PL11 – Property Letter 11 – 15th July 2002.

Posted by admin in Property Letters | July 15th 2002

Dear All,

There have been developments this week with regard to the Bank (Entenial). They originally said that the max mortgage allowable to E.U. clients is 70%, or a 30% deposit. I attempted to negotiate it down to a 25% deposit in the belief that it might be useful to some of us (certainly to me). It looked as if all was well and that we would be accepted as E.U. borrowers because of the source of funds being mostly UK bank accounts. They made it clear all along that it was just an application that would go forward to head office in Marseilles with their recommendation, but that the decision would be made there.

Marseilles have ruled that we fall outside the E.U. as our “incomes” are earned outside of Europe even if funds are held in Europe. Therefore our minimum allowable deposit is 40%. Sadly. They in turn are most apologetic, would still like to have our business, have okayed all our applications on the basis of a 40% deposit, but understand that we may wish to look elsewhere for finance. I however do not wish to look elsewhere at this stage – firstly I am not there at the moment, and secondly from the enquiries that we made at two other banks while we were there, being CCF (the French arm of HSBC) and Barclays, they seemed to be more laden with red tape, and their rates were not as attractive.

Where does that leave us? If we want to use Entenial (and I do) we have to accept for the time being that we must put up a 40% deposit. (Except for those of you who are UK or Europe based). It is not all bad news of course in that monthly repayments are considerably less as all the other conditions remain the same (interest at 4.1%, and loan duration 15 years).
The lower monthly repayments help considerably to ensure that income from rentals will cover expenses, especially in the first critical year, with an increased expectation of surplus income sooner. So, bigger deposit – greater net income monthly.

But for Vicky and I it means one less apartment I am sorry to say, because we can not afford any longer to go for the three we intended to at “25% down”. Thankfully the others of us are all OK with a 40% deposit, so we are only losing one of our six. Ours!


I copy below the detailed analysis of it. It is the biggest apartment we have seen. I personally loved it. Note that it is 73 sq.m. of inhabitable area (huge in comparison to the others we have bought), and the price per sq.m. is a very low 2397 Euros. It is a very substantial building in the Art Deco style (1920’s) with thick walls and high ceilings and doors, and molded ceilings etc. It is in immaculate condition and something of a historic piece. It is not in Palm Beach but in the centre, 100 yards from the main beaches of Cannes, and just behind and next to the main hotels. I think it is a gem, and it really upsets me to have to let it go, and we only do so because we can not afford the 90 000 Euro investment at the moment. Entenial Bank had a valuation done on it, and congratulated us because the price we were paying was considerably below their valuation of it. (By the way, all six of our apartments fall into that category, but to a lesser extent than this one). When it is furnished, and it requires good furnishing although the kitchen is complete, it will provide very upmarket and comfortable accommodation, in an incredible position. (From my memory, it would also be nice, although not imperative, to recarpet the bedroom, which would not be a big investment. Vicky and I intended to do that.)

I realize that I have not “punted” a flat like that before, but I feel strongly about this one. It is very good. I hope someone goes for it.

Although much smaller in size of flat and size of investment, the two I wrote about last week in letter No.10, are still very good I believe. If anyone wants the revised analysis at a 40% deposit I can send it. I don’t know if they are still unsold or not.

Our love and best wishes to you all.

Guy and Vicky.


1 Property Name: Palais Alexandra III
Location: Basse Californie
Type: 1 bedroom
Floor level 2nd floor
Sq m 73
Occupation Date Immediate

2 Purchase cost of property 175000.00
Parking Street
Cave/cellar cellar included in price
Total property cost 175000.00
Tsf duties 7% 175000 12250.00 12250.00
Tsf duties 3% 0.00 0.00

Total cost per sq m 2397.26

3 Mortage % 60.00 105000.00
Deposit % 40.00 70000.00

Rate of Interest % 4.10
Monthly repayments 781.94

4 Estimated rental income Rate per week
11 weeks @ 11 1000.00 11000.00
4 weeks @ 4 750.00 3000.00

25 weeks @ 25 500.00 12500.00
Total Income 40 26500.00

5 Income/cost of property (Rentability) 15.14 %

6 Estimated costs Rate per month
Advertising 70.00 840.00
Tax fonciere 59.50 714.00
Tax habitation 59.50 714.00
Insurance 30.00 360.00
Levy – property 137.20 1646.40
Water 0.00 0.00
Electricity 0.00
R & M 50.00 600.00
Management 276.04 3312.50
Services 40 x 50 2000.00 2000.00
Total annual expenses 10186.90
Mortgage repayment 781.94 9383.22
Total with mortgage repayment 19570.12

7 Investment
Deposit 70000.00
Tsf duties 12250.00
furniture 8000.00
redecoration 0.00
Other 0.00
Total invested 90250.00

8 Net Profit – Return on Investment – 1st yr
Annual gross rents 26500.00
Annual expenses 10186.90
Gross annual operating profit 16313.10
Debt service 9383.22
Net overall operating profit 6929.88
Net Profit R.O.I. % 7.68

9 Capital Appreciation – R.O.I – 1st yr
Original purchase price 175000.00
Cost of improvements Kitchen & redecoration 0.00
Total 175000.00
Forced appreciation Adding value – better use
Natural appreciation 12% 12.00 21000.00
Revised Value of Property 196000.00

Capital Appreciation R.O.I. % 23.27 %

10 Equity Buildup – R.I.O. – 1st yr
Initial Loan Amount 105000.00
Amount applied to principal 5016.20
New Principal Balance 99983.80
Equity Buildup Initial loan amt – new principal bal 5016.20
Equity Buildup R.O.I. % 5.56 %

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 % 7.68 %
Appreciation % 23.27 %
Equity Buildup % 5.56 %
Tax Shelter % 10.00 %
Total R.O.I. % 46.51 %

1920’s Art Deco style building, with wide entrance halls, and original concertina lifts.
Enter flat through double doors to large hall. Spacious lounge leads directly off the hall, with french
doors out onto petit balcony. View across small gardens, peaceful and quiet. Only 100m from the
beach. Large double bedroom carpeted with cupboards, and french doors onto another small balcony.
Modern bathroom, with shower only, attractive cabinet around the basin. Heater in bathroom.
Kitchen fully equipped with fridge, oven, 4plate stove, dish washer, washing machine, and small table.
No garage, but cellar.
Parking is in the street.

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