Main menu

Pages

Investing in rental property: getting started and succeeding

A flat residence


In the collective subconscious, rental investors are wealthy people with the ability to buy property. However, the reality is quite different: you don't have to earn a lot of money to get started and then succeed. Anyone can become a homeowner with the aim of renting out their home.
Why go into rental property?

The advantages of a rental investment

The rate for loans to borrow and finance a rental purchase is currently extremely attractive: in September 2020, the average rate was 1.18%, i.e. 0.92% over 15 years, 1.08% over 20 years and 1.33% over 25 years (source: L'Observatoire Crédit Logement CSA). In addition, this type of investment represents less risk than a traditional loan for banks, notably thanks to the rents received, which reduce the burden of monthly repayments.

Finally, you combine this purchase with very interesting tax advantages. In the context of a Pinel acquisition, the rental investment is built around your tax level. It's always wise to buy a property that will save you money that you won't have to give to the tax authorities.

Certain cities are particularly recommended for rental investment: in Bordeaux, the number of requests for an offer is 6.36, in Lyon (3.92), Paris (3.12) and Nantes (2.95). Source: Blog LocService.

It should be noted that in the case of a purchase in Pinel, the rent is capped and depends on the usable surface area of the property and the eligibility zone. The scale is published on the BO des Finances Publiques-Impôts (BOFIP) each year.
What are the steps for a successful rental investment?

1. Determine your market, your target, your objective and your budget

  •     The geographical area: Buying close to home is an advantage, because not only is travel in the event of a problem less restrictive, but you also know the environment and development prospects of the surrounding area better.
  •     The target: Generally speaking, be aware that each segment of the population has its advantages and disadvantages: high demand, students may cause more turn-overs; older people may offer more stability, but fewer resources, etc. In any case, you will need to know them well to be able to acquire an effective property adapted to their needs.
  •     The objective to be achieved: Object of tax exemption or rental investment intended to increase your assets. Once determined, it will guide the property search.
  •     The budget: Before evaluating all the ancillary costs inherent in your rental investment, such as the cost of works or rental management, it is better to plan broadly than to have unpleasant surprises.

2. Check your debt capacity

Before investing, check your banking situation - and above all, make sure you are not over-indebted. Determine how much you can allocate to this project, you'll save time, as you'll avoid committing yourself to property you can't afford.

As far as banking requirements are concerned, you must have a "risk-free" profile and receive a regular income. Note that during negotiations, it is smart to put different lending institutions in competition to obtain attractive rates.

3. Do your research intelligently

Start by forgetting your instincts: you're not buying for yourself, but for someone else. Favourites" don't work in this market. Look at all the practical elements to be analysed during a visit: functionality, parking, storage, type of work to be carried out...

4. Surround yourself with the right people

The estate agent, the notary and the accountant are the three people you need to recruit. It is important that they are invested in the project, but that they can also ensure good general communication, both between themselves and with you.

You can also surround yourself with craftsmen, architects, insurers, etc. to enhance the value of your property.

5. Make your profitability calculations before you invest your money.

At each visit, its calculation. To find out how to do it, go to the PAP video below. Note that this step should not be taken lightly: it is necessary to determine the rent associated with your rental investment. Naturally, if you have subscribed to the Pinel scheme to invest your money, the profitability calculation is already indicated.

In conclusion, while you can obviously decide to manage your rental investment on your own (using software such as Directim, for example), it is sometimes preferable to surround yourself with an asset management advisor, who will give you a certain amount of security as to the relevance of your operation: he knows the real estate and construction world and its subtleties, the economic levers to be favoured depending on the situation, etc.

 

Commentaires

table of contents title