Things to Consider Before Buying a Villa
It’s surprisingly easy to get swept up in the excitement of buying a villa. But before your get your heart too invested in the idea, make sure to be realistic about what you want and the less-pleasant realities that come with owning property.
Questions to Ask Yourself
Here are some questions to consider to help you determine whether a property you’re considering is your best option:
Are you forcing the numbers to work?
Being able to “afford a house” goes far beyond whether you can hypothetically secure the funds for a down payment and get a mortgage. It also includes mortgage fees, notaire fees, and all the repairs, taxes, maintenance fees, utilities, and who knows what else that pops up over time. Make sure you take all of that into consideration and be realistic about what you can afford without adding financial stress to your life.
Does the home excite you?
Not everyone is in a place where they’re able to hold out for a home that “excites” them, but if you are, why spend that much money on something you’re not that into? It’s better to wait for a villa that you can picture yourself loving for decades, than end up moving again, and likely losing a lot of money.
Does the home meet everyone’s needs?
If you live on your own, this isn’t an issue, but if you live with a partner and/or family, or plan to have guests, make sure the house is a good fit for everyone—not just you. Does it have enough parking for guests? Is it walking distance to your kids schools?
Are you ignoring the findings of the inspection reports?
If so, this may not be the place for you. If the inspection and diagnostics reports come back with red flags trying to tell you this isn’t the house for you, listen to them.
Are you up to the task of making all the repairs the home requires?
Please be aware that home improvement shows only show a tiny part of the entire renovation process. It is so much work. And also expensive. If you don’t have the skills to do it yourself, or the money to hire people to make the repairs, it’s time to pass.
Are you emotionally attached?
Don’t get too attached to a property. Once we begin picturing ourselves in a home or visualizing ourselves raising kids in a home, it’s really hard to avoid overpaying and walk away.
Your Actual Costs
Before buying a villa, you need to realize that the sale price is not the only money you’ll be on the hook for. There are a lot of sunk-costs. In addition to maintenance, fixing things you didn’t expect to need to fix, etc. you’ll also need to factor in these sunk costs:
Costs of Studies
Before you purchase a villa, you should get your own studies done. This costs about €1,000 for an average-sized home, rising to €2,500 for larger properties.
There’s no guarantee that the studies done by the seller’s contractors are correct. In fact, many inspectors are incompetent, and in a government audit, they found huge inconsistencies. For example, one inspector rated a property as being B on the scale, meaning it was energy efficient, while another rated it E, which is poor.
Notary Cost & Tax
To close the deal, the notary collects 7% to 8% (for their fee plus government taxes).
There’s also a one-time sunk cost to set up a mortgage, which is usually 1.5% (1% mortgage registration, plus 0.5% underwriting fee) of the villa’s sale price, plus around €2000 to €3000 to do a ‘valuation’. And if you hired a mortgage broker, they charge a one-time % fee on top of that too. Add to that the yearly costs of mandatory mortgage insurance (which costs about 0.5% of the villa’s value each year), and the mortgage’s interest. Here’s a mortgage calculator so you can calculate your interest and monthly payments.
Yearly Sunk Costs
Don’t forget to factor in your new insurance costs (contents insurance and, if needed, red-zone insurance for natural disasters). Plus, some villas have a mandatory fee for community things like a guard, gardeners, etc. You’ll also need to budget for things like repairs and maintenance.
Taxes, Taxes, & More Taxes!
Every villa owner is also subject to several additional taxes, paid every year. For a €1 million villa, expect to pay around €4000 per year (but this varies). The easiest way to know what yours will be, aside from the wealth tax, is to ask for the tax statements from the current villa owner. Here are the taxes you should account for in your budget:
IFI / Wealth Tax
The IFI / wealth tax is between 0.5% and 1.5% annually, and is payable by both residents and non-residents in France with real estate assets worth over €1.3 million (at the current valuation). For example, if you own a villa worth €2.4 million, you’d pay more than €10,000 per year in IFI tax.
