Investing in property in Languedoc, France

I hope this part of an email exchange today helps some people who are looking at adverts or going to exhibitions about buying French property.

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Hi Tony,
I am becoming more and more confused! I originally approached the “wonderful” people at MRI and we booked the trip with Ryanair to Carcassonne airport with them.

Now I’m just not happy with them at all, and the one certainty is that we don’t want to have our “hand held” by these people. I’m just about to cancel our arrangements with them, but I felt I needed something in place as we still had flights booked.

I came across a number of agents and decided to plump with Latitudes because my contact there seems very nice and sensible and everything she has told me seems to be truthful (unlike MRI who are desperate to sell me a leaseback with a waste recycling plant less than a mile up the road).

The only thing that has me worried was that when I asked her how much equity I would have to free up in our UK home to secure a 150,000 euro property (the limit of our budget) she told me about £18,000 - this figure is based on a resale property with all notaire and other legal fees as well as a deposit.

The only thing is that this is based on a 95% French mortgage, and I’ve got a nasty feeling that that is not something we will be eligible for (isn’t it 70-85% for non French nationals?).

Anyway, as it stands my wife and I will have £20,000 to invest in a property in France come June 1st, when our when the re-mortgage is processed on our UK property.

We want to find a guaranteed rental property to get our foot on the ladder, with a view to selling it and any other property we might accrue in the coming years to fund our retirement in France.

The time frame we have in place is 15 years maximum, and although our dream would be to live in the Languedoc, we are prepared to move further inland to find a suitable property for ourselves when the time comes.

Our financial adviser here has advised us to take out an interest only mortgage in France, with the rental income paying the interest and with the capital element to be disregarded as we will sell the property, hopefully at a profit before the term of the mortgage is up.

Please let me know how you might be able to help given the information above. We are not time-wasters, and we have a certain amount of capital and a definite will to buy in the Languedoc within the next six months at the very latest.

I look forward to hearing from you again.

Kind regards,

Sam

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Hi Sam,

Many thanks for the detailed information - what more can I say about MRI that has not been said by just about every journalist - unfortunately being small I am very vulnerable to threats from some companies when I expose their dishonesty and tricks - they know full well I cannot risk my home in a legal action, even if I am true and in the right.

Latitudes I do respect - they are exactly what they claim to be and work hard to reveal properties in France that many people may not have found in other ways. With the Internet becoming more open and manageable and with the new wave of “social networking”, perhaps they are soon becoming totally redundant, but they have to sell and it will depend on the “luck of the draw” if you get a good rep. Do bear in mind their reps are only working with agents in France who already have their own (usually awful) websites and that all commission is shared and therefore negotiations are “diluted” - however you will be “guided” by what properties they have in their thrall and will be steered away from other sources.

It is a simple fact that the good agents with the best properties will not deal with third-party consolidators. If you get in the grips of these “commission agents” then you may never see the best properties.

Yes, you are correct, for a non-resident the maximum mortgage a French bank will normally offer is 70 percent - this can be more (but will cost more) - interest only mortgages are not common and many banks will not know anything about them, but it is possible (again at a price) to find these through a (commission again ) broker. Loans are given based on income, not on an asset.

Income from rentals can be taken into account for a loan, but seasonal rentals are very irregular and banks are not interested in projections, only guarantees - basically any loan is calculated on three times your uncommitted salary (your proven income minus all payments).

With £20,000 sterling as investment capital, in my opinion, your maximum investment potential in France is about 142,000 euro, including the legal and purchasing costs - this assumes a property with agents commission at about 130,000 euro and a loan based on uncommitted (excluding other loans, mortgages etc) income of 30,000 net a year this also assumes the legal costs can be included in the loan.

Income from a modest property of this value is far from certain or easy. My advice is to totally ignore all past references to village houses or studio apartments. The market is currently flooded for the vacation market.

With care a good investment a fair return can still be made, but over-supply and no real growth in visitors means that the return I have seen for some properties in one of the most popular tourist areas of France has dropped from 16 percent in 2000 to just over 2 percent last year.

Selling at a profit is difficult unless you keep a property for at least ten to twenty years, capital gains Tax and the fact you pay a 7 percent “purchase” tax discourages this type of speculation.

Please remember this is my opinion based on my experience and observations. I have been living here and in this business over the last 17 years. I do believe this is an excellent region to invest in and I have written about this in my blog and newsletter many times.

Building a good property portfolio in Languedoc is, I believe, a very sound investment, but it needs time and careful consideration, if you rely on others to do this for you they will, naturally, look after their own commissions first and your interests second (unless you are talking many millions of euro).

How well do you know the Languedoc? You obviously have a good feeling for what I believe is one of the best places on this planet to live. If you have the time and have booked your flight, then come anyway, but do not put yourself in the hands of a “commission agent”- explore a bit more, meet me and some of my friends over a glass of red wine in a cafe and you will find out more about the “real” Languedoc.

But if you have any doubts at all - cancel your trip.

The glass of wine here is always on offer

hope this helps

Tony