Buying a property: cash vs. mortgage

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From a young age, many of us are taught that debt is something to be avoided.  However, is purchasing a property in cash always a better option than borrowing the money from a bank? We take a look at the pros and cons of each in our latest blog post.

Pros for buying in cash

One of the biggest advantages of buying a property in cash is that the transaction process is much faster as there is no need to apply for a loan or mortgage. In addition, the purchase costs will be lower as you will not need to pay arrangement fees or mortgage registration tax.

Buying in cash doesn’t affect your monthly affordability and there is no risk of your property being repossessed if you run into cash flow problems down the line.

Pros for paying with a mortgage:

The most obvious disadvantage of buying in cash is that it leaves you with a massive hole in your pocket. This can affect your liquidity as a sizeable chunk of your savings will be locked up in brick and mortar. While equity release is an option in other parts of the world if you need to improve your cash flow, it’s very difficult to release equity in France. Taking out a mortgage will allow you to keep some money aside for rainy days and emergencies.

Contrary to popular belief, taking out a mortgage can also help you save money. For example, if the property is rented out, it is possible to offset the interest paid against any rental income. In addition, with private banks offering mortgages of up to 100% LTV, you may also be able to completely avoid paying any property wealth tax if the amount of money you personally put forward is less than 1.3m.

While one of the biggest drawbacks of a mortgage is that you will have to pay additional costs on top of the value of the property (like interest and arrangement fees), low interest rates in France mean that these costs can often be cancelled out by investing money into a financial portfolio. Indeed, many ‘safe’ products have a return which can beat the cost of the mortgage. When investing, always seek advice from a Financial Adviser.

The monthly mortgage repayment will stay the same if you choose a fixed rate. However, inflation means the real value of the mortgage repayment in 10 years will be lower than was at the start. 

Finally, a mortgage allows you to put some money aside for rainy days! 


Everything you need to know about “notaires”

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Without a true UK equivalent, it can be difficult to understand the role of the notaire. In our latest blog post, we take a look at what they do and demystify the costs involved.

What is a notaire and do I really need one?

When selling or buying property in France there needs to be an intermediary present who authenticates the transfer of ownership and reports it to the state. This is where the notaire steps in.

The notaire is not only a key player in the transaction process, they are a legal requirement. As a representative of the state, they are non-bias and their duty is to the transaction. Think of them as the referee. They are simply there to make sure that the transaction complies with French property law and ensure that any taxes are collected.

Notaires aren’t strictly limited to French property law, they are also necessary for a number of other transactions in France such as donations and inheritance.

The role of the notaire

Signature of the “Compromis de Vente’’ (the sales contract)

In France, the sales contract is signed at the beginning of the process once an offer has been accepted by the seller. Technically, you do not need to have a notaire at this stage, but it is a good idea to have one as they can help with legal and financial matters such as mortgage clauses.

During the sales process

Before the signature of the deed happens, the notaire will have to collect the seller’s “Titre de propriété”, a legal document proving that he owns the property. Then, he will ask for 5% to 10% of the property price as a warranty (called “depot de garantie’’ in Moliere’s language).

Between signing the sales contract and final deed, the notaire will carry out a number of searches which can take up to three months. 

This includes, but is not limited to the following:

– Identifying the buyer and seller by checking birth and marriage certificates

– Checking that the mortgage is not higher than the value of the property

– Verifying that the property is usable

In order to complete these checks, the notaire may ask you for further documents.

Completion

If there is a mortgage, the notaire will ask the bank to release the money a few days before the deed is signed.

The money from the mortgage and any personal funds never enter the notaire’s hands, they are sent to an escrow account instead. So there is no need to worry about the notaire running off with the money! The money will be transferred to the seller after the deed (called an “acte de vente’’) is signed. Once this is completed, the notaire will give the buyer a certificate of ownership.

Cost

Notary fees do not depend on the notaire you choose, but rather on the value and the condition of the property (newbuild or existing). For a new-build property, the fees are around 2-3% of the property price whilst existing properties have a higher rate of a higher fee of 7-8%.

Though they are called “notary fees’’, 85% is paid to the state and the notaire receives the remaining 15% as payment.

Table (guideline):
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Sainte Maxime : financement d’une propriété d’une valeur de 1,25 million €

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Le profil

Lieu d’achat : Sainte Maxime

Prix de la propriété : 1 250 000 €

Montant du prêt : 700 000 €

Durée du prêt : 7 ans

Type de prêt : In Fine

Taux d’intérêt : 2,45% fixe pour la durée

Quotité de financement : 56%

 

Le contexte

Le client désirait acheter une fabuleuse propriété dans le sud de la France, à Sainte Maxime, à quelques kilomètres de Saint Tropez. Il avait quelques requêtes au sujet du financement de son bien et French Private Finance a pu l’assister dans chacunes d’entres elles.