You can get out of this by having a mortgage (so make sure you get approved before signing the final contract), which lowers your actual equity in the property, but you’ll need to keep re-financing to keep your equity below €1.3 million.
The property tax (taxe foncière) rate for a primary home is around 1%, and 3% for secondary homes, and increasing. The bill for the taxe foncière arrives in the last quarter of the year and the amount is based on the estimated annual rental value of the property multiplied by a percentage set by the commune (ask for more information at your local mairie).
The amount of the residence tax (taxe d’habitation) will vary depending on the decisions of each commune and the size and condition of each property. Holiday homes in areas of housing shortage (like the French Riviera) are liable to face a surcharge on their taxe d’habitation. Local councils have discretion to apply a surcharge of between 5% to 60%. Most councils apply a 20% rate, but some have adopted the maximum rate of 60%, so it’s good to find this out before you buy.
Even More Taxes!
There are a bunch of other taxes you’ll also need to pay, like a waste removal tax, television tax, etc.
If you reside outside France (and outside the European Economic Area) and own property in France, the tax authorities may also ask you to appoint a representative in France to receive correspondence concerning wealth tax assessment, collection, and disputed claims.
And BTW — when you want to sell, there are even more sunk costs. The French capital gains tax has greatly increased over the last few years. Combined with the required “social charges”, depending on the seller’s residence, it can add up to 34.5% for EU residents or 48.83% for non EU residents, not including the required income tax. Yikes!
Buying as an Investment?
The unfortunate truth is that the French Riviera is not a good place to buy real estate for an investment. Prices have been flat-lined for more than a decade and all signs point to prices decreasing in the future.
Additionally, the French government is actively trying to make real estate less expensive by adding cumbersome yearly taxes for second homes and thinking up ways to disincentivize house-flipping, investment purchases, AirBnb rentals, and vacation homes. You can 100% expect more of this in the future.
Even the CGEDD had this to say (on January 10, 2022): “From an investor’s point of view, the net rental yield (rent net of charges divided by sale price [not including other costs]) is very low. Investment in housing is therefore competitive with investment in long-term public debt, at a level of expected return that is admittedly very low in both cases… the resale value of which is not certain at any time.”
And, when you sell, you need to pay an overwhelming amount of taxes which can add up to 49%. All that is in addition to the real estate agency fees and fiscal representative fees, leaving you with less than half of any total gain in the end — if you make a gain at all.
Buying a ‘Newly Renovated’ (or New) Villa
On the French Riviera, there are many, many (did I say MANY?!) developers. They have special relationships with agents where they buy villas at a low price (beware if you’re a seller, as you may get the losing end of this) and then do cheap renovations and try to flip it, using the same agent, at a ridiculously inflated price. You might be able to catch this by checking the map showing the villa sales (with exact location, size, pricing) from the past 5 years.
Naturally, these developers want to maximize profits and minimize expenses. It is, after all, a business. They do this by cutting all sorts of corners on the stuff you can’t see. They hire the absolute cheapest (and often unqualified) construction people, electricians, plumbers, etc. and tell those people to do the job as cheaply and quickly as possible.
They reassure buyers by giving them a warranty (under French civil law all building work is guaranteed for up to 10 years), but insurance pays the repair costs — not them — and you still have to deal with all the problems that pop up. Plus, the insurance won’t cover major problems, like needing the entire plumbing to be re-done because the pipes used were old and put together the wrong way. And you can expect repeated repairs of the same issue because cheap materials keep getting used — after all, the repair company gets paid each time.
This means the developer has zero incentives to do anything other than the cheapest job possible because, once you buy it, it’s your problem, not theirs. It also means BIG headaches for you, down the line, when you move in an realize that your air conditioning doesn’t work properly, the electrical and plumbing need to be re-done, underfloor or insulation was not added, etc.
Just because it looks nice on the outside doesn’t mean it’s well-done. You’re better off finding a villa that was renovated years ago by the owners — renovate for them, not for resale.
