What to do with inherited property in France ?

Question

Recently my wife inherited a 4/2.5 house in France, the house is completely paid off and has no obligations.  This home was recently appraised in about 300K, however it needs some TLC. Although the home is well cared for and very much in mint condition, her parents kept the original style. It definitely has a 60s look (like time froze in there) and it needs all bathrooms and kitchen redone to match todays standards, update heating systems, and energy efficient windows.

This home is located in the southern town of Avignon,  a small-city with a historic downtown area that is very popular area among European visitors during summer time.  The downtown area is very old school european and it is filled with is small buildings with tiny apartments or studios that occupied by students, airbnbs, or couples. The inherited home is located just outside the downtown area, probably a 10 minute drive, or a short tram ride.  I must also say the home was inherited by both my wife and her brother, so we have to include him on whatever is planned.

I would like to hear what are your suggestions about what to do with it,  and here are the ideas I came up with.

- Keep the home and do reno work, split profits with brother or buy him out before renovations.  It is my understanding that in France people tend to own homes more than renting, so I am not sure if renting such a big home will be a good idea.

- Renovate and Airbnb it (because its proximity to popular attractions) Then again I am not sure such a big home is good fit for airbnb, usually european families are smaller and a 4 bed home may be too big

- Sell it as it is, split money with brother and use that cash to buy other smaller apartments in downtown area where rent or airbnb may be more attractive.

- Sell it and invest in the USA, which I think is the worse idea.

Finally I must say my wife and I would like to have a property in the area for our own, so we can have a place to use whenever we retire and wanted to spend time there with her family, or just enjoying the beauty of the south of France.

Thanks to all !!! Looking forward to hear those great ideas.

Jane S. · Answer

Ah, family fridays!

I would not invest a cent in this. You 3 will all be arguing over how to do the renovation and it will end up taking years and tears.

It might wreck your marriage. I'm serious.

The only way to continue being happy is to get rid of this albatross even if you have to give it to the bro. After all you weren't expecting the Spanish Inquisition--or were you? It's "found money". Maybe he could be generous to his sis and your children if you have any. Then you can sit back and watch him lose his shirt.

However if he decides to sell it, THEN you split the gains 3 ways. And put a schedule together. Vous avez besoin d'un avocat You need a lawyer.

Scott Trench · Answer

I will jump on the "sell" bandwagon here. Here are my thoughts:

- Pretend that you had $150,000 in cash. Would you pool with your brother in law to buy a vacation rental in the South of France to operate from California? Hopefully, this proposition sounds fairly preposterous to you. If you wouldn't do that, you shouldn't do.. that. I hope you don't do that. If the brother wants to keep the property, perhaps he could refinance it, and give you the cash from the refinance.

- If you want to retire to the South of France, or be able to travel there at will, then build a financial plan that backs into that outcome as fast as possible. I'd take $150K and invest it in US real estate that cash flows and is likely to appreciate, using government insured mortgages that we can access as US investors, that are long-term and low-risk. I'd buy STRs or Long-term rentals in markets that I can easily travel to or know well, spend less than I earn, and invest consistently over a period of time.

Then, I'd spend the income that my portfolio generated on travel wherever I wanted in the world - including airfare, rent/hotels, and leisure.

Now, my advice changes if your goal is to move to France full-time as soon as possible, you are willing to self-manage the property, speak fluent French, and believe you will be able to build a sustainable competitive advantage in France. If this is the case, then we should talk about starting Plus Grandes Poches!

Even then, however, I'd advise not mixing business and family. You can't fire your brother in law.

Colleen F. · Answer

@Rafael P Martinez  what I get from your post is that you eventually want a place in France in this area but not this place. You also have use for a place now when you visit.   So I suggest you talk to a real estate agent in the area to discuss the best way to proceed on a sale.  I think selling is best but the question would be if you are better off updating and selling or selling outright with no updates. You could then buy a smaller place in town which you can airbnb and use when you are there. For selling, ask them is the market good now? is the house going to be hard to move in the current condition?.  If you do updates what is it going to adding to the selling price?, will it be worth it? Can you do some updates and not others with a good return.   It really is about this house in this area so a local perspective is essential. I doubt an airbnb is the best option based on what you are saying.

Rafael P Martinez · Answer

Scott thanks for your reply, I see the logic of your argument, honestly from the list of things you mention the only one we have is speaking French since my wife was born there.

I could see how managing from abroad may be difficult.  What do you think of selling and lets asume we keep 100k to invest in USA and taking the other 50k to buy a smaller apartment and rent out? Maybe with a property manager?  What about STR with a managing company?

The reason that I insist on this is because our plans for retirement. although we won't live there full time during our golden years we may spend a month or two abroad. However I can see that following your plan it would be posible to afford a STR for the time we would be there, paid with the cash produced from owning several properties in the USA.  Which at the end may be just easier as suggested

Andrew S. · Answer

I co-owned real estate in Europe with a relative for decades (not in France, so my experience may be a tad different but probably not much).  If your Brother in law is very interested and hands-on, you may be able to pull off a renovation, but if he is not, then this will be a bear to deal with from abroad.  Also, you will end up dealing with filing taxes both in France and the US each year, which is doable, but gets old really fast.  I finally got so sick of it, I ended up giving my share of the property to my sister for free!  Well, she had to cover the gift taxes, but I didn’t take any profits.  Now, of course, this was my sister - I would not have given it away to just any stranger, but it does tell you that really did want the monkey off my back….

So, I agree with most of the other answers: sell the thing “as is” either to the brother in law or on the open market.  Owning real estate in Europe sounds cool/sexy/sophisticated, but it’s generally more trouble than it’s worth.

Rafael P Martinez · Answer

@Colleen F. Thank you for your advise.  Yes, we would like to have a place there, but not necessarily the paternal house. Agreed with you, have to research if it is worth it to put money to a rehab or sell it as it is.  I think selling and getting a smaller apartment in the best area for airbnb would be better, also like you say we can use whenever we want.

Bill B. · Answer

If you sent an expert on French law. If you wouldn’t buy a rental in France if you hadn’t inherited this one. I’d sell today. It’s your chance to avoid any taxes (in the US, France might take a chunk out of you, I’m not France expert.)

What’s your response when next month you hear you have squatters, or someone is suing because they were hurt on your property, or you’ve had a water leak for a couple weeks? Can you take time off from work and stay in a hotel for a month or two going to court or fixing problems?

If you have a bunch of international rentals already fine, MAYBE, or maybe there’s s better place with a better use for the money.

Rafael P Martinez · Answer

Actually her brother is a very reasonable man, and not really a man that will fight for $$$, also he is the older brother, so he kind of has the head of family's word. Dad was very smart and had a will done before passing, at this point the house belongs to both brother and sister on the paper.  Brother also lives in another town and owns his own house.

I think an ideal plan would include buying he brother out before hand if we decide to renovate and rent or renovate and airbnb.  Easiest way is to just sell with no work done,  split 50 - 50 and go our way.

What to do with inherited property in France ?

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