  • Tout d’abord il cherchait à sécuriser un prêt In Fine, permettant à l’emprunteur de ne rembourser que les intérêts pendant toute la durée du prêt. Le capital est quant à lui remboursé d’un seul coup, à la dernière mensualité.
  • De plus, FPF lui a trouvé un taux d’intérêt fixe
  • Enfin, l’obligation de souscrire à une assurance décès a été levée alors qu’elle est normalement sollicitée par la banque surtout pour les prêts In Fine.

Notre approche

Ce fut une application extrêmement rapide et de ce fait le record chez French Private Finance: seulement 23 jours entre le premier contact et l’obtention du prêt immobilier avec la banque alors que généralement la moyenne est de 100 jours.


Mougins : Obtention d’un prêt de 556 000€

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Le profil

Lieu d’achat : Mougins

Prix de la propriété : 695 000 €

Montant du prêt : 556 000€

Durée du prêt : 20 ans

Type de prêt : amortissable

Taux d’intérêt : 2,45% fixe

Quotité de financement : 80%

 

Le contexte

Les résidents de Singapour peuvent généralement obtenir une quotité de financement de 60% maximum. Cependant, pour ce client, partenaire d’un cabinet d’avocats prestigieux, nous avons réussi à augmenter cette quotité en présentant son expérience en tant qu’expatrié d’une société en nom collectif à responsabilité limitée britannique.

Notre approche

L’achat d’une propriété depuis l’étranger peut être un processus long et fastidieux, en particulier pour des professionnels très occupés. Grâce à son réseau, French Private Finance facilite considérablement la tâche de ses clients. Il est en effet possible de tout organiser à distance, depuis la demande d’emprunt jusqu’à la création d’un compte bancaire et la mise en place d’une assurance vie (avec tests médicaux à Singapour). French Private Finance s’occupe de tout.

Le client fut ravi de la facilité avec laquelle nous avons présenté son dossier et obtenu l’emprunt avec la banque. De ce fait, il nous a recommandé à plusieurs de ses amis et collègues que nous accompagnons aujourd’hui dans leur achat immobilier.


How to Finance: €1.25 Million property in Sainte Maxime

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The profile

Buying in: Sainte Maxime
Property price:
€1,250,000
Mortgage amount: €700,000
Mortgage type: Interest Only
Mortgage term: 20 years
Interest rate: 2.45% fixed for the duration
Loan-to-value: 56%

The context

The client was buying a fabulous property in the south of France, near Ste Maxime. He had a few requests and FPF delivered:

  • Interest Only: check
  • Fixed rate for security: check
  • No life insurance: check (which is amazing on an interest only mortgage as the bank’s risk does not decrease over time)
  • Quick process: check

Our approach

From the first call to receiving the mortgage offer, it took only 23 days which is FPF’s absolute record (the average is about 100 days). The client was brilliant, the bank was efficient, and everyone pitched in and did the work!


How to Finance: €556,000 Mortgage in Mougins

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The profile

Buying in: Mougins
Property price:
€695,000
Amount: €556,000
Mortgage type: Repayment
Mortgage term: 20 years
Interest rate: 2.45% fixed
Loan-to-value: 80%

The context

Singapore residents can generally obtain a max LTV of 60%. For this Partner of a top tier law firm, we increased the debt to purchase price ratio by showcasing his track record as an expat of a bespoke UK based LLP.

Our approach

Buying a property from abroad can seem lengthy and tiresome, particularly for busy professionals holding high level positions. However, our network can make it easy for you. It’s possible to do everything remotely, from applying for a loan to setting up a bank account and arranging a life insurance policy; FPF looks after everything until completion.

The client was very pleased with the ease of the process and introduced several friends and colleagues to FPF for advice.


Bonne nouvelle pour les acheteurs américains en France : quotité de financement de 70% désormais disponible à un taux fixe de 1,4% pour une durée de 20 ans.

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Grâce à deux nouveaux partenariats, French Private Finance peut désormais offrir jusqu’à 70% aux résidents fiscaux américains qui achètent en France.

Depuis la fermeture du Crédit Foncier en Janvier, les prêts accordés aux résidents américains en France ne dépassent pas 60% de quotité de financement… et les offres concurrentes sont rares. La charge administrative afin de réaliser la déclaration FATCA (Foreign Account Tax Compliance Act) est souvent un frein pour les banques françaises. Celle-ci oblige les banques à déclarer chaque compte américain au service des impôts des États-Unis.

Heureusement, nous avons de nouveaux partenaires qui peuvent offrir une quotité de financement jusqu’à 70% (capital et intérêts payés tous les mois) avec un taux fixe de 1,40% sur 20 ans. Ces prêts nécessitent également l’ouverture d’un compte d’épargne représentant environ 15% du montant du prêt, bien que ces économies soient accessibles et non bloquées. Cette offre est également disponible pour les résidents russes ou brésiliens et est limitée aux employés des sociétés cotées en bourse pour le moment.

