PL10 – 28th June 2002.

Posted by admin in Property Letters | June 28th 2002

28th June 2002.

Property Letter no 10.

We are back in the Cape, and very happy to be here again, reunited with Adam and Alice. We’re supposed to be moving into our new house this weekend, which we have been looking forward to so much, bringing to an end 10 months of living out of suitcases, but our containers haven’t arrived from Zim! We had been told they were in Joburg and coming down any day, but there’s now some debate between SA and Zim as to where the heck they are. The SA Spoornet people say they definitely haven’t seen them. We cross fingers for next week.

Our time in France has been very successful. We viewed nearly 200 properties (on one day we saw nine!), and have bought six, one being a double studio which will become two units again, giving us seven effectively. Both Vicky and I are delighted with what we have found, but are sorry that we were not able to fulfill everyone’s needs.

However there are two more apartments that we recommend.
I attach the details of them and the detailed analysis for each. We have analysed every property in the same way, but for obvious reasons have not sent every one through in detail on e-mail. But today as it’s only two apartments, I will.

The studio No.57 at Residence de Bosquet, in Ave. General Vautrin
We saw this apartment just before we left Cannes, and it’s very good in our opinion. I phoned this morning and it is still available. It is inexpensive and very well situated in the centre of Cannes, just behind the 5 Star Hotel Martinez. It is a short walk to anywhere one needs to go in Cannes, shopping, conferencing, etc., and one block from the beach. The whole of the Italian and French Riviera has a railway line running along the sea shore, built there because in those days it was (and still is) easier and cheaper to build a railway line along the flat. In some places it’s literally on the beach, such as in places along the coast from Muizenberg through Cork Bay and Fishoek to Simonstown. In other places it’s a bit set back. Through much of Cannes it’s about 100m from the beach, and that strip between it and the beach is the expensive Croisette with all the big Hotels. One crosses below the railway line at various points, and Ave. Gen. Vautrin runs along it. On the other side of the road are blocks of flats, and Vicky and I have bought the double studio in exactly the same situation 100m from this Residence de Bosquet. We would love to buy this one too, but we can’t. It does not overlook the street or the railway line, but looks out over gardens and other buildings in the opposite direction. Very attractive outlook, and the flat itself will be lovely with a few thousand Euros spent on it – a new kitchen and a fresh coat of paint have been budgeted for in the analysis.

Studio in La Brise, No. 2 Place de l’Etang
This little flat is right next door to the one Vicky and I bought on the 5th floor. It’s identical in size, location, outlook and even price (which is an odd amount because many of the French still think in Francs and convert to Euros, and it is F.Fr 600 000). The view out the front is over the town square (The area of Palm Beach in Cannes) with its little shops and restaurants all around, and the square itself devoted all day long to “boulle” which the locals and visitors play with enthusiasm. The view out the back of the flat is of the sea – a lovely open outlook. This flat has real character, and again, if Vicky and I could afford another we would go for it.
Palm Beach is a town connected to the main centre of Cannes, and actually on the Croisette, but at the eastern end of it. It is a 15 minute beautiful walk along the beaches, through gardens and a palm filled boulevard (or a two minute drive) to the centre, but it retains the charm and quiet of the old village that it was. It is a peninsula about 500m wide and has sea on both sides, and beaches on both sides, one looking east towards Antibes (visible), and the other west towards Cannes.
We received the e-mail today that this flat is available, and have not seen it from the inside, but it is directly adjacent to ours on the same floor, the same dimensions, and obviously from the photo very well maintained and equipped. In addition, Pierre knows us now, and knows what we want. I would not hesitate.

Modus Operandi.
In the event that you are interested in buying, let me know urgently. I will put in the offer by phone. Once accepted and secured we have time to complete the written offer and all further necessary details by fax, courier and post. There is a bit of work involved but I’m doing it now with Suzie and Des’ flat and it’s going fine. Please refer to my previous e-mails, and remember that there is a 7 day “cooling off” period where you may pull out for any reason, and still get your deposit refunded (in three weeks).
The deposit of 10% of the agreed purchase price is what you have to have available immediately. Thereafter the loan is applied for, granted in a month or less, and transfer takes another couple of months. All the remainder due (balance of the deposit, transfer duties etc.), is not required until transfer.
Buying in the name of an individual is preferable if possible. (Trusts and so on are regarded with some skepticism by the authorities, although it is immaterial the source of the funds you use)
If you are comfortable with a deposit of 30% and a loan of 70% that is easier as it is the max. that the bank will normally give to non-residents. I pushed for 75% but it requires special consideration, so if you can, avoid it.

