There are essentially three types of letting: letting as holiday accommodation, either as bed and breakfast or as gîtes; letting furnished accommodation long term; letting unfurnished accommodation long term. Different criteria and regulations apply to each of these types of letting; all are dealt with in detail in Earning Money From Your French Home. This chaper provides essential information about holiday accommodation letting; for information about long-term letting.
Holiday Accommodation
Owning and operating a furnished cottage (e.g. a gîte) or bed and breakfast (B&B) accommodation (chambres d’hôtes) isn’t usually considered a commercial activity by the French authorities, provided you don’t set up a trading company or let more than five or six rooms (depending on the department the property is in). A property with more than five or six rooms to let is classed as a commercial business and is more expensive (and complicated) to establish and operate. You must also notify your insurance company if a property is to be let. When letting an apartment, you may be required to notify the community’s manager; check before buying an apartment that letting is permitted.
Tip: Always obtain professional advice before buying a property for letting.
It’s difficult to make a living providing holiday accommodation in most areas, as the season is too short and there’s too much competition (the market is saturated in most of the popular locations).
If you’re planning to let a property, it’s important not to overestimate the income, particularly if you’re relying on it to help pay the mortgage and running costs.
In the early ’90s many overseas buyers lost their French homes after they defaulted on their mortgage payments, often because rental income failed to meet expectations. Buyers who over-stretch their financial resources often find themselves on the rental treadmill, constantly struggling to find sufficient income to cover their running costs and mortgage payments.
If you have a mortgage on a property in France, you’re highly unlikely to meet your mortgage payments and running costs from rental income alone. Most experts recommend that you don’t purchase a home in France if you need to rely on rental income to pay for it.
Note also that running a gîte or (especially) a B&B is hard work and not suitable for those looking for an activity compatible with semi-retirement.
Gîtes
Gîtes are self-catering units, which can be either outbuildings in a property you use as a principal residence, or your second home let as self-catering accommodation when you aren’t occupying it yourself. Self-catering accommodation in France is generally referred to as a gîte and can be anything from one or two converted outhouses to a large luxury property with a number of self-contained apartments and cottages. It makes sense to have a number of units, thus reducing the running cost per unit and spreading the cost of installing amenities such as a swimming pool. Note, however, that an established gîte business with a good income costs anything between €200,000 and €400,000.
Properties suitable for conversion to gîtes (i.e. large farmhouses with plenty of outbuildings) are few and far between in the certain parts of France (e.g. Languedoc-Roussillon), where it may be preferable to buy a small village house, which is easier to maintain and service and can be sold at any time should the need arise.
Existing tax legislation in France favours anything to do with the tourist industry and in particular gîtes. Gîtes aren’t considered a commercial activity, so it isn’t necessary to register them as a business. Before establishing a gîte, however, it’s wise to obtain legal advice and contact your town hall regarding local regulations. If you’re buying a property with the express intention of setting up gîtes, make sure that permission will be granted before you buy, or make it a condition of purchase.
Grants are available to set up gîtes (and other types of holiday accommodation) in certain areas, e.g. from the Gîtes de France ( 01 49 70 75 75, http://www.gites-de-france.fr ), but you must apply before starting work. There’s a time limit of two years for the completion of work associated with a grant from Gîtes de France. Grants are conditional on the quality of restoration or conversion and the accommodation provided (properties are assessed annually).
The basic grant is usually equal to around 30 per cent of the cost of work (up to a maximum of €5,000) excluding taxes, which may be paid only on completion, although 50 per cent is sometimes paid halfway through a project. Note that a grant from Gîtes de France is conditional on the property being available to rent by them for a period of ten years; if you sell within this period or the property isn’t made available, you must repay the grant. You must also bear in mind that if you let your gîte under the banner of Gîtes de France or a similar organisation, you may need to wait a long time to get paid.
Bed & Breakfast
No authorisation is required to offer B&B accommodation, although it must be registered as a commercial activity with the local trade registry (Registre du Commerce). The most common B&B accommodation in France is chambres d’hôtes, which provides the option of an evening meal (table d’hôtes), usually taken en famille. Note that, if alcohol is to be served with the evening meal (mandatory in France!), a licence is required from the local town hall, although this is usually a formality and is free.
Grants are available from Gîtes de France (see above) for creating or renovating rooms as chambres d’hôtes. If you operate a Gîtes de France-approved chambres d’hôtes, food must be French and include regional dishes. Running a chambres d’hôtes with a number of rooms isn’t a part-time activity, at least not in the summer, and it’s generally vital that one of the owners speaks good French, or you will have to rely on foreign guests, who constitute only 20 per cent of the market.
This article is an extract from Buying a home in France. Click here to get a copy now.