L’autre bonne nouvelle est que, comparé à l’ancien contrat Crédit Foncier à 2% fixe pour 20 ans, les clients économisent environ US$ 75,000 d’intérêts sur la durée pour un emprunt à hauteur d’un million d’euros.

Besoin de plus d’information ? Visitez frenchprivatefinance.com ou contactez info@frenchprivatefinance.com


Good news for US buyers of French property as 70% loan now available at 1.4% fixed for 20 years creating significant savings.

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Thanks to two new partnerships French Private Finance can now offer up to 70% for US tax residents buying in France.

Since the closure of Credit Foncier de France in January, loans for US taxpayers in France had been limited to 60%, with competing for offers few and far between. The reason for this is that many French banks struggle with the FATCA reporting – Foreign Account Tax Compliance Act –  where banks have to declare everything about each individual US account to the US Tax service.

Thankfully, French Private Finance’s new partners can offer up to 70% LTV on a repayment basis (capital + interest paid every month) with a 20 year fixed rate of 1.40%. These loans will also require a savings account to be opened with circa 15% of the loan amount, though these savings are accessible and not blocked. In addition, this offer is also available to Russian or Brazilian residents as well and limited to employees of listed companies for the time being.

The other good news is that versus the old Credit Foncier deal at 2% fixed for 20 years, people borrowing 1M€ will save close to 70k over the life of the loan.


SARL: Is it viable for your real estate project in France?

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An SARL is a limited liability company and one of the most common types of business in France and very popular with Foreign residents buying in France.

This type of company must be composed of two or more partners or you can create an EURL (single-member company with limited liability) if you want to set up a company by yourself. There is also a Family SARL which allows you to make an SARL with direct family members. This is strictly limited to children, parents, grandparents, siblings and spouses. For example, it would be impossible for a niece and uncle to make a family SARL together. In this case they would need to create a SCI (Civil Society for Real Estate).

Advantages:

Limited liability

The liability of the partners is limited according to how much capital they have invested in the business. However, it is important to remember that it will be difficult to get a mortgage with a small amount of capital. This means that you will need to act as guarantor for the SARL or increase your capital contribution.

Flexibility

There are three major types of SARL, the “classic” SARL, the family SARL, and the SARL Unipersonal (or EURL) which is for those who want to create a business alone. With EURLs, you can always later switch to a different type of SARL if you want to start working with a partner.

Furnished rentals and social contributions

Unlike an SCI, family SARL and EURL businesses can take advantage of the French “rented-out, non-professional, furnished properties” scheme (LMNP). If this is something that you would be interested in pursuing, it is important to get advice on this as your income may be taxed. In addition, if you are trading alone (EURL), you will not need to pay social security contributions if you make €23,000 or less per year. In the case of a family SARL, this limit is multiplied by the number of family members in the company. For example, if your business has four partners, this threshold is increased to €92,000!

Capital gains

Real estate gains in an SARAL are part of the professional tax regime in France because the company’s business is commercial. However, after five years, long-term real estate capital gains benefit from a 10% reduction per year. In other words, you would be totally exempt from paying capital gains tax after 15 years. If you were operating as an SCI, it would take 22 years to reach total exemption from capital gains tax and 30 years to be exempt from the social security part.

Transmission of shares

In France a family SARL allows the dismemberment or separation of shares with the possibility of separating usufruct (use, rent or ability to live in the property) and bare ownership of the property (the ability to sell it once the usufruct has expired). If you keep the usufruct (you continue to collect rent) and you give your children the bare ownership, the amount of inheritance tax will generally be very low. One can see a certain advantage of passing on one’s shares when the company is in debt.

Example: Let’s assume we have client associated in a “SARL familiale” owning an apartment worth 1M euros financed by a mortgage. This client owns 50% of the shares, and there is still 600,000€ to repay. The value of the client’s shares is 200,000€ (400,000€ x 50%). If he transmits the bare ownership to his child worth 80,000€ (200 000 x 40%), the taxable base becomes 0€ thanks to the tax rebate of 100,000€.

Reclaim VAT

When an LMNP investment is subject to VAT (20%), it can be recovered 6 months after the acquisition of the property. In order to benefit from this scheme, your property must fall into one of the following categories:

  • Accommodation services provided in classified tourist hotels
  • Accommodation services provided in classified or approved holiday villages
  • Accommodation provided in classified tourist homes which are intended to accommodate tourists and are rented by a contract for a period of at least 9 years to an operator who has subscribed to a tourism promotion commitment

Whether free or for a fee, you must also offer 3 of these services:

  • Breakfast
  • Daily cleaning of the premises
  • Linen supply
  • Concierge

In addition, you must own the property for at least 20 years to realise the full benefit of the reimbursement. If you do decide to sell before 20 years, the VAT will have to be refunded to the State pro rata. If you have a commercial lease, it will then be necessary to sell your property with the latter to avoid being liable.

