All Forum Posts by: Denis F.

Bonjour, I have a limited experience with french loans but my understanding is that you can easily re-negotiate the terms of your loan with your bank such as adjusting interest rates based on current market, increasing or decreasing your monthly payment or number of years. However, I haven't heard any possibility to refi with cash out.

A possible good strategy for remodel cost is that you can make it part of your initial loan. Say you're considering a 100k euros property but it needs a new roof for 25k. The bank can roll the roof cost into the loan. Your downpayment is 20k, the bank will loan you 105k on a 100k property. Since interest rates are significantly lower than in the US, it usually is a good option.

Another strategy to consider is using the various state level and local government tax breaks. It's a bit like the opportunity zones in the US but there are many more programs. Unfortunately, they evolve quickly (with each new government since housing is a hot topic) so you need a local team of pros who understand it well.

My strategy was to buy a 3-plex which was rent-controlled because the previous owner took advantage of a specific program 20 years ago when he remodeled the building. I was able to get rid of the rent control since it was only mandatory for 9 years after the remodel if I recall correctly. Now when the existing tenants move out, I can adjust the rent to market value about 20% higher...

Hi @Mor Elkobi, I found good loan options in France at 2% fixed interest rate as a non-resident if loan options are your primary criteria. You may have to start with a 25% down payment if you don't have assets there initially but I found it worthwhile... You may include rehab cost in the loan too... The flip side of France is the tax burden when you make any significant income so you have to run your numbers carefully.

@Maggy Fermo

International investing is a broad question... every market is different. You need to know your target market just like you would in the US, local laws and rules, local renter's tastes and you need to take into account the added complexity of taxation in multiple countries. If you want a mortgage, it may be more difficult and the criteria are completely different than the US. You'll need a local team you can rely on. In my experience with investing in France, it's a lot more work up front building a team, figuring out how to get a 2% interest mortgage, calculating ROI after tax but a lot of fun too.

@Eva Sothebys

Although there are many parameters to consider, I'd suggest you look at the tax implications of a purchase in the country of your (potential) choice. Assuming your first buy is going to be at a reasonable price point, you don't want to create a tax headache every year for the foreseeable future if the income/ROI is not large enough. Definitely pick a market you know to start with. If you know good books covering tax implications for REI abroad, please let me know.

Regarding specific countries, US has been good to me but is currently relatively overpriced in my area. France is a bit tricky but there is good potential if you have enough time to understand the rules. Great interest rates, rehab cost part of the mortgage but the french government takes a lot of your income. There is a BP thread called "Anyone buying in France"...

@Matthew Schroeder I only have limited experience with mixed use at this point (small business on ground floor, a few units above). Similar to the US, business lease is far better than residential, the tenant is personally liable if the business fails to pay rent and I am not aware of any non-sense laws protecting a tenant staying for free. It definitely seems a good space for future purchases for me.

A word of caution on rehab in France: Assuming you'll be looking at very old buildings: Don't rely on your knowledge of US rehab work and apply it there like I did to some degree. A roof in France on an old quirky-sized building is way more expensive to replace than a typical northwest US roof despite lower labor rates. Old thick stone walls are much harder ($) to work with if you want to make significant changes. Very little is standard, straight or square. Watch for mold and humidity, also more tricky to figure out and resolve.

@James Wise  I saw the thread but I am a bit skeptical on whether it is real. My reading is an american living in Italy without paying rent (to the government providing him lodging). Although I agree that the US RE market is overall better (that's why it also attracts lots of foreign investments), I also think the US local markets I've been watching are overpriced at this time which makes a new investment risky.

I'd like to react to your comment of international investment being "wild": Since this thread is about France, I'll use the french RE market. There are millions of RE investors in France and although the government has a twisted version of socialism, it kind of functions. There is a free market of buying/selling properties and values go up and down based on offer/demand principles and what you can rent them for. Clueless governments over time have added rules to "help" tenants for political reasons such as rent control, then more rules to avoid tenants abusing previous rules leaving a relatively complex system that no new government has the guts to really cleanup (BTW the city of Seattle is trying to go down the same path, clueless politics know no borders).

Now, if there are still millions of RE investors, they must make some money somehow otherwise they would all park their money abroad or in commercial RE, leading to residential prices dropping. If you study the local rules or connect to a team of people who know them, you can figure out what works and what doesn't. For France, consider a few examples to offset the pro-tenant environment:

- Government gives a bunch of tax breaks for investors in new constructions if you rent them out for a given number of years.

