Buying an apartment in Paris - Fractional Ownership
Sep 6th, 2007, 11:48 AM
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Buying an apartment in Paris - Fractional Ownership
Like many people on this board, I've always dreamed of owning a home in Paris. I'm curious, has anyone done this or have you considered it? To me the idea sounds very similar to owning a timeshare where you purchase 1/2, 1/4 to 1/12 ownershop. Cost wise, this *sounds* very appealing but, I'm wondering investment wise if it's a good idea? Everyone here in the USA seems to end up unloading their timeshares at a loss. I honestly don't know anyone who purchased a timeshare who would do it again! On the other hand, you could rent an apartment on a monthly basis for A LOT less than what you'd pay to own. The issue is long term, I would assume that real estate values in Paris are on the rise so perhaps it would be a good investment in the long run? Just dreaming at work and weighing my options!
Sep 6th, 2007, 11:58 AM
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Well, before you get carried away with this (lovely) idea...you might want to get hold of the "Guides Pratiques du Logement," published by De particulier à Particulier, and read about Les Sociétés civiles immobilières, which is, I believe the French equivalent of a time share agreement. As with anything French, it's complicated. And there are those pesky inheritance laws, which befomre peskier when more than one person owns a dwelling.
Of course, it's been 16 years since I bought property in France, and maybe everything has changed. Maybe a time share is just a time share is just a time share. And maybe someone on this board who's recently bought property in Paris knows more specifically what your options are.
Of course, it's been 16 years since I bought property in France, and maybe everything has changed. Maybe a time share is just a time share is just a time share. And maybe someone on this board who's recently bought property in Paris knows more specifically what your options are.
Sep 6th, 2007, 12:20 PM
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If you do a search here, there were a couple of long threads maybe 10-12 months ago about this very topic... I know, because I have the same dream!
It's more complicated than it seems. My goal would be to have place, use it 3-4 weeks a year and rent out the rest of time using an agency.
With no intention of promoting anything, I do get a newsletter from Parler Paris, They offer seminars on buying in France, as well as a newsletter on the topic.
I will follow this thread with interest.
It's more complicated than it seems. My goal would be to have place, use it 3-4 weeks a year and rent out the rest of time using an agency.
With no intention of promoting anything, I do get a newsletter from Parler Paris, They offer seminars on buying in France, as well as a newsletter on the topic.
I will follow this thread with interest.
Sep 6th, 2007, 12:26 PM
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You know I searched "Fractional Ownership" and "buying an apartment in Paris" and nothing recent turned up! I hate when that happens! 
Now what I'd really like to do is sell our house here and rent an apartment then buy a home in Paris and rent it when we're not there! Now THAT would be living the dream!
Now what I'd really like to do is sell our house here and rent an apartment then buy a home in Paris and rent it when we're not there! Now THAT would be living the dream!
Sep 6th, 2007, 01:38 PM
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There was an article in the NY Times on this exact topic just a few weeks ago. I'm sure you can find that online still (pretty sure). It was much less than 1/4 ownership, I think there were about 10-12 owners of the Parisian apt.
Personally, I thought it sounded pointless. The couple in the article were wealthy physicians and said they went there once a year or more. I believe they were retired. However, the reason is sounded pointless to me was that it was exactly like a timeshare (only with no timeshare benefits of being able to go to other cities). They only had the use of the apt. for a couple weeks a year because there were so many owners (I think more than 12). So then they had to duke it out over who got certain times, I suppose -- but also, because there were so many owners, it really wasn't like your own place in many ways. The amount they paid was so expensive (to me, they thought it was cheap -- which it was in comparison to buying one) that they could easily have paid that for a very very nice vacation rental apt. or luxury hotel in Paris, instead. Then they wouldn't be tied to the legal and other problems of ownership, and could go whenever they wanted. Also, they wouldn't have to stay in the same place all the time if they didn't want to. For this couple, who was at least 65 years old, I believe, if you amortized that payment amount over say 20 years (my assumption for use), it wasn't that cheap, as I said. I think it was around $200K for this small partial share of a studio apt. in the 7th arr. and they only got the use of it for a couple weeks a year.
