put $5k on credit card
to make up $6k needed right away for deposit on mortgage.
Then read the financials..then sent this email...
Just got a chance to look at your email.
Things aren't adding up.
It's not a leaseback without the VAT refund, for one thing.
Guaranteed rental income : 5.60% has become 5.14%
The amount I have to come up with is not $4500 CDN but over $6000 CDN(4052Euro), and thats only the deposit. I would have to come up with that much again to close the mortgage. The lease is not 9(as I asked for) or 11 years, but 14.
And all that to incur a negative monthly cash flow.
This deal is not for me Fernando.
Thank you for your time.
Doug
Then received this...
Dear Doug,
Thank you for your feedback. Please see below some clarifying points:
The leaseback program reimburses the VAT for all new properties. If the original buyer decides to sell, he/she needs to reimburse back the government for this discount (pro-rata out of 18 years).
The original total VAT for this property was 8,270€ and we estimated that your reimbursement would then be of 6,891,67€. We will try to arrange to have the owner pay you directly this amount to avoid delays from the government or apply the discount to the total price. The VAT reimbursement amount needs be verified by the notary— which is why we did not included it in our financial projection. (Note: our financial projection is always made to be as conservative as possible.)
The rental income calculated at 5,6% is achieved as follows: With a VAT refund of 6891,67€ and not including the furniture (whose value is €3 500), the total investment comes to €78 408. With a net return of €4448 per year, this comes to a total net return of 5,67%. Including furniture, it comes to 5,4%-- still one of the highest achieving returns the leaseback market has to offer.
Please note this rental income has a contractual yearly increase based on the cost of construction. This property has seen a total of 5% increase on the rental income and a property value total increase of 48% in the past five years.
In our interest to help you achieve your goals, we are offering you a 100% financing to lower as much as possible your outlay however we cannot finance on the cost of the notary. We were under the understanding and perhaps this was a mistake on my side, that you had available 4500CD immediately but that later you will have more to put down in 2 months time. Did I misunderstood how much you wanted to put down in total?
To make an adquisition in France and in any of the countries we work with, it will not be possible for us to present you a program that only requires a 4500CD total investment. But as you said that you have High income and also the possibility to save at least 2,000 cnd per month. I made this possible for you. Please remember that you a buying a property that is worth €88800 with a 100% mortgage. In this case: yes, every year you have to put down some money from your pocket towards the payment of this property. This will gives you high returns.
The original length of the lease agreement was of 9 years. There have been 5 years passed already. The original contract requires an immediate roll over into a second period which in your case this is the optimal solution. Please note that banks in France and in most markets will have a hard time lending as high as 100% if they don’t have some reasurance on the loan payments. Having a 14 year lease in your case is crucial and indispensable as you are not able to invest a higher down payment.
In the end, my advice was based on your needs and requirement but also on the possibilities. Based on the capital available for investment, your financial situation and desire to leverage as much as possible your capital, Floriades seemed to me the best match. 100% financing are not easily available and are easier to acquire when the property is already built. I want to talk to you on the phone to explain this and answer any questions that you may have. Please understand that is capital high appreciation program in long term. I am here to help you on your project. Don’t be afraid to ask or talk about this program.
Please let me know if you have any other questions about this proposal and its financial implications. I want to talk to you on the phone XXXXX
Studio €88,800.00
VAT € 6,891,67
Total € 81,908.33( after VAT reimbursement)
Furniture € 3,500.00
It's so divergent from than what was sent (that i didn't post because its a large spreadsheet) that I choose not to pursue this. Putting the $6k in my RRSP.
Doug
Then read the financials..then sent this email...
Just got a chance to look at your email.
Things aren't adding up.
It's not a leaseback without the VAT refund, for one thing.
Guaranteed rental income : 5.60% has become 5.14%
The amount I have to come up with is not $4500 CDN but over $6000 CDN(4052Euro), and thats only the deposit. I would have to come up with that much again to close the mortgage. The lease is not 9(as I asked for) or 11 years, but 14.
And all that to incur a negative monthly cash flow.
This deal is not for me Fernando.
Thank you for your time.
Doug
Then received this...
Dear Doug,
Thank you for your feedback. Please see below some clarifying points:
The leaseback program reimburses the VAT for all new properties. If the original buyer decides to sell, he/she needs to reimburse back the government for this discount (pro-rata out of 18 years).
The original total VAT for this property was 8,270€ and we estimated that your reimbursement would then be of 6,891,67€. We will try to arrange to have the owner pay you directly this amount to avoid delays from the government or apply the discount to the total price. The VAT reimbursement amount needs be verified by the notary— which is why we did not included it in our financial projection. (Note: our financial projection is always made to be as conservative as possible.)
The rental income calculated at 5,6% is achieved as follows: With a VAT refund of 6891,67€ and not including the furniture (whose value is €3 500), the total investment comes to €78 408. With a net return of €4448 per year, this comes to a total net return of 5,67%. Including furniture, it comes to 5,4%-- still one of the highest achieving returns the leaseback market has to offer.
Please note this rental income has a contractual yearly increase based on the cost of construction. This property has seen a total of 5% increase on the rental income and a property value total increase of 48% in the past five years.
In our interest to help you achieve your goals, we are offering you a 100% financing to lower as much as possible your outlay however we cannot finance on the cost of the notary. We were under the understanding and perhaps this was a mistake on my side, that you had available 4500CD immediately but that later you will have more to put down in 2 months time. Did I misunderstood how much you wanted to put down in total?
To make an adquisition in France and in any of the countries we work with, it will not be possible for us to present you a program that only requires a 4500CD total investment. But as you said that you have High income and also the possibility to save at least 2,000 cnd per month. I made this possible for you. Please remember that you a buying a property that is worth €88800 with a 100% mortgage. In this case: yes, every year you have to put down some money from your pocket towards the payment of this property. This will gives you high returns.
The original length of the lease agreement was of 9 years. There have been 5 years passed already. The original contract requires an immediate roll over into a second period which in your case this is the optimal solution. Please note that banks in France and in most markets will have a hard time lending as high as 100% if they don’t have some reasurance on the loan payments. Having a 14 year lease in your case is crucial and indispensable as you are not able to invest a higher down payment.
In the end, my advice was based on your needs and requirement but also on the possibilities. Based on the capital available for investment, your financial situation and desire to leverage as much as possible your capital, Floriades seemed to me the best match. 100% financing are not easily available and are easier to acquire when the property is already built. I want to talk to you on the phone to explain this and answer any questions that you may have. Please understand that is capital high appreciation program in long term. I am here to help you on your project. Don’t be afraid to ask or talk about this program.
Please let me know if you have any other questions about this proposal and its financial implications. I want to talk to you on the phone XXXXX
Studio €88,800.00
VAT € 6,891,67
Total € 81,908.33( after VAT reimbursement)
Furniture € 3,500.00
It's so divergent from than what was sent (that i didn't post because its a large spreadsheet) that I choose not to pursue this. Putting the $6k in my RRSP.
Doug
posted by Doug Delaney at
9:53 PM
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