25 per cent fixed for the whole term, where's the risk in that? The cherry on the cake is that he can expect excellent capital appreciation at the end of the term. The only thing to bear in mind is that to get the maximum advantage this is a long-term investment."

Lynne Williams is the international sales director of Pierre & Vacances (020-7368 1633, www.pierre-vacances.fr/immo)

THE SOLUTION

Property one: Bonavista, Bonmont, near Barcelona.

Price: One- and two-bed apartments from €135,000 (£92,000).

Agent's details: Situated on an 18-hole, par 72 championship golf course, the development consists of 216 fully furnished apartments split among seven two-storey buildings. Each has sea or golf course views. The clubhouse includes; restaurant, bar, conference and meeting rooms, terrace, pro shop and buggy hire. Facilities include four tennis courts, a semi-Olympic swimming pool, small children's pool, jogging trails, exclusive access to the beach and a fitness centre.

Property two: Calarossa, Sardinia.

Price: Studios from €105,000 (£71,000), one-bed apartments from €130,000 and a two-bed starting at €170,000.

Agent's details: Calarossa is situated in the north-west of Sardinia, on the Paradise Coast. Designed in the style of a fishing village, the resort is made up of 328 properties and includes a mini-market, restaurants, three swimming pools, tennis courts, amphitheatre and private beach.

Property three: Paris Côte Seine.

Price: Studios start at €210,000 (£143,000); one-bed apartments start at €365,000 (£248,000).

Agent's details: Paris Côte Seine is located in the vibrant 15th arrondissement on the Left Bank of the River Seine. The residence stands 32 storeys high, offering superb views of the Eiffel Tower, the Sacré Cœur, Les Invalides and the Panthéon. Each one of the 375 fully-equipped studios and one-bedroom apartments is air conditioned and elegantly furnished. Facilities include a business centre, fitness centre and indoor heated swimming pool.

THE VERDICT

"This all sounds extremely interesting and I'm reassured to hear that this is a government-backed scheme. Originally I had thought of investing for no longer than 10 years - I'm knocking on a bit - but I like the idea that you can get out at any time, although you lose out financially.

"I really don't want the hassle of managing anywhere myself. I'd hate to find that the telly had gone missing or turn up and find that the whole place needs redecorating, in which case you'd need to take it out of the rental pool anyway, so this sounds ideal. I'm amazed by the prices, they sound almost too good to be true, particularly in Sardinia. I'm tempted to buy one and live there, and let the other out. This has really got me thinking, especially about taking out a mortgage, because I've got a lot of deposits in my budget. I could take out loads of mortgages; they'd all be earning minuscule amounts but added together it wouldn't be bad and at the end of the term they would all have appreciated substantially in value."

If you would like House Hunter's help, write to House Hunter, The Independent, 191 Marsh Wall, London E14 9RS, or e-mail with full details: househunter@independent.co.uk