Disadvantages:

Set up costs

You will need to write up the statutes of the company for the clerk’s office at the Commercial Court and advertise the incorporation of the company in the newspaper. This will cost between €1,000 and €2,000.

Direction

The company is managed by one or more managers appointed from among the partners or it can be someone external. However, a manager must be natural person – not a legal entity. The powers of a manager are defined in the statutes of the family SARL. The partners meet at least once a year in an ordinary general meeting. Decisions leading to a modification of the statute would be made at an extraordinary general meeting. If taking out a loan from a retail bank then the guarantor should be the manager.

Change of regime

If you choose to pay corporation tax, you cannot change your mind and opt for income tax. However, it would be possible to switch to corporation tax if you were originally paying income tax.

If you choose the income tax

The SARL, since it carries out economic operations for a fee, is a taxable person and, as such, is liable for VAT. When you recover the VAT on the amount of the property, you will have to pay VAT of 20% on rental income. For LMNP property in a senior, student, business or tourism residence, a rate of 10% applies. Property that falls into the leaseback LHPE residence type, the VAT is 5.5%.

If you choose the corporation tax (IS).

For companies with a turnover of less than 7,63m, corporation tax varies according to which profit bracket your business falls in:

ProfitCorporation Tax Rate
0 to 38,12015%
38,120 to 75,000 28%
75,000+33.33%


For companies with a turnover turnover between
7.63m and 50m, corporation tax is broken down into two brackets:

ProfitCorporation Tax Rate
0 to 75,00028%
75,000+33.33%


Companies with a turnover in excess of
50m will pay a flat rate of 33.33%, regardless of profit.

Source: https://www.impots.gouv.fr/portail/professionnel/imposition-des-resultats

The territorial economic contribution

Like those who are self-employed, the SARL will need to pay territorial economic contribution (formerly business tax). New businesses will not need to pay this tax during the year of their creation.

Conclusion:

A real estate company in the form of an SARL has more advantages for less inconvenience than SCI. However, you will need to be very mindful of the requirements of a family SARL if you want to make the most of the furnished rental. As this is a complex issue it is best to involve your mortgage broker and tax adviser at an early stage to ensure all works well.

Published in June 2019. This article is for informational purpose only as an initial guide to the main points and does not constitute tax advice. Please seek independent tax advice before committing to any purchase to ensure the have the correct set up for your personal situation.


SARL Immobilière : Est-ce viable ?

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La SARL, société à responsabilité limitée, est un des types d’entreprises les plus répandu. Ceci dit, elle est méconnue dans le domaine de l’immobilier. La société doit être composé de deux associés, si vous êtes seul, vous pouvez créer une EURL (entreprise unipersonnelle à responsabilité limitée). Dans le cas de la SARL de famille, celle-ci oblige la SARL a etre constituée des membres de la même famille en lien directe (enfants, parents, grands parents, frères et soeurs, conjoints, personnes liées par un Pacs ou mariage), et uniquement cela ! La création d’une SARL de famille avec sa nièce ou son oncle est impossible (par exemple). Dans ce cas il faudra se tourner vers la SCI (Société Civile Immobilière).

Avantages :

Devant la loi

La responsabilité des associés est limité en fonction de l’apport au capital de la société. Cependant, il sera difficile de contracter un emprunt immobilier avec un faible capital. Il sera alors nécessaire d’augmenter l’apport ou de se porter caution pour la SARL.

Flexibilité

Il existe trois grandes familles de SARL, la SARL “classique”, la SARL familiale, et si vous souhaitez vous lancer seul, la SARL Unipersonnelle (ou EURL). Pour cette dernière, vous pourrez à tout moment changer son statut dès l’entrée d’un nouvel associé.

Location meublée et cotisations sociales

La différence notable entre SARL familiale / EURL et SCI est qu’il est possible d’obtenir le régime loueur en meublé non professionnel (LMNP). Il est alors possible d’être imposé sur le revenu. De plus, lorsque vous êtes seul, vous ne payerez pas de cotisations sociales si vos revenus sont égaux ou inférieurs à 23 000 Euros. Cependant, cela est apprécié par associé. Par exemple, si vous êtes quatre associés, ce seuil est augmenté à 92 000 Euros !

Les plus-values

Les plus values immobilières relèvent du régime des plus values professionnelles du fait que l’activité de la société est commerciale. Il est intéressant de relever que les plus-values immobilières à long terme bénéficient d’un abattement de 10 % par année de détention au delà de la cinquième. Autrement dit, les plus values sont totalement exonérées au bout de 15 ans (contre 22 ans pour les particuliers (ou SCI) et même 30 ans sur la partie prélèvements sociaux).

