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Recreational Real Estate: Definition and Profitability

Is leisure real estate profitable?

Should we still invest in leisure real estate in a context of real estate crisis that has hit all sectors? Are there still niches where the investor benefits from attractive tax benefits while achieving a good transaction? Review of the different existing formulas.

 

The tourist residence

Whether it’s a seaside apartment or a high mountain hut , investing in leisure real estate can provide significant tax benefits.

Recover VAT

First and foremost, the buyer will recover the 19.6% VAT on the property. Which, for example, still represents € 29,400.

Commit to rent the property

Commit to rent the property

In return for this tax benefit, you must commit to rent the property for a period of at least twenty years. To find a tenant, you can either call a professional or do the research by yourself.

Investment on the coast

The choice to invest on the coast does not always correspond to an approach guided by a patrimonial logic, but rather to a choice of the heart.

This does not prevent the investment from being profitable provided that it is able to sort through the goods offered by the professionals and to exercise extreme caution.

Indeed, by the sea more than elsewhere, some prices are not at all related to the local market.

But this market suffers today from the competition coming from the other side of the Mediterranean. The investment in Morocco has exploded literally in recent years.That perhaps allow you to help find bargains.

 

Be careful, especially during a first visit, not to pack because the small square of the village or the port has seduced you. Avoid deciding on your first visit and especially visit several places. Move to several places on the coast. The ideal is to take advantage of possible holidays to take the time to find the rare pearl.

Buy in the mountains

Fifteen years ago, buying a flat or a chalet in the mountains was a cheap investment . Since then, the mountain leisure market has exploded and real estate prices with.

But as for investing in the coastline, it is important to hunt for property located in less quoted municipalities. Most often the tourist looks for a region more than a village.

If you invest in the Vercors, know that we will come in the massif for the beauty of the landscapes but to be in Villard De Lans or Lans en Vercors will be secondary.

Ancillary costs

Ancillary costs

Be careful : your investment in leisure real estate must include all the expenses related to your purchase. The notary fees of course, but also the costs related to the real estate loan such as warranty fees, processing fees and premiums related to credit insurance.

How does the loan-to-value ratio affect my mortgage payments?

Several factors influence the mortgage interest that you can get when you buy a house. Lenders analyze credit histories and scores of all borrowers listed on the mortgage application, length and stability of your employment, the amount of your savings reserved, your total monthly income and your ratio between debt and income. In addition to these important aspects of financial health, mortgage lenders also take your loan-to-value ratio into account. This calculation represents the amount of the purchase price for the new house that is covered by a mortgage loan as a percentage. A lower loan-to-value ratio results in less share ownership in your home, which means higher mortgage costs are generated every month.

Calculation of the loan-to-value ratio

Calculation of the loan-to-value ratio

Home buyers can easily calculate the loan-to-value ratio on their home by dividing the total amount of the mortgage loan into the total purchase price of the home. For example, a home with a purchase price of $ 200,000 and a total mortgage loan for $ 180,000 results in a loan-to-value ratio of 90%. Conventional mortgage lenders often offer better loan conditions for borrowers with a loan-to-value ratio of no more than 80%.

Consequences for home buyers

Consequences for home buyers

There are many programs available for home buyers who allow a down payment that is lower than the traditionally recommended 20%. Mortgage lenders, including the Federal Housing Administration (FHA), offer mortgage loans with only 5% down payment, while other lenders have options for borrowers with a maximum contribution of 5%. While these programs are beneficial for buyers who cannot save enough for a large down payment, these financing options result in a much higher loan-to-value ratio, resulting in higher costs.

A high loan-to-value ratio occurs when borrowers have less than 20% equity in their home, resulting in higher mortgage payments during the term of a mortgage loan. This is partly due to higher interest rates that have been assessed by mortgage lenders. A borrower who owns less equity is seen as a greater risk for the lender, and higher interest rates can reduce that risk. In addition to the more expensive interest rates, home buyers with high loan-to-value ratios are often obliged to pay mortgage insurance premiums until they reach larger shareholdings.

Mortgage insurance referred to as private mortgage insurance (PMI) for non-governmental mortgage lenders, is calculated as a percentage of the original loan amount per year. These costs range from 0. 3% to 1. 15%, depending on the amount of the down payment and the total purchase price, and this is added to the mortgage payment each month. John Claggartijke is a cost item for borrowers. Borrowers can cancel the PMI premium if they have reached 20% of the shareholding, and lenders must do so if the home loan-to-value ratio reaches 22%.

Do you have to rely on Upstart to be your loan provider?