Refresher of the principles we have stayed faithful to.
• These are not holiday homes for you or us primarily, although all of them can be used by the owner or your friends if you so wish. They are very clean.
• All so far are in Cannes and perhaps we should keep it that way.
• We have tried hard to ensure that each property is highly rentable, and that all the factors such as position, character, reasonable quietness, and good sound building, are there.
• We have driven hard for a good competitive purchase price, as well as examining the costs applicable to each building, such as imminent repairs, taxes, levys etc.
• We have insisted that as a rule, and according to our consistent formulae, every apartment we recommended achieved a positive cash flow if our targets were attained.
• We have had difficulty evaluating and recommending on the more expensive apartments that some of you have asked for, because it is much more difficult to achieve the returns that one can on smaller units (two small units outperform one big one every time it seems). We are very happy to continue to try, but fear that the income generation side will be more difficult, although capital appreciation (the medium to long term) should be good.

Our Timetable.
We expect the completion of transfer of the properties we have already bought to take until August or September to complete. Work on painting and other redecorating may well be able to begin through our people on the ground there before we arrive, although in every case the amount of work (cosmetic) required is no more than a few days.
Vicky and I will go to Cannes on the weekend of 12/13 October, with Steve and Averil, and spend a few weeks there with them. We will be settling Steve and Averil in, furnishing apartments, equipping, starting the letting, and probably buying some more properties.

Marketing.
Project No. 1 for the next few months and for all time thereafter.
We have many ideas, have already made contacts and partnerships in Cannes and Nice, and have started our own website which we will build (more accurately, Lao in London will build for us). You can already go into it if you wish at www.hanagwe.com which we will later re register as www.Azur-Accom.com. Of course we can not put photos etc onto the site until the apartments are redecorated and furnished.
A question has been put to us by a prospective buyer – “ how are we going to allocate apartments if we have one potential lessee and three empty apartments each of which meet his requirements?” My feeble answer was that it will be Steve’s responsibility to be scrupulously ethical and honest, and to allocate as equitably as he can. But it is an answer I am not happy with. Any ideas? The truth is that not all apartments will be full all of the time, so there is bound to be some competition. I will be making enquiries, but do any of you know how other companies have worked out this potentially tricky question, which must apply wherever you place your property, and whoever represents your interests? Please let me know your thoughts.

Please keep in touch, as I will with you. And if you want one of the apartments above, please let me know immediately – we have lost quite a few as you know.

Love to you all, from Vicky and I.

Guy.

First Property
PROPERTY ANALYSIS

1 Property Name: La Bruis
Location: Palm Beach – Cannes
Type: studio
Floor level 5th
Sq m 22
Occupation Date immediate

2 Purchase cost of property 91470.00
Garage
Parking
Cave/cellar
Total property cost 91470.00
Tsf duties 7% 91470 6402.90 6402.90
Tsf duties 3% 0.00 0.00

Total cost per sq m 4157.73

3 Mortage % 70.00 64029.00
Deposit % 30.00 27441.00

Rate of Interest 4.10
Monthly repayments 476.82
mortgage plus life assurance
4 Estimated rental income Rate per week
9 weeks @ 9 600.00 5400.00
4 weeks @ 4 450.00 1800.00
balance @ 0.00
Other @ 27 300.00 8100.00
Total Income 40 15300.00

5 Income/cost of property 16.73 %

6 Estimated costs Rate per month
Advertising 70.00 840.00
Tax fonciere 36.90 442.80
Tax habitation 36.90 442.80
Insurance 30.00 360.00
Levy – property 67.00 804.00
Water 14.00 168.00
Electricity 50.00 600.00
R & M 50.00 600.00
Management 159.38 1912.50
Services 40 weeks x 50 2000.00
Total annual expenses 8170.10
Mortgage repayment 476.82 5721.89
Total with mortgage repayment 13891.99

7 Investment
Deposit 27441.00
Tsf duties 6402.90
kitchen 0.00
furniture unknown factor 2000.00
redecoration 0.00
Other 0.00
Total invested 35843.90

8 Net Profit – Return on Investment – 1st yr
Annual gross rents 15300.00
Annual expenses 8170.10
Gross annual operating profit 7129.90
Debts service 5721.89
Net overall operating profit 1408.01
Net Profit R.O.I. % 3.93 %

