Real Estate It has Its Ups and Downs and its Ins and Outs

Buying or renting real estate in any big city can be a crapshoot.  What’s in today may be out tomorrow. Neighborhoods change and not always for the better. Prices ebb and flow and who’s to predict when it’s the optimum time to be parting with hard-earned dollars?  Or signing on the bottom line of pages and pages of legalese that may make you real estate poor and feeling like an indentured slave. For example, there are times when you sense the bank or lending institution owns your house and not vice versa.  

Every city is different.  For example, many people were counting on Paris’s real estate prices skyrocketing when the Euro became the official EU currency on January 2000. Transferring funds between the eleven member states (which included France) would require a simple bank wire.  Funds wouldn’t be lost due to currency fluctuations or arbitrage.  

In retrospect, many economists say people held off buying property in order to wait to see where the Euro would settle. The anticipated bubble was anything but; most especially in Paris where many people rent apartments rather than purchasing them for myriad reasons, including high transfer costs and taxes. Plus, real estate tends to be passed down from one generation to another.  

Horror stories are rampant with tales of what happens among the generation that inherits a property, when not all are like-minded and can’t come to an equitable solution. As soon as money is involved, let’s face it; people most probably won’t be on their best behavior. Remember, because Napoleon was a bastard, he made it impossible for parents to disinherit children even if they were rapists. If you’re buying property in France, there are legal entities that can be created to protect buyers. They cost some money to set up; you’re required to file a yearly tax statement and ultimately can keep you from waging war against your (former) nearest and dearest.  This is especially necessary if you’re buying property with a non-relative or if you have children from previous marriages.  

One couple I know spent (literally) years settling a mother’s estate as each and every piece of furniture took on added significance when it came time to divvy it up. Bud and Christine still roll their eyes when the subject of patrimoine is introduced. For more than three years, they lived their lives with spreadsheets, flow charts and hearing sisters and brothers (and their spouses) having a lot to say.

When someone buys an apartment in Paris, here are some caveats: Space is at a premium. If you’re American, more than likely, you’ll need to scale down your expectations unless you like and can afford the grand family apartments in the usually calm and quiet 16 th and 17th arrondissements. Survey each property with an eye for what can fit where and where hidden closets might be constructed. Adopt a "sailboat frame of mind" to maximize every inch – since each one of them counts. When I’m in the US, I never visit without making a minimum of one foray to the Container Store.  

There are so many variables, which are frequently too numerous to quantify. But, you have to start somewhere – so here goes a mini-laundry list:
 

How many people do you need to house? Is this your permanent home or are you the type of person who likes to buy, re-do and then trade-up?  This can be iffy in today’s US sub-prime real estate market, where lending institutions doled out mortgages counting on the market going nothing but up – and interest rates remaining status-quo. If you signed up for an interest only or variable rate mortgage, your financial goose might be cooked.  But, if you believe real estate magnate Donald Trump’s predictions, unless you live in Manhattan (or possibly, Beverly Hills), there are real deals to be had.  When my Paris friends hear this is how I accumulated more than a few dollars buying, re-doing and then selling properties, they look at me with disbelief.  It’s just not a part of a French person’s mentality.  

Trump was a guest on CNN’s Larry King show and in all modesty (for which he’s [not] known) said that someone who wants to make money investing in real estate can do it. His just published book that’s met with less than stellar reviews swears that all it takes is volition. But The Donald does make some valid points. In the US, now is the time to renegotiate a property since banks don’t need or want house after house cluttering their portfolios, if the mortgage hasn’t already been sold off in a secondary market. It’s also a good time for buyers to make lower than low ball offers.   

Real estate is cyclical and now may be your chance to pick up a steal. One caveat: this everything is for sale at a bargain price is more prevalent in the States than in Europe.   And most especially Paris and in the EU – where prices may not be on the same dramatic upswing they were even a few months ago; but are by means on the way down and hitting bottom.  If people are selling property in order to raise money, it’s probably a maison secondaire.

No French bank is going to lend you a king’s ransom on a property where you’re investing little to no equity. That is, unless they know you extremely well, are holding attachable liquid assets that you’ve used as collateral. Lending institutions in France protect themselves from becoming landlords.  Most require you have a life insurance policy that covers your portion of the mortgage debt should you be run over by a truck.   
 

Come to think of it, during my nearly 20 years of living in the City of Light, I’ve known people who have moved from one rental to another. Conversely, I can’t think of anyone who has moved from one purchased apartment into another.  I’m sure some have. Upon reflection, I have. They’re Americans.  

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