Imagine the horror: returning to your villa in France after going out for dinner, only to find unwelcome occupants watching TV and making themselves dinner in your kitchen. Or while you’re relaxing in your apartment or villa, a window is pried open, allowing a man to enter and squat in one of your bedrooms. Or you simply open your front door and a family with many young kids enters without your permission then refuses to leave. You’d think you can just call the police and they will handle it for you, right? Nope. Not in France.
The laws in France protect the poor and the criminal, and the police rarely make arrests for break-ins. So it’s not surprising that burglaries are a big (and growing) problem on the French Riviera. There’s a break-in every two minutes in France, and the French Riviera has the most break-ins of any region, with roughly 8,000 break-ins every year. Villa owners (and renters) in this area routinely get gassed and robbed while sleeping, or held up at gunpoint while entering their villa. It’s, sadly, an inevitable part of owning a villa on the French Riviera.
You’ll need to get familiar with the laws so you don’t end up in jail for defending yourself during a break-in. In short, you can’t defend yourself with more force (or even the threat of more force) than the criminals are using *at that exact moment* (so if they have a gun and they turn away from you, you can’t shoot them in the back), or you’ll go to jail.
There’s a lot to know, so we wrote a guide to break-ins and gassings on the French Riviera.
Squatters & Home Invasions
Squatter’s rights are a big problem for homeowners on the French Riviera (which is one of only four areas in France that account for 79% of all squats).
From gypsy families who live the “squatter’s lifestyle” (with the help of many websites, online instructions, and other squatters), to foreigners seeking asylum, to criminal networks (mostly from Russia, Romania and Bulgaria), there are many people out there who know the laws and abuse the French system, which seems designed to protect criminals.
There’s so much to tell you about this problem that we wrote a separate, must-read guide to squatters and home invasions, since it’s so important to understand the limitations of the police (most of the time they won’t help you) and the fact that you can get charged as a criminal for threatening the home invaders.
Buying a Villa? Read This First!
When you’re ready to look for a property, make sure to read our complete guide to buying real estate in France. These guides explain how to estimate a property’s real value, how to get the best price and avoid over-pricing, what to look out for, how to avoid getting scammed, and more.
First, in order to understand the real estate market in France, you must understand how m² pricing is a giant scam. Then, you can move on to the other guides:
Our guide to where the market is headed includes: French Riviera real estate market predictions, current & historic pricing trends in the market, and the reasons why prices will continue to fall. Plus, supplementary guide to Russians & their impact on the French Riviera real estate market.
Our guide to real estate listings includes: how to find villas for sale, what to look out for, misinformation and warnings, auctions & foreclosures, buying direct from sellers, why timing is everything, and the reason why only about half of villa sales are publicly listed.
Our guide to scams and secrets includes: warnings about the unethical tricks that agents, notaires, sellers, developers and builders use to get more money out of you. This is a must-read, and the whistleblower guide that those in the business don’t want you to see.
Our guide to real estate agents includes: the dishonest things agents will tell you, how real estate agencies operate, buyer’s agents and property finders, why you should avoid illegal and non-local agents, and who to trust (an important warning).
Our guide to pricing & determining a villa’s market value includes: why there’s so much extreme overpricing, how to estimate a villa’s market value (what it’s worth), and a step-by-step guide to finding your offer price.
Our guide to important things to find out includes: diagnostic reports and surveys, sun & micro-climates, potential issues with the view, housing taxes, the age, internet and mobile access, danger (red) zones, health risks, privacy & space issues, nearby problems, what you’ll actually own, illegal additions and structures, why they’re selling, how to verify, and more.
Our guide to the buying process includes: negotiating the price & the initial offer, choosing an honest notaire, buying in the black, the official offer & deposit, using a SCI, contract pitfalls, the cooling-off period, what to do before handing over the money, and the final signing.
Our guide for after you buy includes: insurance pitfalls, tips for second homes, renting your villa, renovating, and what to know about hiring people.
Guide for sellers: How to price your villa so it will sell.