From One Pocket to the Other

An Op Ed piece ran in the New York Times yesterday titled “Will You Leave the Country if Trump Is Re-Elected?”

I had to laugh. Duh, Ms Jennifer Finney Boylan, author of the opinion piece! We could have told you that. We are flooded with Francophiles who have been dreaming of life in France for a long time, but now are over the edge wanting to make a move as soon as they can physically do it—meaning get a visa, pack their belongings, rent or sell their lodgings and head east…as far east as France.

The emails flew in and the phone started ringing the moment Donald Trump was elected in 2016. The disastrous outcome of the Covid-19 pandemic Stateside,  the passing of Supreme Court Justice Ruth Bader Ginsburg and the uncertainty of the 2020 election have added fuel to the growing fire in the bellies of those who have dreamed of life in France, but never acted on it…until now.

It’s not just the rich seeking a “pied-à-terre” in the City of Light or a villa in Provence or a sea view on the Côte d’Azur—it’s everyone from young to old, rich to poor who believe there is a better life to be had in France. And there is.

We have an extraordinary number of clients buying properties sight-unseen at this moment—so desperate to get on with their lives…their lives in France, that is. It’s a kind of escape, but to something much more enriching, wonderful and a whole lot less expensive.

A “pied-à-terre” in Paris

This morning an old friend from Los Angeles phoned me. She’s French, but has lived in the U.S. her entire adult life. Her daughter came to Paris with us in 1994 to be my daughter’s live-in au pair. Now, her daughter has three children of her own all grown up and my daughter celebrates her 35th birthday today. She has dreamed of moving back to her native country for many years, but never wanted to leave her children and grandchildren. The time is ripe for her to come back to France. She and her husband would reduce their living expenses by at least half if not more than that by settling in Nice, a spot in France she loves. Rent would be half of what it costs in Los Angeles. They wouldn’t need a car saving them about $10,000 a year. Seventy percent of their health care costs would be covered by the French social security system. They would make a lot of new friends and have a whole host of activities, not to mention the ability to travel in France and Europe easily and inexpensively.

I told her, “Don’t waste a single moment. Come now.”

During a consultation this week with a client, who is arriving soon in Paris, now that he was informed that he could travel to France with the visa he acquired last April, we discussed what he could afford to buy, because he doesn’t believe in paying rent—what is someone else’s mortgage. Why pay someone else’s when you can pay your own? I am in full agreement with this principle, but he couldn’t afford very much in Paris. His budget would only stretch as far as a studio or small one bedroom and not necessarily inside the city.

I presented him with another strategy: purchase in Nice where property is half the price, rent the property short-term (legal for the first six years in Nice) and live in Paris on the rent revenues from the Nice property. This way he could have the best of both worlds—he could use the Nice property as his second home, yet it can fund his rent in Paris. Making the investment gives him the kind of security he wants and the revenue it would generate would contribute to a very fulfilling lifestyle in France.

A “pied-à-terre” in Nice

This strategy works for lots of people, because of the relationship between the cost of property and the revenues it can generate. Short-term rentals will generally generate twice what a long term rental generates for the landlord, hence the popularity of it. The formula we use to determine the rents for furnished apartments is this:

Short-Term: 1) Nightly rate up to 6 nights, 2) One Week = 7 nights’ rate less 10 percent, 3) One Month = 2.5 to 3 times the weekly rate for up to 3 months

Mid-Term: Monthly rate up to 3 months based on the Short-Term formula, 3 to 6 months = monthly rate less 10 to 20 percent

One Year: The monthly rate depends on location and amenities, if there is rent control (Paris) and what the market will bear

Short-term rentals require maintenance and often agency fees, but the landlord can expect to net about 65 percent of the gross rents. Even with this, the nightly rate is usually comparable to a hotel room of a similar nature. If occupancy rate is as high as 65 to 75 percent, then a landlord can net double the amount of a one-year lease rental. This is a big reason for the popularity of short-term rentals and why city administrations are trying to find ways of making them less attractive!

And here’s the clincher: the property is better maintained and taken care of the shorter the rental terms. On the surface, one might think a long-term rental is less wear and tear on a property, but it’s the exact opposite. A property that is used for short-term rental is not lived in 100 percent of the time. Full time occupancy means the tenant is cooking, partying, and using the facility to it’s capacity. A vacationer is hardly using the property. They are not making elaborate meals or hosting large parties. Meanwhile, there is regular housekeeping and maintenance. If you’ve ever owned a long-term rental, then you know how the tenant leaves behind a lot of maintenance and repairs you wished you didn’t have, even the best of the lot.

John Garland Jones Made a New Life in Nice

At the moment, short-term rentals are having a tough time making ends meet while people cannot travel between countries as they would like. But, that won’t be forever. Even so, the strategy to invest in a revenue-generating property that supports your rents in another property is still a valid solution for someone who lacks the funds to invest somewhere as expensive as Paris. It’s just a matter of creating a flow of money from one pocket to the other.

A bientôt,