Buying to rent in France

Investing in rental accommodation in France seems the best of two worlds – owning property in the French countryside, or near the sea, which is steadily rising in value and also having a property you can rent out to a few of the seventy million visitors to France every year seems a simple way of making money and having a good quality of life.

Perhaps buying an established Bed and Breakfast business or starting one in a beautiful corner of France will combine a good living with an idyllic lifestyle

But – as I have said three times in recent blog posts – there ain’t no such thing as a free lunch.

I am often asked for this sort of investment property and it can be done very successfully, Carole and I brought up our three children in our own home in Nizas which was a medieval ruin we made into a home and apartments.

Here are a couple of emails I had today about this very important subject.

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>>>Hello Tony,

I hope that it is okay to write you.

I got your address from a friend of ours who owns a home in France. My husband and I are American. He is working in the U.K. now as the Managing Director of a company. Our oldest son lives in Paris. He finished University there and is now working for a large production company. He is married also.

All of this to say…we are seriously considering buying a home in France. I feel that we are preparing for the future as we will have extended family there someday. I have found a range of properties, and have found a few that I like very much. We would need to get a French Mortgage for either. I have checked into that and got a pre-approval.

So…I have a few questions and concerns about moving forward. One property is modestly priced and is being sold fully furnished. It is in the Auvergne Region on the Sioule River. On this property we would market it as a holiday home to let. It is very nice, needs no work, and has river views from all 4 bedrooms.

The dilemma is the other property. It is twice as expensive – in the Auvergne Region also, fantastic views – being run as a B&B – very successfully for the last 10 years. The price has dropped 200 000 euro already, and is being sold fully furnished – beautiful antiques – really amazing. So… we could really stretch our budget and do the larger home which we could see ourselves living in more permanently down the road. I would rather let it out as I saw another home in the area that is let out weekly for the next year. It was 1600pounds a week – high season. (sorry, I can’t find the pound or euro symbols!) The current owner, however can’t imagine why I would not want to continue the successful business she has built up over the years.

Any direction you could give me would be greatly appreciated!

Kind Regards,
Nadia<<<

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Hello Nadia,

Thank you for writing and I hope I can be of some use.

The Avergne is indeed a breathtakingly beautiful area. It is a popular tourist area, but, compared to Paris or the South of France the season is very short and to make a living from tourism is getting harder, prices for rentals and accommodation have risen much more slowly than property prices or other investment, plus costs have increased. Good accommodation is still only from 40 to 75 euro a night in that region. It is becoming a very hard way to make a living and is a “lifestyle” commitment.

Rental properties even in the South of France have found that their weekly rates have dropped in real terms over the last five years, the levels of occupancy are falling and the return on investment is now very low. When we started rentals in 1996 we were getting a 16% return on investment after taking out costs – you would be very lucky now to get over 2%.

What you may be seeing is people trying to get out of their business while property prices in general are high and still in most places rising steadily due to demand.

As a place to live I am sure the region offers many special attributes which you find attractive and this cannot be given a price. But I advise strict commercial intelligence for anything which is offered as an “investment” and you must not only do due diligence on the accounts and business records (do not believe a word about anything to do with cash under the table), but you must also do some serious objective market research as the numbers of tourists, past present and projected (though take projected with a pinch of salt if the figures show significant increases) and you must do some good marketing studies as to the needs and wishes of vacationers and travelers – habits, ages and demographic profiles are shifting fast now and what was a sure-fire business may be history soon.

Have you ever run a hotel or bed and breakfast business?

Tell me some more details and I will try to help further

best wishes

Tony

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Dear Tony,

In 2005 I purchased a small studio (15 meters) in Saint Claude, Jura. It is quite clean and in a good location. Since I consider this an investment, not a place of residence, it would be good to rent it out, even for the smallest amount of money. I explained my position to the real estate agent who sold me aforementioned property. She agreed to help me.

A year and a half later my apartment is still unoccupied. I understand that in some areas it could be more difficult, but taking in consideration that I am willing to rent it for any price, a year and a half of time seems to be enough. My agent is not as enthusiastic as before. Now she says that there is no interest in such small apartments.

Last September I visited Saint Claude again. All three real estate agencies in town had many ads offering similar size rentals for the double money of what I wanted. I couldn’t find any advertisements regarding my studio. There was no room in the window, my agent said. I visited the two other agencies and they were initially pretty confident that renting out my place would be no problem. With time they lost all interest.

It seems like a “small town networking” between agencies took place. Is there something I should know? What is your opinion? Do you have any suggestions regarding other avenues I could pursue?

Your honest advice will be sincerely appreciated.
Andrew<<<

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Hello Andrew,

Many agents will “exaggerate”, or are “economical” with the truth to get a sale. Promises to let a property or the rises in price or resale values are often optimistic.

However, it is a fact that 2004 and 2005 were poor years for vacation rentals in France, slightly fewer visitors plus a very large increase in the numbers of available properties has meant that it was a “renters market” . Agencies have tended to look after their established clients and only let the easy properties. This may be the case in your situation. I do not know Saint Claude personally so cannot give a specific comment.

I assume it is only short-term rentals you are asking for as the studio is really too small to attract a long-term tenant and the area is only popular seasonally.

It is annoying that other agencies are offering similar properties for a larger amount, this does not mean they are getting rentals, but clearly they are giving preference to other owners and are not considering your property as a viable unit for them.

The excuses given by your agent are very “weak”, to the point of being ridiculous.

My only suggestion is to advertise and rent the studio privately through Internet sites. I used to own the best one for France, but the rogues and fools who took it over have turned it into a flat and boring site so I cannot recommend it. Other like http://www.vrbo.com/ are very good and you will find many others if you search “apartment rentals in France” or similar search terms.

You will need a local person to have the keys, clean and and to change the sheets towels etc every time you rent, I am sure other owners in Saint Claude can recommend a local company or person.

Generally, in my experience, local estate -agents are not skilled in renting vacation accommodation now. This has become a big specialised Internet industry and one I plan to go back into, when I can, and to show people how it should be done.

I hope this helps, do let me know how you get on

Best wishes

Tony<<<