Renovation Property Development is usually exclusively sold to French investors as it allows them to reduce the level of taxation by off setting most of the renovation costs against their rental and income tax.
But it is first of all, great property investment opportunities, which we believe, international clients should also be able to access. Stone and Living has many years experiences selling these types of developments and we are delighted to be able to assist our international investors to get into this property market.
Each project we select needs to pass our due diligence:
Quality of the renovation (references of previous renovation realised)
Identify clearly all parties involved (seller/ law firm/project manager/renovation company/notary/investor)
Analyse of the ratio between the property and the renovation costs
Exit price – it needs to be coherent with the price of the new built in the same area.
What is a renovation property development?
It is a complete renovation of an existing building inside and out, so the end result is the equivalent of a new residence and apartments. All the renovation works are delegated to a specialized company representing the interest of the investors. All costs are agreed and controlled by the ASL (Association Syndicat Libre). An ASL is a company created only for the purpose of managing the renovation work and its costs. It is created by a law firm that is appointed to oversee all the legal and fiscal requirement. Once the renovation is completed and all have been perfectly executed, the ASL is terminated. Once the keys are exchanged, each owner is free to use their property as they wish – rental property / main home / second home.
What are the advantages for the buyer?
A complete renovation executed and managed professionals
This is piece of mind for the investors, all the renovation works is done and supervised by professionals. No unforeseen delay, no extra costs as all is agreed at the time of the signature of the pre-sale contracts. The renovation will benefit from the same 10 years guarantee as a new build.
A property investment in a prime location
It is one main objective for the investor, building a property portfolio in a prime location like Paris, Lyon, Cannes, Nice, Bordeaux. For the French investors it is very important that the rental market be dynamic. For the international investors, it is an opportunity to acquire a renovated property in a prime location and either to use it as a second home and/or as an investment property.
All the comfort of a new build
With a complete renovation, you will acquire an apartment and share of a building, as you would in a new residence, with the addition of original features kept and restored when possible.
Low maintenance costs
No major works to be planned for several years for both private and common parts. In general, the latest technological and environmental standards have been anticipated.
An existing property that can be seen
Contrary to a new build where you would buy off plan, in the renovation property development you will be able to see the layout of the apartment, the views and the existing surrounding
Notary fees only paid on the property price
As the price of the property is split in 2: property price before renovation and the renovation costs, the notary fees can only be applied to the first part. So it is a saving for the investor.
How does the purchase process work?
The pre-sale contract
The investor reserves an apartment through a pre-sale contract (compromis de vente), that binds him to the seller. The pre-sale contract is the summary of what you are purchasing (ie the apartment before renovation and share of the common spaces ) and its price. You then transfer your deposit to the notary. You can of course have the same conditions as a standard sale and put down the requirement of a loan to finance your acquisition.
At the same time you are also signing all the documents to be part of the ASL and have the renovation costs listed. So you have your final property price.
The deed of sale
When both parties have met all the conditions, the notary hands over a draft of the deed to the purchaser and call for the sale of the property. The property price (minus the deposit) and the notary fees are then called by the notary – the sale can be then concluded.
The day after, the ASL via the law firm called the first instalment for the renovation costs for your apartment – it is usually between 35% to 40% of the total renovation but one can choose to transfer all the funds in one go. Depending at what stage of the renovation, you are purchasing, it can be more as the work can be further advanced.
Progress of the work
As the renovation progress, the ASL via the law firm will carry on calling the rest of the funds.
It is pretty much like a new build, the project manager will submit the attestation of completed work and then only the funds are transferred and dispatched to pay the different tradesmen companies.
Once the property is completed, the buyer is invited to the meeting for the handing over of the keys. On this occasion, the buyer is invited to visit the property and, if necessary, to make a snag list if he finds any non-conformities with the descriptive notice. Often, developers organise a visit one month before the delivery date in order to anticipate possible snag list.