I just really don't understand the appeal of this at all.
Personally, I thought it sounded pointless. The couple in the article were wealthy physicians and said they went there once a year or more. I believe they were retired. However, the reason is sounded pointless to me was that it was exactly like a timeshare (only with no timeshare benefits of being able to go to other cities). They only had the use of the apt. for a couple weeks a year because there were so many owners (I think more than 12). So then they had to duke it out over who got certain times, I suppose -- but also, because there were so many owners, it really wasn't like your own place in many ways. The amount they paid was so expensive (to me, they thought it was cheap -- which it was in comparison to buying one) that they could easily have paid that for a very very nice vacation rental apt. or luxury hotel in Paris, instead. Then they wouldn't be tied to the legal and other problems of ownership, and could go whenever they wanted. Also, they wouldn't have to stay in the same place all the time if they didn't want to. For this couple, who was at least 65 years old, I believe, if you amortized that payment amount over say 20 years (my assumption for use), it wasn't that cheap, as I said. I think it was around $200K for this small partial share of a studio apt. in the 7th arr. and they only got the use of it for a couple weeks a year.
I just really don't understand the appeal of this at all.
Sep 6th, 2007, 01:42 PM
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Sep 6th, 2007, 01:45 PM
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Here's the article for discussion:
http://preview.tinyurl.com/2s2a7t
I remembered the figures a little wrong, but I did some math when I read it and did have those opinions. They paid $112K for a 500 SF studio share with about 12 people. SO they are allowed to use it four weeks a year. I figured $112K over 20 years (which is simplistic, but I'm assuming what you could earn on that invested would balance out raise in rents/fees for a vacation apt. or hotel) is an average cost of $5600 per year or $1400 a week for the time they are allowed. That's $200 a day. Now maybe it's worth it to them to pay that, but I just think the drawbacks would outweigh any advantage (such as if it were nicer than what you could rent from an agency for $200).
http://preview.tinyurl.com/2s2a7t
I remembered the figures a little wrong, but I did some math when I read it and did have those opinions. They paid $112K for a 500 SF studio share with about 12 people. SO they are allowed to use it four weeks a year. I figured $112K over 20 years (which is simplistic, but I'm assuming what you could earn on that invested would balance out raise in rents/fees for a vacation apt. or hotel) is an average cost of $5600 per year or $1400 a week for the time they are allowed. That's $200 a day. Now maybe it's worth it to them to pay that, but I just think the drawbacks would outweigh any advantage (such as if it were nicer than what you could rent from an agency for $200).
Sep 9th, 2007, 03:10 PM
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Ive read a little about fractional ownership/destination clubs and one thing that sticks out in my mind is that it might be better to think about buying into a place run by one of the companies that would give you the option of using not just one property, but also the others in the group..that would give you a lot more flexibility. Try searching for destination clubs...
Sep 10th, 2007, 02:47 PM
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Hello to everyone on this board. I am the owner of the apartments that the New York Times article on Aug. 8th was referring to and I thought it would be fair for me to clarify/ some points concerning our fractional ownership program:
1. On the difference between timeshare and fractional ownership: There's a lot of information on the Internet about this subject. For me, however, the main differences are, (1) in time share, you usually buy time, not real estate; (2) since you don't own real property, you don't have much control over upkeep and maintenance, or their cost, and often end up with either run down units over the years or overly expensive maintenance costs that only benefit the promoter; (3) Fractional properties are typically up market as you are buying into a property or unit, rather than time in a hotel room or resort.
It is general knowledge that timeshare has been a poor investment. And the reason surely must be a chronic oversupply created by developers, plus that there is no underlying property investment. It is difficult to predict what the resale market will be on the performance of fractionals, but I expect their exclusivity will prevent an oversupply developing. That is to say, as long as developers don't go down-market and market these as fractionals.
