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Everything you always wanted to know about France - from France |
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Investment IdeasThe new tax year brings novel ways to invest in property, anything from Sipp syndicates to a hotel backed by Liz Hurley, says Kathryn Cooper for the Sunday TimesLIZ HURLEY, the actress, is backing a new scheme that allows wealthy investors to buy a room in a top London hotel, stay there for up to 90 days at a discount and earn a fixed income for the rest of the year. The plan, which invests in Number Eleven Cadogan Gardens in Chelsea, is the latest product to tap into investors’ insatiable appetites for unusual property schemes. While it is unlikely to be allowed into self-invested personal pensions (Sipps), plenty of other schemes are likely to fill that gap in the coming weeks. The Hurley plan follows hot on the heels of Guestinvest, a property company that allows investors to purchase rooms in its Notting Hill and Paddington hotels and let them out for a profit. However, the owners of Number Eleven Cadogan Gardens insist this is a different type of property plan. Not only is Hurley a hotel director and shareholder, but you must also be classed a certified high net worth investor to participate. In other words, you must have an income of at least £100,000 or assets, excluding your property, of £250,000. And the owners say the plan is not an investment in the same way as Guestinvest because you do not benefit from any growth in the value of your hotel room. The plan is aimed at people who live outside London but spend a large amount of time in the capital and own a property there. The plan allows them to sell their pied a terre and buy a hotel room instead. You can invest from £140,000 for a single room, which would normally cost £140 a night, to £500,000 for a top suite, which would cost £500 a night. In return, you hold a debenture, a type of loan. You have lent the hotel money and the hotel pays a fixed income of 3% a year for five years. So if you invested £140,000, you would get an annual income of £4,200, which would be subject to income tax. At the end of the term, you should get your capital back in full, but there are no guarantees. The yield and your capital depend on the performance of the business, although the loan is secured on the hotel so in the worst-case scenario the property could be sold. Debenture holders can stay in the hotel for 30 nights free of charge, another 30 nights at a 33% discount and a further 30 nights at a 25% discount an average of 47 nights free of charge. After five years, you can either sign up for another term or ask for your money back. Colin Emson, owner of Number Eleven, said: We are targeting four types of people. First, people who live in country houses but spend two nights a week in London. This plan is an alternative to their costly pied a terre. We will also appeal to tax exiles who can spend only a certain number of days in the country, international film and media professionals who are regularly in London for premieres, and big companies with international executives who make regular visits to Britain Sipp investors are unlikely to be allowed to invest in the Hurley plan. The government confirmed last month that residential property cannot be held directly in pensions, and while hotels are not classed as residential property they are still excluded if the investor has rights over a single room. However, Sipps can get round the rules on direct residential property if they invest through what the government calls a genuinely diverse commercial vehicle in other words, a fund that pools the cash of several investors to buy a portfolio of properties. This will include Sipp syndicates and real-estate investment trusts (Reits) when they are launched in January. However, both must meet certain criteria. They must hold at least three residential properties and the total value of their assets must be at least £1m. No single asset can be worth more than 40% of the total value of the fund . And your pension cannot hold more than 10% of the fund, so you must team up with at least 10 people. Stuart Law of Assetz, a property firm, said: This is fantastic news for pension investors. The government has been sensible in permitting residential property that is of a true investment nature. Assetz already offers property funds that are eligible for pensions under the new rules and it will launch the first residential Sipp syndicate tomorrow, with more to follow in the next few weeks. However, while syndicates will give investors more control over the underlying assets than in a property fund, some commentators think that they spell trouble. Ronnie Ludwig at Saffery Champness, a law firm, said: On a practical level, property syndicates involving a minimum of 10 Sipps investing in at least three residential properties looks like a recipe for problems. Issues will arise when some members wish to sell and others do not. And there are likely to be disputes over whether a property is suitable and how to pay for repairs and maintenance. While the tax breaks are attractive, the practical difficulties will be the real issue and I suspect that the easiest and best way to invest in residential property with a Sipp will be through Reits. There have also been warnings that the new rules could lead to the rise of property clubs, which will not fall within the remit of the Financial Services Authority (FSA) when it takes over the regulation of Sipps next year. Neil Young of the Young Group, a property-fund manager, said: Individuals will be able to hold property in Sipps, as long as they club together to invest. This has prompted speculation about the rise of the property club, which could leave consumers exposed. There are over 2,000 features and articles on this site about French life and living in France. You can search from the search box above. Do browse through our website and please use the advertising links, they help pay for the site. I do try to reply to all mail - Contact Me - most is about property or living in France. I publish comments in this newsletter which I believe are of interest and may help find answers for people wanting to come to France. I hope readers will go to the adverts which help support our overheads. |
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