Leaseback property investment is spreading across Europe and becoming easier to finance in France, the country where it originated.
A leaseback property is a specially built house or flat that you hand over to a leasing company in return for guaranteed rental income and a right to stay there for limited periods during the year. Having spread to Spain, leaseback property is appearing in Austria and Britain as demand grows for this relatively safe and easy-to-manage investment.
'People who prefer leaseback are normally older people who are looking for a long-term investment and a hassle-free product. They don't want to have to deal with the management issues,' said Sarah Rothschild, associate at property consultancy Savills.
'Normally, leaseback offers lower returns because the managing agent takes a share of the income. But people like them because the rental is guaranteed for a long period. If you are going to let out your property yourself you are likely to get a higher return but you will have to deal with the management of the property.'
France offers the least risky types of leaseback investments because they guarantee the longest rental returns, but they are relatively inflexible. Some French schemes forbid owners staying at their properties so that they can be available to tenants 365 days a year.
At other schemes, personal use greatly reduces the rental income. At the end of the typical nine- or 11-year lease, the leaseback company has the option to renew the contract.