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Investing in Lifestyle

Simply-Stunning-May 325x215Provence in May

Sunny France with waterwheels, a rosé with lunch at a table beside the canal and the purple haze of the Luberon ranges in the distance. That was the dream! And the reality? A delayed aircraft into Nice, an interminable queue at the hire-car desk and two hours on the road resulting in opening the door to our new property in L’Isle sur la Sorgue in complete darkness.

Even travel fatigue couldn’t erase the inevitable emotions of excitement laced with doubt associated with buying a property sight unseen from the other side of the globe. It wasn’t a complete leap into the unknown. We knew the town and the previous owner, and had watched a detailed video ‘walk-through’ before signing on the dotted line. But, even though this is beautiful Peter Mayle country, you never know do you?

Dellas and I love France! We travel there every year, always stay in private accommodation and live like locals. So, an investment plan began to emerge. Why not acquire a few properties, pay them off over the last years of our working lives and use them as an income source to fund summers of long lunches in southern France?

It helped that three investment ‘planets’ had lined up beautifully: a booming Aussie dollar, a depressed European property market and the added attraction of a fixed-rate mortgage of under 4% over 15 years. That adds up to good value, particularly compared with property investment in WA.

Yes, there are risks. We’ve exposed ourselves to any further downturn in Europe, the devaluation of the Euro and a softening of tourist demand. But the sword cuts both ways – a falling Euro would make our properties less valuable from an Australian perspective, but the repayments would be less in Australian dollar terms.

Two other factors are worth mentioning: firstly, we’re focusing on short-term holiday rentals on UK letting sites at the lower end of the pricing market in a highly desirable location. It would take a monumental GFC Mk. 2 to pull us under 22 weeks occupancy, our ‘break-even’ point. Secondly, most of our clientele are from Australia, the UK and the US so the relative strength of the European financial landscape is of minimal consequence.

Moss-SimonPrize.200x290Dr Simon Moss

One of the secrets to success is finding competent people on location in France. We’ve got a Scottish-born local real estate agent complete with a tatty Renault and an even tattier Border Terrier named Thelma.

Then there’s Jonathan, a rather comical English teacher turned Anglophone banker in ill-fitting suits with a resigned acceptance of the mysteries of French commerce. And finally there’s Francine, the elegant notaire in her designer office on the edge of a picture-perfect village near author Peter Mayle’s first farmhouse, who handles the legal side.

The network expands. Cath does the cleaning, her daughter will manage minor renovations and she knows a carpenter who’ll knock down a wall and reshape the kitchen. We leave a key with Robyn from the boulangerie who we know rather too well.

All the vicious rumours regarding French bureaucracy aren’t true – they’re much worse! Just opening a simple bank account will have you jumping through the hoops. In fact, it was harder to give them our money to put in the bank than it was to negotiate a mortgage to take it out again.

There’s always another document to scan, more papers to sign and another courier envelope on the way. But the beauty of multi-page documents in tiny font written in French legalese is that you don’t even have to pretend to read them.

And sometimes you do have a win. Our second property is connected to mains gas, it’s never had a meter and none of the previous owners felt the urge to install one. We won’t either. We feel like locals already.

As told to Mr Peter McClelland

Simon’s Provence Tips

  • A negatively-geared investment showing no actual profit. A French tax return will be submitted.
  • The French rarely reduce sale price. They’re happy to wait until a willing wallet comes along.
  •  Small two-bedroom apartment: €200,000 approx. Break-even rental 22 weeks/year on a UK rental listing.
  •  Rental €390-490/week (Low/High Season).

         ATO’s Provence Tips

  • Income from overseas investments in property is deemed ‘Foreign Source Income’.
  • The full rental amount, regardless of whether it’s paid to you or your agent, must be declared in your tax return.
  • If you pay foreign tax in another country you may be entitled to an Australian foreign income tax offset.