Transmission des parts

La SARL familiale permet le démembrement des parts sociales (possibilité de dissocier usufruit, et nue propriété). Si vous conservez l’usufruit (vous continuez à percevoir les loyers) et que vous transmettez à vos enfants la nue propriété, le montant des droits de succession sera généralement très peu élevé puisque calculé sur un montant forfaitaire en fonction de l’âge auquel vous procédez à la donation. On peut voir un certain avantage de transmettre ses parts lorsque la société est endettée.

Récupération de la TVA

Lorsqu’un investissement LMNP est soumis à la TVA (20%), il est possible de la récupérer 6 mois après l’acquisition de la propriété. Afin de disposer de cette récupération, il faut que votre bien soit dans une des catégories suivantes :

  • Prestations d’hébergement fournies dans les hôtels de tourisme classés
  • Prestations d’hébergement fournies dans les villages de vacances classés ou agréés
  • Prestations d’hébergement fournies dans les résidences de tourisme classées lorsque celles-ci sont destinées à l’hébergement des touristes et sont louées par un contrat d’une durée d’au moins 9 ans à un exploitant ayant souscrit un engagement de promotion touristique à l’étranger

Il faut également offrir 3 de ces prestations, que cela soit de manière gratuite ou payante:

  • Le petit déjeuner
  • Le nettoyage quotidien des locaux
  • La fourniture de linge de maison
  • La réception de la clientèle

Il ne faudra pas revendre le bien avant 20 ans, sinon la TVA devra être remboursée à l’Etat au prorata. Si vous disposez d’un bail commercial, il sera alors nécessaire de vendre votre propriété avec ce dernier pour ne pas être redevable.

Désavantages :

Mise en place

Il faut rédiger les statuts avant de les déposer au greffe du Tribunal de Commerce et d’en faire la publicité dans des journaux d’annonces légales. Cela se chiffre entre 1000 € et 2000 €.

Direction

La société est dirigée par un ou plusieurs gérants nommés parmi les associés ou en dehors d’eux. Il doit s’agir de personnes physiques. Le gérant dispose de pouvoirs qui sont définis dans les statuts de la SARL de famille. Les associés se réunissent au minimum une fois par an en assemblée générale ordinaire. Les décisions entraînant une modification des statuts se prennent en assemblée générale extraordinaire.

Changement de régime

Lorsque l’on choisit l’impôt sur la société, on ne peut plus revenir à l’imposition sur le revenu. Le changement est possible dans l’autre sens.

Si choix de l’impôt sur le revenu

La SARL, puisqu’elle réalise des opérations économiques à titre onéreux est redevable de la TVA. Lorsque vous récupérez la TVA sur le montant du bien, vous devrez reverser une TVA de 20% a l’état sur les loyers perçus pour le régime classique. Concernant des biens LMNP en résidence senior, étudiante, d’affaires ou de tourisme, c’est un taux de 10% qui s’applique. Pour finir, concernant les biens LMNP en résidence de type EHPAD c’est 5,5% de TVA.

Si choix de l’impôt sur la société

Pour les sociétés dont le CA est inférieur à 7 630 000, l’imposition à l’IS est le suivant :

  • la tranche de bénéfice de 0 à 38 120 euros, le taux d’IS est de 15 %.
  • la tranche de bénéfice de 38 120 à 75 000 euros, le taux d’IS est de 28 %.
  • au-delà de 75 000 euros, le taux d’IS est de 33,33 %.

Pour les sociétés dont le CA est entre 7 630 000 et 50 000 000 €, l’impôt est le suivant :

  • la tranche de bénéfices de 0 à 75 000 euros, le taux d’IS est 28 % ;
  • au-delà de 75 000 euros, le taux d’IS est de 33,33 %.

Pour les sociétés dont le CA est supérieur à 50 000 000 euros, le taux d’IS est de 33,33 %.

Source : https://www.impots.gouv.fr/portail/professionnel/imposition-des-resultats

La contribution économique territoriale

Comme toute personne physique ou morale qui exerce en France, à titre habituel, une activité professionnelle non salariée, la SARL est redevable de la contribution économique territoriale (anciennement taxe professionnelle). Les entreprises nouvellement créées échappent à la taxe l’année civile de leur création.

Conclusion :

Une SARL immobiliere présente plus d’avantages pour moins d’inconvénients que la SCI. Cependant, il faudra faire très attention de respecter les exigences d’une SARL de famille si vous voulez profiter au maximum de la location meublée.


