Pitfalls to avoid when buying property in a student residence
What mistakes to avoid before buying in France ?
BE ON THE ALERT: Don’t be blinded by the tax benefits
1. The mirage of the “guaranteed” financial investment “without risk”
You are not buying a “financial product” – a “guaranteed investment without risk”. The selling point of “tax exemption” in France should not make you forget that it is a PROPERTY PURCHASE carried out by YOU ONLY. It is the only version of reality which will appear on the contracts and legal documents you sign in France.
The fact that you neither created the documents, nor signed them in person, nor even saw the property is no excuse under French law (actually this is similar to the laws in most countries).
2. Buying property that is much too expensive in medium-sized towns
A common mistakes is believing that the law will protect you against loss incurred when buying such property in France. The tax benefit should not lead to the purchase of a property that will be unsellable (and sometimes hard to rent) in the future.
3. Buying in a student residence without checking the number of students and the local market
You should invest in a student residence in cities with a strong university potential (Lyon, Bordeaux, Lille, Marseille, Nice or Montpellier) to ensure an occupancy rate that is high enough for the operating leaseholder and the lessor who will be paid only if the company makes a profit. Beware of investments in medium-sized towns already jammed with housing where the developer who approaches you is offering hundreds of accommodations in addition to yours.
4. Don’t invest in a student residence which is badly located even in a City full of students
Despite all the “guarantees” offered by the sales representative who approaches you, you must not forget the golden rule of property purchase: LOCATION, LOCATION, LOCATION.
THREE TIPS TO AVOID MISTAKES
- Enquire about the rental market (existing studies) and the schools and universities in the proposed town/city,
- Check the exact location of the accommodation (using googlemap, google earth or mappy, for example) to avoid buying property that is too far from the main schools.
- Involve local experts, who know the market. We can help.
- Frequent and recurring risk of unpaid rents (for several years sometimes)
- Attempts by the company that holds the lease to renegotiate a lower rent
- Capital loss on the property’s sale, including after 10 years (!)
- Bankruptcy of the company that holds the lease
- Substantial work to be funded after ten years or so, despite low rental income
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