A Place to Call Home in the City of Light
Paris, France: For many, the dream of owning a vacation home in Paris remains just that. Perhaps they can't afford it, or maybe they think they wouldn’t use it often enough to justify the expense. Some don’t feel knowledgeable about the rental market and unsure of how to cover their mortgage and expenses through rental income. And for many, the hassle of managing property in a foreign country is simply more work than they are willing to take on.
But an intriguing opportunity in Paris real estate is addressing these challenges and giving France-lovers the chance to own their piece of Paris. Called fractional ownership, it is rapidly growing in popularity as an alternative to sole ownership of a second home.
Fractional ownership – also called shared or co-ownership – brings together a small group of investors, typically five owners to a property. Owners enjoy the capital growth of property, the rental income along the way, and a beautiful, luxurious property in the heart of Paris. At the same time, everything is fully managed behind the scenes: personal use time, luxury amenities and concierge services, property maintenance, legal and financial requirements, and rental management.
Each co-owner commits an initial cash investment of 50% of the cost of their one-fifth ownership share. Financing for the remaining half is arranged on favorable terms in advance, with no loan needed for the individual owners. Unlike a time-share, residency periods are flexible; and with only a small group of investors, owners are able to quickly make decisions about the management and ultimate sale of the property – flexibility that would be difficult or impossible with larger groups.
While the benefits could end there, co-ownership presents an even greater investment opportunity in areas where there is a vibrant short-term luxury rental market, such as Paris. Successful fractional ownership apartments in Paris are selected for their luxurious amenities and for their star location in the districts that attract the highest luxury rental demand. So, during periods not used by the owners, the properties are rented to generate income, which can completely defray the costs of ownership and even provide owners with an income – again, with someone else taking care of all the details. The projected result is that, with up to three weeks use of the property, an owner will realize an annual income from the rental that is more than his or her contribution to the mortgage.
Currently on the market is a 3 bedroom, 2½ bath luxury apartment on the fashionable rue des Saints Pères in Saint Germain des Près, the heart of Paris’ 6th arrondissement. The 19th century building has been fully updated, including an elevator; the apartment encompasses the entire fourth floor (fifth floor US). There are 8 large windows looking out onto the street, providing great light throughout the day. The rooms evoke a comfortable and intimate feeling with beautiful woodwork, carvings, and fireplaces. This classic apartment of 117m² will be completely renovated to the highest standard by a noted Paris interior designer with an eye to practical modernity while preserving the timeless aspect of Paris charm. These improvements will include:
Fully equipped modern kitchen with high-end appliances and furnishings.
Completely new modern bathrooms.
New soundproof windows
Refinished wood floors
New light fixtures throughout
All new plumbing
All new electrical
Amenities will include cable television, wireless high speed Internet, telephone, and audio system.
What’s more, you are pampered you with a comprehensive suite of concierge services to assure that your vacations are memorable, meaningful, and totally trouble-free.
The price includes the all acquisition costs, renovation and furnishing, and legal and financing fees.
The cost of this apartment for a sole purchaser? All told, over $2,700,000.
The cost of a fractional share? Only $299,000 (€220,000) down, and financing in place for the rest.
Buyers have expressed interest not only for this kind of high-end luxury rental property, but for smaller-scale properties in other areas of the city, as well as non-rentals. When a group of investors with similar criteria in terms of location, price and apartment size are brought together, any custom property is possible.
“The advantages are myriad,” said Miranda Bothe, managing director of Paris Property Finders, the exclusive broker for these fractional properties. “As an investment with a fixed term of ownership, real estate in a market like Paris is difficult to beat. Our buyers get to enjoy an amazing apartment in one of the best neighborhoods in town, at a fraction of the cost of full ownership, and then realize the appreciation when the property – or even their individual share – is sold. In the meantime, the management company has extensive experience in real estate, and in the fractional ownership market in particular. They manages the property flawlessly on behalf of the owners, organizing the personal use calendar and renting out unused weeks to provide an income stream for owners if they wish. They also provide personal concierge services and luxury amenities to make the vacation experience truly incomparable. It is, I believe, the most intelligent way to own a vacation home.”
What’s more, the ownership structure is designed to minimize the hassle of each of the investors, so that their financial experience is a simple one. The property is owned by an LLC based in the United States, which in turn is the entity in which each investor owns shares. The maze of French taxes, closing fees, accounting, legal and reporting requirements and so on are handled by the management company, leaving each investor the ease of being a simple shareholder in an American company.
With these benefits, co-ownership is an ideal model for certain purchasers. “Vacation homes and pied-à-terres may be prohibitively expensive and can be a lot of work to manage from afar,” said Ms. Bothe. “The co-ownership option is very exciting, because it makes it possible for people to maintain a foothold in a fabulous destination, with their own luxurious apartment, for a comparatively small cost and minimal hassle. Moreover, by keeping ownership to a small group of five owners, the property retains a spirit of privacy and ownership that is lost in fractional ownership properties with 10 or more owners. Our clients appreciate the exclusivity of this structure.
I am often approached by buyers with a budget that otherwise could not buy them a quality, income-generating property in Paris, or people who are hesitant to step into the unfamiliar world of owning property abroad. I am really pleased to now be able to tell them that, yes, they do have a viable option open to them.”
Co-owners in fractional properties still enjoy some of the benefits of sole ownership: they can store personal items in the apartment when not in residence, and can offer their use time to family and friends. What’s more, these fractional ownership properties are linked into a property exchange network, so each co-owner can trade weeks in their Paris property with stays in any of more than a thousand properties around the world.
The fractional ownership properties offered by Paris Property Finders also contemplates an exit strategy. Owners can decide among themselves, but ordinarily the property is sold after 10 years, and the owners enjoy their share of the capital gains on the sale. Return on investment in a real estate in the Paris market remains strong, as prices continue to rise vigorously – averaging over 10% a year.
Will this up-trend continue? Probably yes. For one thing, Paris is the most visited tourist destination in the world. So there is no end to the demand for good rental properties, especially larger apartments in the most coveted neighborhoods. At the same time, real estate in Paris remains better priced than other major European capitals such as London, Rome, Dublin, Madrid, and Zurich. Finally, for savvy investors, owning a great property in Paris has the added benefit of diversifying assets into a strong and rising currency. Thus, even with the strong Euro, a medium- to long-term investment in Paris offers excellent growth possibilities.
ADVERTORIAL
Fractional ownership has opened up this investment and vacation market like never before, offering an accessible alternative for owning and enjoying a second home in Paris. For more information, visit www.parispropertyfinders.com/fractionalownership.php or request additional information at http://parispropertyfinders.com/fractional_InquiryForm.php?p=2222.
