Real estate: investing in rental to start building a heritage

Real estate: investing in rental to start building a heritage

Posted Sep 28, 2022, 3:00 PM

Wealth managers tend to say that one of the first steps to take in building long-term savings is to acquire your main residence as soon as possible. It is often in the thirties when one “sets up” personally and professionally, that a first real estate transaction is completed. The following years over the promotion or change of company, income can appreciate giving a greater debt capacity allowing the purchase of a rental property.

However, “we are seeing more and more 30-somethings living in large cities who, unable to buy their overpriced main residence, are opting to buy a rental property. They become owners in this way”, underlines Stéphane Van Huffel, managing director of Netinvestissment and Leemo at Primonial.

“This scenario of rental investment before the main residence is also favored by those who have a job requiring regular geographical mobility in France and/or abroad. It’s a new way of starting to build up a real estate portfolio,” adds the latter.

The SCPI alternative

If the financial effort is too great to buy a physical good because the smallest studio is worth at least 100,000 euros, another parade will consist in buying SCPI shares. “Very diversified, this type of investment can be calibrated according to its financial possibilities and expand over time,” says Vincent Cudcowicz, CEO of Bienprevoir.fr.

In these two versions of the rental investment it is better to use the leverage effect of the credit so the rental income collected will be used to reimburse part of the monthly payment. Even if credit interest rates go up, this cost is still cheap. However, the rates reserved for financing rental properties are often increased by 0.20 to 50%.

At the moment, the pitfall will be above all to obtain the green light from the banks, which are increasingly reluctant to lend, taking care not to find themselves stuck because of an exceeded debt ratio (35%) or interest rate. wear exceeded.

To facilitate obtaining credit, a first-time investor will have every interest in having a personal contribution. This will be appreciated by the lending bank.

Last straight line for the old formula Pinel

The “Pinel” may be suitable for savers who do not yet have a rental property portfolio and who wish to build one thanks to the leverage effect due to credit, income tax savings and the rent paid by the occupant.

Investors still have a few weeks to complete a rental investment with the Pinel system in its current version which will end on December 31, 2022. For the record, this measure is accompanied by a still generous tax advantage before being planed in 2023 then in 2024, date of its final shutdown.

For this year again, the taxpayer benefits from an income tax reduction equal to 12%, 18% and 21% of the amount of the investment provided that the property purchased new is rented for 6, 9 and 12 years. . This tax carrot is capped at 300,000 euros per year and within the limit of 5,500 euros per square meter of living space.

In addition, rents are regulated and the tenant is chosen subject to means testing. Making a decision in October means taking advantage of the last “window of opportunity” to buy a property (to be built), having time to find financing to sign the deed at the notary’s at the end of the year.

Overpriced real estate?

However, several elements must be taken into account. First, the detractors of Pinel denounce a real estate overpriced because of the margin of the promoter and the commissions of the intermediaries. “There is certainly the tax advantage at stake, but the risk is to overpay the price per square meter. This additional cost can then erase the tax savings burdening the hopes of long-term capital gains, ”argues a wealth management adviser. It is important to carefully analyze the selling price of the program in relation to the local market.

Then, the available supply of off-plan properties (sale in the future state of completion) is dwindling everywhere in France with new programs arriving on the market in dribs and drabs and whose prices are constantly rising ( construction and labor costs). This stock contraction may limit choice. Finally, bare rental – mandatory in Pinel – exposes you to taxation on property income taxed at the marginal tax rate, plus social security contributions of 17.2%.

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