There seems to be a lot of discussion about Leasebacks at the moment, and it seems to stem from bad agents jumping on the bandwagon of Leasebacks, making an easy sale without fully explaining to the customer how the concept works and how it may be of benefit or not.

Some of the quotes I have seen from people slowly realising what they have invested in is totally different from their expectations is frightening.

Leasebacks can be a good investment. There are 3 types of leaseback;
1. Residence de Tourism
2. Residence d'Etudiant
3. Residence D'Affaire

Most people in these discussions have been referring to Residence de Tourism, in glamorous places, with offers of 2 weeks usage sometime more. This type of Leaseback is the one which has been truly mis-sold. Most people I have spoken to think that when they buy into one of these, their property will grow in value in the same way a classic property might.

This can't be true, as the true value of the Leaseback is its ability to rent out and the yield / revenue stream offered. Looking at the resell market????? There isn't one. You are advised to HOLD onto to your leaseback FOREVER. This is the only way you'll realise any true benefits.

If you decide to resell, who can you sell to. NOT owner occupiers as Leasebacks were never designed for this, that only leaves INVESTORS. Why would an investor want a secondhand leaseback, after the majority of the VAT refund has been taken, and if you try and sell it above its true value, it will reduce the yields!!!

Therefore the other main point is that there ISN'T really any capital growth. The growth is linked to the rental amounts, i.e. if the rental amount your leaseback can generate increases by 1.5% or 2.5% per year then so will your property value.

The VAT refund and occupation is a smoke screen. Forget about using a leaseback, don't buy it because its in a place that you like otherwise you'll start making decisions based on your heart and not your head. Leasebacks are investments that should be made with the head not the heart - your ideal holiday home is more about making a decision with your heart and less with your head.

In summary the basic concept behind a leaseback is getting someone else (through the commercial lease) to pay off your mortgage, leaving you with a debt free asset which is a revenue stream in later life for you or for the children - leasebacks can be passed onto family members.

Look at Residence D'Etudiant or Residence D'Affaire - here the demand for this type of residence is REAL - no glamour just real demand. No usage in these, but the demand makes the longevity of your investment Low Risk.