- Many tenants including most students are eligible for the equivalent of section 8 in the US (without the site inspections), that's part of the rent guaranteed for the landlord.

- There are rent insurances: for ~3% of rent cost, they are supposed to pick up the tab when the tenant doesn't (I haven't had to use it yet but I factor it in my ROI calculations when I run my numbers before I make an offer).

- You can get subsidies for rehab, government will pay up to 30% of the bill (labor+material).

- You can rent your property to a subset of the government. Government will pay your rent for an agreed number of years, take care of everything including finding tenants and kicking them out if needed and return the place to you in good condition at the end of the agreed term. Hands off approach.

- Appliances typically not included => Harder for tenant to move out and less maintenance calls/cost for the landlord. That's also why Europe has smaller ovens, fridges and washing machines :-)

- Mortgages at 1.x% fixed rate. Sometimes no down payment. Rehab cost often included in the mortgage.

My point is that once you learn how to navigate the system, it is not that wild, just different. Whether you want to tackle a foreign market is the same thought process as deciding which area you want to invest in within the US: you consider population migration, local economy, risk factors, tax implications, local laws and don't just judge on a few horror stories.

A significant difference France vs US is that there is no MLS system so it is harder to assess the market and you really have to rely on local experts or work harder through listings and site visits. If the market is harder to assess for the buyer, it is also harder to assess for the seller... A few scary stories can actually help making good deals by keeping away investors who don't fairly assess the market.

@Sofia Liebon  Thanks for sharing such a detailed list. 

@Eric K.

In addition to the list provided by Sofia, I was also asked for lease agreements for properties already owned and rented. However, I didn't have to provide credit cards info, just checking investments accounts in all countries.

@Wes S.  Great to hear your story and advice. I really appreciate you following up after 2 years. Please give us an update in another 2 years... you may be on the podcast by then :-)

@Alexi Schreier

My first buy was in St Etienne but it was a bit of an experiment with rehab. I'll take me another year to conclude if it was worth it. Right now, it doesn't look too good as we have to deal with lawsuit within the HOA. I also underestimated some of the rehab costs... a good lesson. Government implemented a mandatory assessment of heat loss a few years ago countrywide when you buy or rent so tenants know how much they'll spend on heat or AC. Tenants care about it so when you consider a rehab, you have a dilemma between a cheaper but ultimately less attractive rehab or insulation in walls/ceilings/floor and a new set of windows/doors $$$. I am navigating the various potential subsidies to determine my path forward...

My previous example is in a smaller city around Lyon in which I bought properties in relatively good shape and with long term tenants. I would recommend Lyon area. Central location within Europe, many companies who need a good location without paying the price of Paris. Amazing food. Mountains, sea and Paris within a few hours drive or train. I think Lyon has a good future ahead: I don't think it has too many foreign investors yet (yes, it's all relative) but it is getting more and more visibility because of its food scene, culture, history and amazing events (fete des lumieres).

If you are serious about investing in France and are not quite fluent in French, consider this:

- If you talk about notary to a french speaking individual, chances are he will understand "notaire" which is more or less an escrow, not a notary public. Could be confusing when setting up power of attorney.

- If you say "escrow" to a french speaking individual, he will hear the french word "escroc" which mean a crook.

- Trying small talks, if you use the french verb "trompe" which sounds very close to the last name of a very prominent public figure in the US, be aware that "trompe" in French means one of the following depending on the context: misleading, deceiving, cheating, making a mistake.  :-)

@Alexi Schreier I bought them over the last 14 months, so yes, I still own them. Yes, I am somewhat impacted by some of Macron changes and by the CSG tax for non-EU residents but I am buying relatively affordable units and my goal is long term buy and hold (30 years) so I am not too worried about tax changes. They'll change again many times before I sell and others have a lot more to lose than I do. My motivation is not to get a better ROI than US investments but rather generate euros long term to hedge against currency value changes and an eventual USD value drop.

Also, I targeted units already rented for which rent is below rent control threshold. It is not in desirable areas but rents are low and so is purchase price. One of my tenant moved out recently and the new tenant moving in is paying 30% more while still within rent control requirements... The kind of value-added which makes up for higher taxes. The equation low purchase price + low interest rate + potential for higher rents works for me regardless of Macronomics :-)