Why creating a SCI, and why not…

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An SCI, or “Société Civil Immobilière”, is a company that allows a number of individuals to share one or more real estate entities. The partners of the SCI can make contributions ‘in kind’; movable or immovable property that they already possess. These contributions, most often in kind or in cash, give entitlement to shares in the SCI  based on the total capital to partners share accordingly the profits and losses of the company. The SCI can be administered by one or more managers who are chosen by the partners. The managers may be physical or moral persons, for example, a company.

Pros of an SCI

Legal Protection

One of the advantages of an SCI is that it can protect the assets of the partners. Registered in the Trade and Companies Register, it has a legal personality and a heritage that differs from that of an individual. The SCI is the sole owner of the property. Therefore, in case of a dispute, creditors will first turn against the company. If their action proves to be unsuccessful, they can then bring an action against the partners. Only the shares can be seized by the creditors. In addition, it is difficult for creditors to sell the shares of another SCI associate or to know the extent of their wealth. In fact, the partners have an indefinite responsibility according to their participation in the share capital of the SCI, but not in solidarity. This implies that the creditors must act independently against each partner, to engage their responsibility.

Inheritance

SCI also gives parents the possibility to pass on their property to their children while maintaining the management of the property. They simply bring the property to the SCI and distribute the shares of the company to their children. They are the managers of SCI and thus retain control of the property. When parents and children of the same family are associated with an SCI, we are talking about creating a family SCI.

Taxation

The SCI makes it possible to have advantageous taxation. The transfer of a property is normally subject to capital gains tax, with a tax deduction depending on the length of ownership, and a total exemption from tax after 22 years. For the sale of the shares of SCI, the holding period is calculated from the date of subscription of the units and not from the date of entry of the property into the SCI. In addition, the transfer of shares is simpler than the sale of a building that must go through an authentic notarial act.

Investment

the SCI makes it possible to realize several real estate investments by gathering means, which can facilitate the obtaining of financing. It may indeed be intended, for example, to rent.

Business

if you are a business owner, you may also want to use the SCI to acquire the real estate necessary for your business. SCI will collect rents while deducting rental expenses. This arrangement also allows you to allocate shares of SCI to your children without being in your company. In addition, the creditors of your company will not be able to attack the SCI, so real estate is protected.

Cons of an SCI

Creation

The biggest disadvantage with the SCI is its creation. You must complete certain formalities to create it, in particular:

  • the drafting of the statutes,
  • registration of statutes in the tax department,
  • the publication of the constitution of the SCI in a Journal of Legal Announcements (JAL),
  • the registration of SCI with the Registry of the Commercial Court,
  • the declaration of the beneficial owners of the SCI.

These operations have a cost especially if you go through a lawyer to write the statutes. As for the legal announcement, it takes about 200 €.

Management

You must comply with the operating rules of the SCI such as holding an annual general meeting of partners or the keeping of accounts. Accounting is more rigorous if you have made the choice to submit the SCI corporation tax. The accounts should be handed over to the registry every year.

Engagement

You must also take into account the fact that as an associate of an SCI, you have an indefinite responsibility regarding the debts of this one. You commit your personal wealth in proportion to your shares in SCI.

Sell of shares

The sale of shares of an SCI can be complicated if a clause of approval is provided for in the statutes. Indeed, if you want to sell, it will require the agreement of other partners.

Our Suggestions

Creating an SCI is a good option if you are planning to simplify transmission and protect real estate assets, it permits to be flexible in the choice of the tax system and it adds the possibility to sell shares easily with the agreement of the shareholders. But the procedure may seem complex, you must be rigorous regarding the law concerning the organization of the general assembly and the accounting.


SCI : Avantages et inconvénients

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La SCI, ou Société civile immobilière, est une entreprise qui permet à plusieurs personnes de s’unir dans l’achat d’un ou plusieurs biens. Les partenaires de SCI peuvent faire des contributions en nature, c’est-à-dire qu’ils réunissent des biens mobiliers ou des biens immobiliers dont ils sont propriétaires. Ces apports en nature ou en espèces, vous donnent droit à des parts de SC. Ainsi, les partenaires partagent les profits et les pertes. Les SCI peuvent être gérées par un ou plusieurs gestionnaires sélectionnés par les partenaires. Les gestionnaires peuvent être des personnes physiques ou morales, par exemple une entreprise.

Avantages

Devant la loi

Une SCI a l’avantage de protéger les actifs des partenaires. Inscrite au registre des commerces et des sociétés, elle possède une juridiction différente de celle des partenaires. Une SCI est l’unique propriétaire des biens immobiliers, par conséquent, en cas de difficulté financière, les prêteurs doivent d’abord contacter la SCI. Si leur action échoue, ils peuvent intenter une action en justice contre leurs partenaires. Seules les actions peuvent être saisies par les créanciers. De plus, il est difficile pour les créanciers de vendre les actions d’une SCI ou de connaître l’étendue de leur patrimoine. Les partenaires ont une responsabilité indéterminée en fonction de leur participation au capital social de la SCI, et non par solidarité. Cela implique que les prêteurs doivent agir indépendamment de chaque partenaire pour les obliger à assumer leurs responsabilités.