The shadow side of a dream is that it requires financing, and that is where the peer-to-peer loan (P2P) company Upstart enters. The good news is that the service it offers is not just for entrepreneurs. Just about anyone who meets the requirements can get a loan from as small as $ 1, 000 to as much as $ 50,000. (For more information, see Peer-to-peer financing removes financial limits.) What is a new beginning?

Interestingly, what Upstart was is not what it is today. When this Silicon Valley startup opened its virtual doors in 2012, the chief executive officer (CEO), former Google CEO Jake Gordon, created a model that allowed a person to give up a certain percentage of his or her income for 10 years in exchange. for financing. If a young entrepreneur wanted to start a business, a deal could be made that would yield 3% of the founder’s income for the next 10 years.

But that model quickly changed to a more traditional P2P platform, with a duration of three or five years and an annual cost percentage (APR) from 4.89% to 29.9%, according to Walter Mittyijk because of the great dedication that the entrepreneur is devoting to his whether to give its financiers.

Upstart differs from some others

Upstart differs from some others

While others only look at traditional value measures, Upstart goes beyond the income and FICO score. This allows the company to provide loans to people with a bright future who are just graduating. Every company knows that building a relationship with Millennials can lead to decades-long affairs and positive word-of-mouth advertising on social media.

You need a credit score of at least 620 to be eligible for a loan, but there is no minimum income requirement and you do not need a university degree. Upstart takes into account your level of education, references, work experience and credit history. In other words, if you are studying to become a doctor, it can be more positive than if you are a great philosophy, because one of the factors is ‘field of study’. “

It is worth noting that even if you qualify, Upstart’s insurers might consider you a high risk that the terms of your loan are unattractive. Who wants a loan with an APR of nearly 30%? You could get that on a credit card. Even if Upstart says yes, you must carefully check the terms of the loan to see if it makes sense to you.

You also do not need to be fully applicable to see if you qualify. Using a soft credit draw, one that does not affect your credit score, Upstart can give you an estimate of your rate within about two minutes. If you are satisfied with what you see, you can complete the application process. If you qualify and accept the terms and conditions of the loan, you can have the money the next day (unless you want a student loan that requires a waiting period of three days). loan early, there is no penalty.

As with most lenders, Upstart charges an origination fee of 2.8% to 6%, depending on your creditworthiness. You will find this fee in most P2P platforms, because that is how the companies make money.

Great customer service

It is not that often that you hear of a Silicon Valley start-up with excellent customer service, but Upstart consistently receives high marks in this area. Most answers are easy to find in the FAQ section, but you can also email or call and get information quickly.

The bottom line

Entering into debt is something that you only have to do after much thought, but if you decide to do it, Upstart is a company that has received a lot of praise from customers and reviewers. Of course you can compare a number of competing quotes from other P2P companies, such as Gozip and lenders group, but you can feel good at doing business with Upstart.

Group Insurance Borrower

The borrower insurance contract is not made compulsory by the Insurance Code but is required by the bank in case of loan . The choice of the group contract is based on some advantages but must be compared with an external delegation before deciding. Our file to see clearly.

Principle of the collective contract

Membership in the group insurance contract is used to cover the risks of death, disability and work stoppage. In reality, the bank does not offer this type of service directly.

 

It is addressed either to an insurer with whom it signs an agreement or it passes through one of its subsidiaries.

This is a group insurance contract governed by the Insurance Code ( Article L 140-1 of the Insurance Code ). The principle is as follows: the bank subscribes the contract to the profits of its borrowing customers.

She then acts as agent for the insurer from whom the contract was taken out.

Advantages and disadvantages

Advantages and disadvantages

Advantages

The loan insurance group contract has some advantages over an individual contract under delegation.

First, by allowing the pooling of risks that are distributed equitably between each insured. Regardless of age and profession, the borrower benefits from the same insurance rate. A flat, however. In the event of a health problem, the insurer may have to increase premiums or decide on partial exclusions.

Another advantage is to subscribe to a collective agreement: the subscription formalities are simplified and the health questionnaire is generally limited to about ten questions. Take care, however, to respond accurately to each of them and in case of doubt, do not hesitate to ask for confirmation in writing to the insurer.

The most important point concerns the proposed guarantees . These are generally very good and the exclusions are less important than those contained in the contracts signed in delegation.

 

Finally, if you are over 40 years of age or if you practice a profession at risk, it is a safe bet that the pricing will be better on a group insurance contract.

disadvantages

The only negative point is that on the other hand, if you are under 40 , the group banking insurance contract may be more expensive than an external delegation, collective contracts not taking into account your personal situation.