9 Capital Appreciation – R.O.I – 1st yr
Original purchase price 91470.00
Cost of improvements Kitchen & redecoration 0.00
Total 91470.00
Forced appreciation Adding value – better use
Natural appreciation 12.00 10976.40
Revised Value of Property 102446.40
10976.40
Appreciation R.O.I. % 0.31 30.62 %

10 Equity Buildup – R.I.O. – 1st yr
Initial Loan Amount 64029.00
Amount applied to principal 3058.88
New Principal Balance 60970.12
Equity Buildup Initial loan amt – new principal bal 3058.88
Equity Buildup R.O.I. % 8.53 %

11 Tax Shelter R.O.I. – 1st yr
Expenses will offset most or all
income for tax purposes – depending
On individuals tax circumstances 10.00 10.00 %

12 Return on Cash invested % 3.93 %
Appreciation % 30.62 %
Equity Buildup % 8.53 %
Tax Shelter % 10.00 %
Total R.O.I. % 53.08 %

Tiny little studio appartment in good position. Front balcony overlooks the
town square where they play plenty of boules. Square surrounded by
a couple of shops, and restaurants. 250m from the beach.
Back balcony overlooks the sea.
We have not seen this flat, but have bought an identical one next door on the same
floor, so presume it has the same sea view from the back.
Our flat came with all furniture and we would negotiate that the same should be the case
with this one.

Second Property

PROPERTY ANALYSIS
57 Residence Le Bosquet
1 Property Name: Ave General Vautrin
Location: Cannes Central
Type: studio
Floor level 5th
Sq m 28
Occupation Date immed

2 Purchase cost of property 88500.00
Garage none
Parking none
Cave/cellar
Total property cost 88500.00
Tsf duties 7% 88500 6195.00 6195.00
Tsf duties 3% 0.00 0.00

Total cost per sq m 3160.71

3 Mortage % 70.00 61950.00
Deposit % 30.00 26550.00

Rate of Interest 4.10
Monthly repayments 461.34

4 Estimated rental income Rate per week
9 weeks @ 9 600.00 5400.00
4 weeks @ 4 450.00 1800.00
balance @ 27 300.00 8100.00
Other @ 0.00
Total Income 40 15300.00

5 Income/cost of property 17.29 %

6 Estimated costs Rate per month
Advertising 70.00 840.00
Tax fonciere 26.00 312.00
Tax habitation 26.00 312.00
Insurance 30.00 360.00
Levy – property 47.00 564.00
Water 14.00 168.00
Electricity 50.00 600.00
R & M 30.00 360.00
Management 159.38 1912.50
Services 40 x 50 2000.00
Total annual expenses 7428.50
Mortgage repayment 461.34 5536.10
Total with mortgage repayment 12964.60

7 Investment
Deposit 26550.00
Tsf duties 6195.00
Kitchen new required 4000.00
Furniture 3000.00
redecoration 800.00
Other 0.00
Total invested 40545.00

8 Net Profit – Return on Investment – 1st yr
Annual gross rents 15300.00
Annual expenses 7428.50
Gross annual operating profit 7871.50
Debts service 5536.10
Net overall operating profit 2335.40
Net Profit R.O.I. % 5.76 %

9 Capital Appreciation – R.O.I – 1st yr
Original purchase price 88500.00
Cost of improvements Kitchen & redecoration 4800.00
Total 93300.00
Forced appreciation Adding value – better use
Natural appreciation 12.00 11196.00
Revised Value of Property 104496.00
11196.00
Appreciation R.O.I. % 0.28 27.61 %

10 Equity Buildup – R.I.O. – 1st yr
Initial Loan Amount 61950.00
Amount applied to principal 2959.56
New Principal Balance 58990.44
Equity Buildup Initial loan amt – new principal bal 2959.56
Equity Buildup R.O.I. % 7.30 %

11 Tax Shelter R.O.I. – 1st yr
Expenses will offset most or all
income for tax purposes – depending
on individuals tax circumstances 10.00 10.00 %

12 Return on Cash invested % 5.76 %
Appreciation % 27.61 %
Equity Buildup % 7.30 %
Tax Shelter % 10.00 %
Total R.O.I. % 50.67 %

Set on Ave Gen Vautrin, the front of the building overlooks railway line, but this flat looks to the back
The block is directly behind the five star Hotel Martinez on the beach front.
Small hall leads to studio, with large balcony beyond. Looking down onto some rooftops and garden below
Kitchen separated from living area by wall. Quite old and should really be redone.
Probably cost 4000 Euros and would greatly enhance the value.
Small bathroom with shower, separate loo.
Whole flat should be painted.
Pleasant building with marble entrance – well kept.

Leave a Comment