Succession

Une SCI donne également aux parents la possibilité de transférer progressivement leurs biens à leurs enfants, tout en maintenant la gestion des actifs. Ils apportent simplement des biens dans la SCI et distribuent des actions de la société à leurs enfants. Ils sont les gérants de la SCI et conservent ainsi le contrôle sur les propriétés. Lorsque les parents et les enfants d’une même famille sont liés à une SCI, nous parlons d’une SCI familiale.

Imposition

Une Sci rend possible une imposition avantageuse. En effet, la vente d’une propriété vous rend redevable de l’impôt sur la plus-value, cet impôt est exonéré après 22 ans de détention de la propriété. Dans le cas de la SCI, c’est la date de création de la SCI qui comptent. Même si vous achetez des biens immobiliers des années après le lancement de l’activité de la SCI, vous serez, de la même manière, exonérés de cet impôt après 22 ans suivant la création de la société. De plus, pas besoin de passer par un notaire lors de la vente de parts.

Investissement:

La SCI permet l’achat de plusieurs propriétés, de part, notamment, la capacité à posséder plusieurs associés, et donc plus de garanties auprès des banques. Cela permet donc de facilement se lancer dans la location (acheter plus de bien et faire grandir son capital bien plus vite).

Entreprise

En tant que chef d’entreprise, vous pouvez également utiliser une SCI pour acheter les biens immobiliers nécessaires à celle-ci. La SCI facturera le loyer en déduisant les frais de location. Cet arrangement vous permet également de distribuer des actions de SCI à vos enfants sans qu’ils soient dans votre entreprise. De plus, les créanciers de votre entreprise ne pourront pas attaquer la SCI, ce qui garantit la protection de l’immobilier.

Inconvénients:

Création

Le plus gros inconvénient de SCI est sa création. Pour sa création, il est nécessaire de remplir certaines formalités, notamment:

  • rédaction des statuts
  • enregistrement des statuts au service des impôts,
  • publication de la constitution de la SCI dans le Journal d’annonces légales (JAL),
  • l’enregistrement de SCI auprès du greffe du tribunal de commerce,
  • la déclaration des bénéficiaires effectifs de la SCI.

Ces opérations ont un prix, surtout si vous vous adressez à un avocat pour rédiger les statuts. Quant à l’annonce légale, cela coûte environ 200 €.

Gestion

Vous devez vous conformer aux politiques de la SCI, telles que la tenue d’une assemblée générale annuelle ou la tenue de comptes. La comptabilité sera plus stricte si vous choisissez de déclarer la SCI sous le régime de l’impôt sur les sociétés. Les comptes doivent être transférés au registre chaque année.

Engagement

Vous devez également prendre en compte le fait qu’en tant que partenaire d’une SCI, vous avez une responsabilité indéterminée en ce qui concerne les dettes de la société, et ce, proportionnellement aux parts que vous détenez.

Vente de parts

Vendre des parts d’une SCI peut être difficile si la loi prévoit une clause d’approbation. Si vous voulez vendre, il faudra le consentement des autres partenaires.

Pour résumer

Créer une SCI est une bonne alternative si vous envisagez de simplifier la transmission et de protéger les actifs immobiliers, cela vous permet de faire preuve de souplesse dans le choix du système d’imposition et d’ajouter la possibilité de vendre facilement des parts avec l’accord des actionnaires. Mais la procédure peut sembler complexe, vous devez être rigoureux en ce qui concerne l’organisation de l’assemblée générale et la comptabilité.


How to Finance: €1,950,000 property in Grimaud

South of France

The Profile

Buying in: Grimaud, South of France
Property price:
€1,950,000
Mortgage amount: €1,365,000
Mortgage type: Repayment
Mortgage term: 20 years
Interest rate: 1.70% fixed for the duration
Loan-to-value: 66%

The context

The client was buying in the south of France the house next to his family house. His profile was outstanding and his professional situation excellent. All the lights were green for an 80% Loan to value.

But there it is. It is not called loan to value for no reason. The survey from the bank came back lower than the purchase price for 2 reasons:

  • French banks are very conservative and risk averse. Should there be a default in the mortgage payment, the bank seizes the property and has to sell it to repay the mortgage. However, they take into account the location and the possible demand there would be and what price would allow a quick sale (within a month) which means the price would need to be dropped.
  • The renovation works to be made in the house were not adding as much in value as they were costing as they were mainly decoration work.

Overall, the bank decided to reduce their loan to value to 70% to limit their exposure based on the value that came back from their expert.

Our approach

Obviously, it came back as a shock to both us and the client. As mentioned above, the financial situation of the client was great so adding more deposit was officially not an issue. However it meant liquidating some assets and it created a bit of disbelief between the client and the bank.