Thus, from the buyer's point of view, the best insurance against an oversupply is to buy into upmarket exclusivity. Ask yourself the question: How easily can this property be replicated? -
2. Buying versus renting: We rent vacation apartments in Paris too, so I can't say that there's anything wrong with renting. The main differences here are, (1) if you are a regular visitor to Paris, then it makes sense to buy into a fractional ownership, as you will most probably get your money back when you sell (more on that below). In other words, let's say you keep your share for 10 years, you can say "I spent one month a year in a wonderful Parisian apartment and it did not cost me a thing". In this case, rental money would be wasted money. (2) There is a psychological factor involved in having your own pied-à-terre in Paris, even if you own a fraction of it only. Over the years, you get to really know the place, the neighbors, the neighborhood butcher and boulangerie, the local market... All of which makes you feel like a true Parisian. With rentals, you are never guaranteed to stay in the same apartment every year.
3. About real estate values in Paris: These have been increasing steadily over the past few years, and I don't see any reason why they should stop doing so. Demand is bigger than supply, interest rates are low, banks lend easily, and Paris is still by far cheaper than either London or New York. Investing in fractional ownership is not normally done for purely business reasons. If you had some cash and wanted to invest it in order to secure a good return in the future, you are better off putting it in another instrument. Fractional ownership is more of a lifestyle investment. In the case of Paris, if prices continue to increase, you might not only have spent 10 years in your own wonderful apartment for free, but you might even make some return on your investment. The worse case scenario is that you sell out at a loss, but you still get some money back and your 10 years of vacationing in France will have cost you a lot less than renting or going to a hotel. Remember, you and the other 12 owners (time shares usually involve a lot more people) can sell the whole property anytime you like.
4. Concerning buying a whole apartment and renting it out when you don't use it: I get a lot of requests from people who would like us to help them buy an apartment and rent it out for them. Here's what I usually tell them: unless you are going to stay in it for at least 3-4 months, and unless you will not use the high season months for yourselves and keep some quality time for renters, and unless you are willing to put up a large sum of cash to cover your down payment and transfer tax costs; and unless you are willing to rent it out by yourselves and save on the hefty commissions you will pay to agents (30-50% is normal, which might not cover your mortgage costs), and unless you have time to attend HOA meetings and take care of leaks and maintenance yourselves and guarantee a good service to your renters, and unless you want to avoid a lot French tax and inheritance law and other legal hassles... don't buy direct.
5. Concerning the "wealthy couple" that bought into our program: They are extremely nice people who are now retired and have some disposable income to afford a share of a Parisian apartment. What they bought into was a full program, with services and amenities, plus the possibility to trade their four weeks (not two), not only with other apartments in our program (they can choose to stay with friends in a larger unit if they wish, or trade their week for another one during the year), but they can also trade any of their weeks with our property in Provence, and others to come in France. One advantage to trading with our other units is that they are sure to get same quality of interiors and service. Having said this, we are currently working on adding other trading facilities, but we want to make sure that our owners get the same quality everywhere they go.
6. Concerning the price: The starting prices that our properties are going for are 82,000 euros for the one-bedroom apartment (not a studio), and 137,000 euros for the 2-bedroom apartment. And you get a minimum of four weeks per share for each.
Using the same calculation method as was used by Christina, 82,000 euros amortized over 20 years would be 4,100 euros per year. Should you rent the same apartment for four weeks every year, you'd have to pay at least 6,000 euros. Over 20 years, you would have "wasted" 120,000 euros in rentals, whereas if you were to sell your share after 20 years, even if you were to sell it at the same price -- highly unlikely for Paris, you get your money back and you can say "this did not cost me anything -- and it was hassle-free". Obviously, there's a lot more to it than that, but I'm just using the same method you used.
Walid Halabi
www.fractional.parispiedaterre.com
Live like a Parisian… with an advantage
1. On the difference between timeshare and fractional ownership: There's a lot of information on the Internet about this subject. For me, however, the main differences are, (1) in time share, you usually buy time, not real estate; (2) since you don't own real property, you don't have much control over upkeep and maintenance, or their cost, and often end up with either run down units over the years or overly expensive maintenance costs that only benefit the promoter; (3) Fractional properties are typically up market as you are buying into a property or unit, rather than time in a hotel room or resort.
