French Property Investment Buying Guide & Timeline

Requirements to buy all new build (“off-plan”) under French Property Acquisition Law :

• For residential, vacation, retirement : You must visit the property – development site first with a French licensed real estate professional expert.
• For Investment (income producing buy-to-let property) : Either above, or attend a meeting or seminar with a French licensed real estate expert. However, you do not have to visit the property(s) if ONLY for investment purposes.

Following is a helpful guide to give you a general idea of the timeframe for the process of buying investment property in France :

• Reservation documents will be emailed to you 3 days after choosing property(s).
• After receipt and 3 days to read; you then have 7 days to sign and *return documents to head office and transfer the 5% reservation deposit to notaire. Either fax or scan tracking & bank receipt to this office. If the tracking and bank receipt is not received on time – reservation is automatically cancelled.
• Approx. 3 weeks after receipt, the head office/notaire signs contract and returns to you by registered mail and gives you another 7 days to cancel. If you cancel the deposit is immediately refunded by notaire to your account.
• You have 15 days to apply for mortgage from day you send deposit. You must complete loan within 90 days.
• If you are refused French finance, (within the 90 days), your deposit is refunded.
• IMPORTANT! After 5 months, if "deeds" are not signed, the developer has the right to increase the price of the property(s) to current market value, or to cancel the contract and retain the deposit!

* NOTE : Send all documents requested by courier, ie DHL, UPS, or FEDEX

RESERVATION (earnest money deposit) = 5%

CASH PURCHASE : After 3 months (or to where building completed – whichever is higher); another 25% plus "closing costs" for notaire/tax fixed on new build at 2.5%, (allow 10/15% plus agent's fees of 7% on old build). Then stage payments of approx. 10% to 15% every 2 to 3 months until completion.

FINANCED PURCHASE : 80% mortgages – totally "non recourse" – are available. If you take mortgage, you invest the reservation 5%; then the 15% plus "closing costs".

90% mortgages are also available, but at present only on full amortisization during construction, and the banks give you a choice that either you pay a small part of the interest they have paid out, (approx. 50 euros per month for each 100.000 euros borrowed) or pay nothing until completion. However, in this method, repayments will be slightly higher for "using" banks funds. (Mortgage insurance is compulsory if taking higher than 50% mortgage)

• IMPORTANT NOTE : ONLY place initial investment direct to a French state notaire, or direct into the State Treasury Bank controlled by a notaire – never to any individual, company or entity! (French licensed real estate experts only use this method)

ABOUT THE FRENCH MORTGAGE LOAN PROCESS

Required information about the property: (provided by developer)

• The bank will require a signed and completed copy of the preliminary contract (contract de reservation)
• And the Attestation de valeur locative permanente. This document simply states that the property will be let(rented) under the French Civil Code, and is provided by the developer & management company.

Required information that MUST BE PROVIDED BY YOU! (the loan applicant)

• A completed and signed loan application form.
• A photocopy of your passport (for each applicant) to confirm your personal information.
• Any Marriage/Divorce certificate if applicable.
• A copy of the RIB (Relevé d’Identité Bancaire) from your French bank account. (if you do not have one – this will be opened for you at later date so you can leave this blank for now).
• They will want to receive copies of your current agreements for bank loan(s), car loan(s), or other loan(s).
• Your latest annual mortgage statement.
• A copy of the rental contract (tenancy agreement) and proof of rental income (if property rental income is part of your total income).
• Your bank statement for the last 3 consecutive months (for each applicant if not a joint account).
• Evidence of where your personal contribution (downpayment) is coming from (eg. copy of your savings or other account statement).
• A completed bilingual insurance form.

If you are salaried employee they will require (for each applicant):

• A Confirmation of employment and salary signed by your employer (an existing one will suffice).
• The last 3 consecutive months’ salary slips
• Your last W2 tax return

If you are self-employed or a company owner (for each applicant):

• Your last 2 years’ tax returns.
• And last 2 years’ accounts.

ABOUT CLOSING COSTS :

• On new build and property up to 5 years old : 2.5% fixed.
• On property over 5 years old closing costs are between 10% & 15%.
• When selling, ALL costs are for the purchaser – none for the seller. The seller appoints realtor; notaire etc., but BUYER PAYS ALL CLOSING COSTS.

ABOUT TAXATION :

France has double-taxation treaties with every country – and therefore you will not pay tax twice!

Tax on rental income is very low – if not zero – in most cases. And capital gains tax in France is on a sliding scale that after approx. 11 years, (including deductions), there is zero taxation.

As far as we are aware, the following taxes benefit U.S citizens :

• You may deduct your mortgage interest even for French mortgage from your US tax.
• You may deduct 2.9% per annum depreciation for your French property.
• You cannot do a 1031 exchange.
• You can deduct 2 visits a year to France for the purpose of “checking on” your property(s).
• With respect to IRA's – please consult an expert.

We are more than willing to pass on our knowledge and experience; however we are neither tax advisers or accountants/cpa’s and strongly advise you to take personal advice from an international tax professional before investing. The notaire can also advise and it is part of his profession to do so.