Calculation of the return on investment, type of lease, amount of the transaction, choice of accommodation … follow our practical advice for a successful rental investment. From the search for the property to the type of tax, including your property income.
Buying a rented apartment cannot be improved. And any new investor will have to pay attention to the choice of residence, location or tax status. What you need to do to avoid some frustration and increase your real estate investment. Here are our tips for a successful rental investment.
Rental investment: a reassuring investigation
Closed investments are reassuring, especially in times of crisis. The French appreciate this type of check, which yields more than regulated savings and life insurance. With very low real estate rates, many buyers are turning to foreclosure checks to get or build a property tax-free. It remains to be seen how the market will behave after the health crisis.
The choice of accommodation, a key step
But we do not just jump into an investment that represents an investment of several tens of thousands of euros. Because a bad investment can quickly become a financial pit, especially if you cannot find a tenant … You want to make a rental investment this year but you do not know which type of property to direct you to. Here are some tips to remember when researching real estate.
The surface of the property
Are you looking at the real estate classifieds and you hesitate between a studio and a T3 for your rental investment? If this is your first operation, it is better to choose a studio or one-bedroom apartment. Small surfaces are generally rented more expensive per m² than large ones
“There is indeed an eternal rule of thumb, the smaller the apartment, the more it will be rented out per m². The same goes for the sale, the smaller it is, the more it is sold. this type presents better profitability, especially in cities such as Lyon , Paris or Bordeaux “, remarks Stéphane Desquartiers, Founder of the House of the investor. “On small surfaces such as studio or small two-room apartments, the average profitability is around 5.5% or 6% in large cities. , 5 or 5% on average. In new buildings you will have a little less profitability because of rent ceilings. For example in Pinel law, profitability is around 3 and 3.5%, but this investment remains interesting if we pay a lot of taxes, ” adds Stéphane Desquartiers.
The return on a rental investment
In addition to building up real estate assets , you can expect a higher or lower return on your rental investment. A good way to prepare for retirement or to have additional income.
During your real estate research, therefore, consider calculating the gross return and the net return . These calculations will allow you to compare the return between two real estate acquisitions.
However, be careful with the choice of taxation, since in all cases, you will be taxed on your rental income. Better to be advised by a professional for this choice in order to avoid paying too high taxes on your property income. Calculating the net-net return will give you a more accurate idea of the actual profitability after tax and tax deduction.
Which sector for your rental investment?
Another basic rule to remember for any real estate investment: location above all! The location of the home is indeed very important to any real estate investment.
” I even recommend making a rental investment close to home . I do not recommend making remote investments. Real estate is not like a life insurance product, you have to take care of it even if you have a It is easier to personally check that the apartment is in good condition or to take care of changing furniture for a furnished rental, … In short, it is easier for the management and allows you to buy at the right price because you know the market and the sectors to target, ” continues Stéphane Desquartiers.
Be careful to respect the rent regulations if you want to invest in Paris or Lille, for example, and probably soon in Bordeaux, Montpellier or even Grenoble, which have requested it.
The amount of the transaction for your real estate investment
Depending on your mortgage loan capacity, you can finance your investment by applying for a mortgage. For a first transaction, you can start, for example, with a studio for less than 100,000 euros by borrowing for as long as possible depending on the wealth strategy you want to adopt.
Also be careful to always provide security savings to ensure a possible rental vacancy, taxes or repairs at your expense: failure of the water heater for example .
The choice between new or old real estate for your investment
In addition to the purchase price, you can hesitate between an investment in new or old real estate. One of the main pitfalls for real estate investors remains the choice of taxation (real or micro tax system, LMP or LMNP status in particular).
Note that two tax incentives exist for tax exemption: the Denormandie in the old with the completion of major works or the Pinel law in the new.
In both cases, you must respect the rent ceilings in force and commit to renting the property for a period of up to 12 years. These two devices will allow you to benefit from a tax reduction of up to 21% within the limit of two housing units per year. If you opt for one of these devices, once again pay attention to the location.
Real estate investment: the type of rental lease
Before becoming a landlord, consider choosing the type of rental lease that you will offer to your tenant. This contract has an impact on your taxation, on the length of the notice period or on the elements that must be present in the accommodation.
You can therefore rent bare or furnished accommodation. The last option is popular for small areas. Explanations.
The advantage of bare rental for a rental investment
Bare rental is certainly the most stable option for the lessor who concludes the lease over 3 years against 1 year for the furnished lease. The departure notice is 3 months in France and 1 month in the most tense areas such as for the furnished lease. The empty lease is particularly suitable for large surfaces.
For the choice of the type of lease, everything therefore depends on the time you want to allocate to your real estate investment.
The advantage of furnished rentals for a real estate investment
Furnished rental is a very flexible form of lease that appeals to many landlords: the owner benefits from 3 months notice to give the tenant leave against 6 months for empty space. The lease is concluded for a renewable period of one year. And tenants are very keen on this type of lease for small areas.
In addition, you can alternate between a furnished rental during the school period, a 9-month lease, and a seasonal rental during school vacation periods if you are in a tourist area. Which will boost your profitability.
But whatever your strategy, you will have to respect the list of furniture to be provided to the tenant for furnished accommodation. A list of furniture regulated by law .
Management fees for a rental investment
We must not forget the management costs of a rental investment to calculate the return . “We often forget the time necessary for the management of a property. Solutions exist, in particular online tools which will help you in your management and will edit for you all the documents related to a rental: the contract, the calls, the receipts … Another option, which offers absolute comfort but which has a cost, is to entrust the management to a professional but the amount of the service amounts to approximately 4 and 7% of the rents for empty and 7 and 15% for furnished accommodation, ” notes Maud Velter, rental specialist . “Do not hesitate to ask for the price list of services so as not to have unpleasant surprises,” she continues.
Rental investment: advice from a video expert
As you will have understood, the choice of the rental lease is very important for the taxation of your property income. Stéphane Desquartiers Founder of the House of the Investor discusses the elements to be taken into account in choosing between a traditional lease and a bare lease, to have a better return according to the types of rental projects.
“Furnished accommodation fares well for a landlord: more flexibility and more efficiency. Between seasonal rentals and traditional rentals , the tip to remember, if you are in a mixed city with both a student market and leisure, like Marseille or La Rochelle , is to make a student lease of 9 months then to rent it on a seasonal basis in the summer. with healthy and dynamic markets ”, explains the professional.