France Home Finance recently assisted American banker Matt Yonally and his wife Karen with the purchase of their 3 bedroom, 2 bathroom flat located in the historic Marais area of Paris.

Like many visitors, Matt had been thinking about how nice it would be to own a property in France. “For the past eight years, each time we came to Paris we found ourselves spending more and more time staring in the windows of various estate agents. And each year we found ourselves regretting we hadn’t done it the year before – prices were going up and the American dollar was going down.”

Although they currently live in Santa Barbara, California, Matt and Karen have been regular visitors to France for the past twenty five years. “My wife had attended the Sorbonne when she was younger and that was what started her love of French food, culture and lifestyle. It’s become something that we both share.” As a self-described numbers person, Matt admits that he would have been reluctant to buy a property just for personal pleasure. At the same time, he was also not interested in purchasing something solely as investment.

“The idea of a vacation home that we could enjoy with our young son coupled with the business prospects it represented convinced me that we finally needed to make this happen.”

Finding the right property…
Matt found Susie Hollands of Bonapart Consulting through a recommendation from a friend. Bonapart is a full service property search company catering to international clients. They provide assistance with renting and buying as well relocation and renovation services. Matt also met with France Home Finance who provided an explanation of the differences in the lending process in France versus the US and a decision in principle for the loan amount Matt and Karen wanted to obtain.

Once the financing had been discussed and the budget secured, Susie was in constant contact with Matt over a period of four months to advise on the parameters and characteristics of the property in order to achieve the best balance between what they personally wanted from the property and what was required to maximize rental revenues.

“Most of our clients do quite a bit of research before they come to us. But what you are drawn to for a personal property needs to be balanced against the budget. It is also critical to consider the criteria that an investment property must have to make it desirable to renters. We work closely with our clients to balance out these three considerations.” Factors such as proximity to transport and historical sites or districts, traditional Parisian features such as mantelpieces, wooden parquet flooring and high ceilings, and views are all elements that visitors to Paris look for in a property they rent.

Matt and his family came back to Paris in July 2007 to view the short list of properties that Susie had put together and were able to close on an apartment on their last day in Paris.

During that time, they viewed almost thirty properties in ten days before closing on the last one they saw – literally on the way back to catch their flight. “Susie arranged to have the notaire meet us at 7 am as we were on our way to the airport!”

Obtaining the French mortgage…
The process to obtain a mortgage in France was surprising to Matt and Karen in terms of the paperwork required however they were very pleased with the lower euro-based interest rate and the tax advantages of having the loan secured on the French property. After reviewing many loan options they opted for a capped variable rate mortgage over twenty years. A larger down payment and the strength of their financial situation enabled them to waive the life insurance normally required which represented a significant savings.

Thankfully technology has made the process more manageable. Matt was able to scan and email many documents which gained valuable time. “The difficulties our mortgage broker overcame and the money they saved us were especially impressive. Knowing what I know now about the process, I would never recommend anyone attempt the journey without professional assistance.”

Getting up and running…
With the final papers signed, the Yonally’s were able to take possession that October and then start on the renovations. Susie worked with Matt on both the decoration and renovation of the flat. “As with the property search, when it comes to decorating a vacation property one of the challenges is to find a balance between your own personal tastes and the functionality and durability required from a rental property.” When the property closed, Susie took a series of professional pictures to start showing prospective renters what was on offer and begin to get a head start in marketing the flat.

The property has only been advertised for rent in its completed state for the past three weeks. Nevertheless, demand is high and they already have 16 weeks in 2008 booked – with Matt and his family reserving certain weeks for their own personal use.

The focus now is on managing the property to insure maintenance and maximum rental profits. Finding and working with a rental management company you can trust is a critical step for any non-resident investor. His advice to others looking to make a similar sort of self-funded investment is to definitely work with professionals that cater specifically for the overseas investor.

“Neither my wife or I speak French, and although we have bought a number of properties in the US, the process was completely different than in France. Working with trustworthy local professionals meant that our experience could not have been smoother or more successful.”

Summing it all up...
Balance is the key to a successful self-funded property investment. This includes matching your investment goals with your personal lifestyle goals and making sure that the characteristics of both the property and the financing are in harmony.

It is important to spend the time upfront to obtain a pre-approval from a French mortgage intermediary to set both your budget and cash needs. This will ensure an efficient search. As the search market is very competitive, this also allows you to provide a letter from a bank to prove you are financially viable if needed to win a bid on a property.

Location, renovation, and furnishings will have a major impact on future rental returns. Find a sourcing and management company with in-depth experience in all of these areas. When organizing your budget and financial planning, keep in mind that almost all properties require at least some renovation before they are able to be rented. This means planning for additional cash or financing up front and factoring in a lag time between closing on the property and being able to offer it up for rent.

Lastly, it is always worth checking with a solicitor or tax advisor in your home country in order to understand the tax implications of owning a rental property in a foreign country. Rental income earned in France must be declared to the French tax authorities.

May, 2008