It is general knowledge that timeshare has been a poor investment. And the reason surely must be a chronic oversupply created by developers, plus that there is no underlying property investment. It is difficult to predict what the resale market will be on the performance of fractionals, but I expect their exclusivity will prevent an oversupply developing. That is to say, as long as developers don't go down-market and market these as fractionals.
Thus, from the buyer's point of view, the best insurance against an oversupply is to buy into upmarket exclusivity. Ask yourself the question: How easily can this property be replicated? -
2. Buying versus renting: We rent vacation apartments in Paris too, so I can't say that there's anything wrong with renting. The main differences here are, (1) if you are a regular visitor to Paris, then it makes sense to buy into a fractional ownership, as you will most probably get your money back when you sell (more on that below). In other words, let's say you keep your share for 10 years, you can say "I spent one month a year in a wonderful Parisian apartment and it did not cost me a thing". In this case, rental money would be wasted money. (2) There is a psychological factor involved in having your own pied-à-terre in Paris, even if you own a fraction of it only. Over the years, you get to really know the place, the neighbors, the neighborhood butcher and boulangerie, the local market... All of which makes you feel like a true Parisian. With rentals, you are never guaranteed to stay in the same apartment every year.
3. About real estate values in Paris: These have been increasing steadily over the past few years, and I don't see any reason why they should stop doing so. Demand is bigger than supply, interest rates are low, banks lend easily, and Paris is still by far cheaper than either London or New York. Investing in fractional ownership is not normally done for purely business reasons. If you had some cash and wanted to invest it in order to secure a good return in the future, you are better off putting it in another instrument. Fractional ownership is more of a lifestyle investment. In the case of Paris, if prices continue to increase, you might not only have spent 10 years in your own wonderful apartment for free, but you might even make some return on your investment. The worse case scenario is that you sell out at a loss, but you still get some money back and your 10 years of vacationing in France will have cost you a lot less than renting or going to a hotel. Remember, you and the other 12 owners (time shares usually involve a lot more people) can sell the whole property anytime you like.
4. Concerning buying a whole apartment and renting it out when you don't use it: I get a lot of requests from people who would like us to help them buy an apartment and rent it out for them. Here's what I usually tell them: unless you are going to stay in it for at least 3-4 months, and unless you will not use the high season months for yourselves and keep some quality time for renters, and unless you are willing to put up a large sum of cash to cover your down payment and transfer tax costs; and unless you are willing to rent it out by yourselves and save on the hefty commissions you will pay to agents (30-50% is normal, which might not cover your mortgage costs), and unless you have time to attend HOA meetings and take care of leaks and maintenance yourselves and guarantee a good service to your renters, and unless you want to avoid a lot French tax and inheritance law and other legal hassles... don't buy direct.
5. Concerning the "wealthy couple" that bought into our program: They are extremely nice people who are now retired and have some disposable income to afford a share of a Parisian apartment. What they bought into was a full program, with services and amenities, plus the possibility to trade their four weeks (not two), not only with other apartments in our program (they can choose to stay with friends in a larger unit if they wish, or trade their week for another one during the year), but they can also trade any of their weeks with our property in Provence, and others to come in France. One advantage to trading with our other units is that they are sure to get same quality of interiors and service. Having said this, we are currently working on adding other trading facilities, but we want to make sure that our owners get the same quality everywhere they go.
6. Concerning the price: The starting prices that our properties are going for are 82,000 euros for the one-bedroom apartment (not a studio), and 137,000 euros for the 2-bedroom apartment. And you get a minimum of four weeks per share for each.
Using the same calculation method as was used by Christina, 82,000 euros amortized over 20 years would be 4,100 euros per year. Should you rent the same apartment for four weeks every year, you'd have to pay at least 6,000 euros. Over 20 years, you would have "wasted" 120,000 euros in rentals, whereas if you were to sell your share after 20 years, even if you were to sell it at the same price -- highly unlikely for Paris, you get your money back and you can say "this did not cost me anything -- and it was hassle-free". Obviously, there's a lot more to it than that, but I'm just using the same method you used.
Walid Halabi
www.fractional.parispiedaterre.com
Live like a Parisian… with an advantage
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