Interest from an investment in real estate
The purchase of an apartment or a house can also be done for the purpose of investment, it is a very popular investment in France. There are different ways to make money with real estate investing:
- either by the value of the investment which may increase (the objective is then to generate capital gains on resale),
- or by property income which will be collected via rents after deduction of charges and taxes.
The first thing to do before deciding to invest in a home is to calculate its rental profitability . This is the first golden rule for a successful real estate investment, especially in a context of low interest rates where house prices are high in relation to income and rents. You can, for example, use good rental yield calculation services .
This will allow you to study the interest of this solution and to compare it with other types of investments or with this classification of the rental yield in 100 large cities . You can see that depending on the city chosen for buying and renting the home, the average return will not be the same at all. Strong disparities can also appear from one district to another. If a rental property investment in Paris has certain advantages from a patrimonial point of view and hope of capital gain, it is quite different in terms of rental profitability. It’s up to you to determine what your medium and long-term goals are and the best ways to get there through the right real estate investment:
- create additional income to prepare for your retirement, for example,
- increase your total wealth,
- reduce your taxes by investing in a concrete asset,
- invest a few tens or hundreds of euros per month,
- invest existing capital,
- optimize real estate assets,
In the vast majority of cases, investing in the rental will only be interesting over the long term, that is to say over many years.
In addition, it is one of the only investments that can be made on credit, which makes it one of the favorite investments of the French. Some borrow to rent with zero euros of contribution (we speak of a purchase at 110%). It is therefore one of the recommended ways to build up heritage.
Choice of property, type of rental contract, rent and tenants
As you begin to perceive, it is not about investing in the first apartment for sale that you see and renting to make a profit and collect your first euros. The real estate market is not currently very profitable for individual investors: high prices, low average yields, confiscatory taxation and the rights of the lessor often low in the face of bad tenants, etc.
It is therefore essential to make a very precise selection of the property (s) in which to invest. We will come back to this in the various articles in this section. You have to take into account your local rental real estate market, trends in the neighborhood (is it developing well? Will it be more attractive in a few years?). You will also have the choice between investing in new housing, often with tax exemption, or investing in old real estate with or without work.
The advantages and disadvantages of each type of operation are not the same. Everyone will adapt their project to their income and assets, but it is better to focus on quality and profitability in the long term.
You will also need to choose the right taxation and therefore the right type of rental agreement. Indeed, there are important differences between bare rental on a renewable 3-year lease and a furnished rental under the LMNP regime.
For everything that is the purchase itself, the negotiation of the price, the terms of making an offer to purchase, etc. consult our articles dedicated to the purchase of an apartment or a house
At this point you have taken the 1st step of your “ buy to rent ” goal , you have purchased a home with potential. You have to rent it out. For that, it is necessary to define a rent . Attractive enough to find a tenant quickly and easily, but as high as possible to obtain the best profitability. It’s all about the right balance between these two needs.
You will then need to prepare a rental contract, an inventory document , to be able to generate a rent receipt . In short, you will have to deal with all the administrative procedures of your relationship between landlord, landlord and tenant.
Finally, you will need to find a tenant . There are many means of prospecting for this. You will be able to choose your tenant on file and quickly set up the lease in order to start collecting rents without having too much rental vacancy.
This is summarized, along with tools to help you do it, in our article on the 6 things to do before renting a place .
Manage your rental properties
When you have invested in one or more real estate, you will have to manage the rental of its property (the needs of your clients, changes in tenants, discussions with condominium trustees, etc.). To help you, you will find advice and tools for your rental management .
You also have the possibility of delegating these tasks against part of the rents collected to professionals in the management of rental property. As for the search for tenants, the realization of the inventory of fixtures, it is always possible to entrust certain elements to an intermediary, but this will come to reduce your rental yield by creating additional costs.
You will also need to manage the taxes payable on the rents collected and choose the best tax option on your property tax return . You will have the choice between deducting your actual costs which will then be recorded exactly according to what you have paid or choose the micro-foncier regime so that a standard allowance is retained. Depending on your situation and your projects, it will be necessary to calculate what is most profitable for you in order to reduce your property taxes and thus optimize your profitability.
To buy for rent, you not only have to take into account the price of the accommodation, but you also have to take into account the possible work. This requires knowing how to estimate the cost and being able to do them or to surround yourself with professionals for these services. Real estate taxation (property tax, tax and social security deductions on rental income, etc.) must also be taken into account.
Finance your investment with good credit for a more profitable purchase
To finance your real estate investment, you can use our loan or borrower insurance simulator to find the best offers so that your purchase for a rental is even more profitable, in particular by obtaining a good mortgage rate . You will thus optimize your loan repayments compared to rental rents thanks to our practical tools.
Once you’ve found the right property to invest in, you should optimize your financing if you don’t want your bank to benefit the most from your work. For this, you will find many tips and tricks for your financing with our mortgage loan guide . To be a good real estate investor, you also need to know how to be a good borrower. This increases the quality of the financial transaction for the same purchase. For example, it is interesting to know how banks work for calculating the mortgage rate .
In the specific case of rental investment, we may wonder whether it is better to finance its purchase through a contribution or a mortgage . In addition, we come back to the advantages and disadvantages of a rental property investment without contribution .