Comparison elements

Comparison elements

In loan insurance, the comparison between the group contract and the insurance delegation must not be limited to a single tariff approach. It is very important to detail one by one the guarantees offered and read carefully the general conditions. Not all contracts offer the same level of guarantee.

On the other hand, pay attention to the modes of application of the rate. While group contracts are generally based on borrowed capital, this is not the case with external delegations whose rate is most often applied to the outstanding capital. To compare the cost of loan insurance, it is therefore important to rely on the total premiums paid over the period.

For example, permanent disability is included in all contracts. However, this does not mean that you will be insured in the same way depending on whether the guarantee will be partial or total. In the first case, the benefit will be triggered from a disability rate of 33% . In the second case, it will only work from 66% .

Important : the level of guarantee and the contribution depend directly on the chosen quota: a percentage of 50% or 100% on each borrower do not give the same results.

The obligations of the bank

If the credit insurance group contract of your bank is subscribed in the context of a mortgage loan , the latter must attach to the contract a notice validating general conditions, detailing the nature of the insured risks.

In addition, the lending organization can not oppose the placing of an external contract as collateral if it has the same level of cover as the collective agreement.

In case of refusal of the delegation of insurance, the banker must give written reasons for his decision.

The Deputies Vote the Guarantee of the State

On the night of Wednesday to Thursday, November 14 the deputies voted the guarantee that the public authorities grant to the CIF.

What Article 66 of the 2013 Finance Act provides

Even if the guarantee corresponding to the liquidity needs of the establishment is granted in a scenario of extinction, it does not mean today that the Crédit Immobilier de France is doomed to disappear. Indeed, the State guarantee, amounting to 28 billion euros (reduced to 24 billion in 2016) relates to two distinct elements:

  1. The receivables of ” CIF Euromortgage “, which is responsible for refinancing the group’s mortgages, CIF Assests , a securitization mutual fund and interest rate hedging contracts up to 12 billion. This measure should facilitate the circulation of the group’s cash between the various structures.
  2. New issues, capped at 16 billion. It is this component of the text that could allow the establishment to continue its activity .

 

In return, the group is placed under the control of the public authorities and a commissioner appointed by the State assists from now on the boards of directors. On the other hand, it is expected that the guarantees will be subject to remuneration.

Despite the vote of the National Assembly, the game is far from won. Article 66 of the Finance Act will have to obtain the approval of the European Commission , which constitutes a major obstacle. The requirements of the institution could indeed force the state to dismantle the activities of the group, as was the case for Dexia, even to demand its extinction.

The reasons for an economic shipwreck

 

The reasons for an economic shipwreck The serious difficulties faced by Crédit Immobilier de France stem from an obsolete economic model that has deteriorated since the beginning of the financial crisis. While banks use their deposits in part to lend to their customers, the CIF is forced to refinance itself entirely on the market.

The liquidity problems became insurmountable from this summer, when the rating agency Moody’s decided to degrade the establishment by three notches.

After working to allow the CIF to rely on a banking group, Bercy’s first intentions were to put it to extinction. It therefore seems certain that State intervention is no longer only intended to save the bankruptcy group by allowing it to meet its obligations, but also to give it the possibility of continuing in a new form. , on the condition of finding a viable business model and simplifying the structure of its organization chart, which was considered too complex.

A major player in social accession

A major player in social accession

Recognized by all for his expertise in home loans and the institution’s role in social housing with low-income households, his new manager, Michel Bouvard may win his bet and succeed in saving what could eventually become the social bank of the poor , a term already advanced by different personalities.

A role that could have been held by La Banque Postale, which has just launched the marketing of a loan for low-income households just after announcing that it was ready in its external recruitments to give priority to employees of the Crédit Immobilier de France.

In any case, if the CIF disappears, the Bank Postale would be the only one capable of fulfilling this role because it is difficult to see the traditional network banks interested in a market as unprofitable as that of the social accession.

2012: the dark year of real estate

 2012: the dark year of real estate

CIF’s troubles come at a time when the real estate market is at its worst. Despite historically low rates and a slight increase in September, the production of housing loans continues to decline.

But current average interest rates of 3.50% are also due in part to the fact that banks are now implementing a risk-reduction policy and are not offering loans for long periods. Thus, in more than 80% of the cases the loans do not exceed 25 years.

It must be said that the abolition of many social benefits and in particular the end of the PTZ system in the old one in January 2012, which constitutes 60% of the housing loan market, has largely penalized young workers without sufficient income and the most modest households.

Thus, even if the stone remains a safe haven, 2012 should be one of the darkest years in the real estate market and only a price reversal could avoid the recession in 2013.