In order to still provide the best possible deal for the client, we lifted our shirt sleeves and got to work. We managed to reduce the bank fees by 3 times and lower the rate of the mortgage from 2% to 1.7% on 20 years. For a mortgage of 1.365,000 €, that is a save of about 10,000 € on the bank fees and 46,000 € on the interest .


From London to France – The Brexit Effect on Paris Real Estate

Paris streets

A new month, another new high for Paris property price records. London, on the other hand, is experiencing the effects of Brexit and all the uncertainty that comes with the constant delays and lack of clarity which has impacted the London residential property market negatively from a price perspective.

The numbers speak for themselves

In the French capital, we are close to reaching the 10,000 €/per square metre mark after continuous price rises over the last 4 years. This is not the same for all the European capitals, especially if we are looking across the English Channel.

The London market prices reached extreme levels pre-2016, especially in Zone 1 and 2 where some flats are on the market at around 16,000 and 17,000 €/per square meters on average, and sometimes more than 25,000 €/m2 for premium addresses. This is still 70% more than in Paris but in the last 2 years, average prices have begun to fall, which is not the case for the French capital, quite the contrary.

The latest publication from LonRes, a leading data source and network centre for property professionals in London, reveals that the situation is similar to a mini crash. In Q1 2019 properties valued under 2 million pounds in London (around 2.3 millions €) suffered the worst decrease for the last 10 years; a stunning -10% in 1 year only.

This is mainly due to the months of political instability and the probability of  a No Deal Brexit growing in the mind of investors and corporates. According to Marcus Dixon, lead researcher at LonRes, Property owners have started to become more inclined to accept offers lower than what their property was previously valued for because of the unpredictability of the political events and the risk for even further decrease in value.

French Private Finance views

The market is showing an interesting dynamic. The extremely hot UK market is cooling off and the Paris property market is booming due to the Parisian returners and the wider interest in the Grand Paris project, which is rejuvenating and improving many areas. The French mortgage rates available in Paris are some of the lowest in France. This is due to the high liquidity of the market, which means that banks can be confident the property will sell quickly, which leads to lower mortgage rates to buy property in Paris.


The Grand Paris, or how to make the capital more attractive!

paris

The project Grand Paris should take about 20 years to complete. It aims to create a united cluster seven times bigger than the current city of Paris, with a population 3.5 times bigger. The challenge consists of transforming a region that has been up to now characterized by its star shape into a more homogeneous territory.

What is the current size of Paris?

Paris “intra-muros”, meaning the part of the city located inside the ancient walls (now disappeared) is a very compact area of 100 square kilometers and 2,2 millions habitants. Its image of a closed city has been reinforced by the ‘Great Boulevards” built along the paths of the ancient fortifications, the ring road and the new circular tramway.

A large-scale project

The Grand Paris will include the City of Paris, the Seine-Saint-Denis, Hauts-de-Seine and the Val-de-Marne suburbs and several other neighborhoods situated on the outskirts.

Source : www.parisdigest.com  

Together, they’ll create an area seven times bigger than the historical Paris. Once the metropolis expansion is completed, Paris will house 7,5 millions inhabitants, more than half of the population of the ‘Ile de France’ department, representing 25% of the country’s wealth. The project aims to confirm the status of Paris as a world economic power and an example for sustainable development. The successful bid of the city for the Olympic Games in 2024 and its desire to build the reputation of a European financial center after Brexit is one of the steps the city is taking to detach itself from the touristic image it has. Another objective of the project is to improve the quality of life in the suburbs, mainly by improving and introducing new housing and transportation solutions.

A new transport network

The Grand Paris Express, as an automated transit network, will be the new metro of the capital city region. The Grand Paris Express will consist of a circular ring around Paris (line 15) and lines connecting developing areas (lines 16, 17 and 18). The Grand Paris Express will also involve the extension of existing metro lines. These new lines will surround the capital and provide links with the 3 airports, the business district and research centers. It will serve more than 165,000 businesses.

The Grand Paris Express in numbers
  • 4 additional lines
  • 200 km of new railway lines
  • 68 new interconnected stations
  • 2 million passengers a day
  • a train every 2 to 3 minutes
  • a 100% automatic metro system
  • 90% of the lines will be built underground
  • It will only take 34 minutes – instead of 53! – to go from Roissy Charles-de-Gaulle Airport to La Défense
  • It will only take 15 minutes – instead of 1 hour and 6 minutes! – to go from Orly airport to Paris Saclay University campus
A positive conclusion for all investors:

The ongoing project of The Grand Paris will have a positive impact on urban planning, housing, businesses and environmental protection. It offers a unique opportunity for all stakeholders, including developers, transport operators, public and private investors, construction companies, architects, urban planners and the population of Greater Paris.