Investment Property - Definition, Understanding, and How it Works?
The real estate market often offers two types of investment: the acquisition of a property as a principal residence or the purchase of a property to rent it. This is called rental investment.
There are many reasons to invest in new rental property: to build up a property portfolio, to obtain additional income, or to take advantage of a property tax exemption scheme.
Beyond the financial and tax advantages, rental investment also boosts the French economy, since it is a market that drains 9% of the annual wealth. It is also a way to offer more housing, especially in areas facing housing problems.
Opting for rental investment: tax advantages
Investing in rental property gives you access to advantageous tax measures, starting with notary fees. Specific to new construction, you benefit from reduced notary fees, which amount to only 2% to 3% of the sale price, compared to 7% to 8% on the old market.
Another advantage is the exemption from property tax in certain municipalities. Purchase the nine exempts you from property tax where the property is located for two years. For this, the H2 form, which is dedicated to a dwelling in a collective building, must be completed and sent to the property tax department. You have 90 days from the completion report to make the declaration. However, check with the city hall of the place where your apartment was built to make sure of this exemption.
In recent years, one of the main schemes that facilitate rental investment is the Pinel law. It allows you to benefit from a reduction in your income tax of 12% to 21% over 12 years. To benefit from this scheme, however, you must meet certain conditions. In particular:
In addition, the Pinel scheme is effective for operations carried out between September 2014 and December 2021. When renting, a monthly rent ceiling must be respected, it is determined according to the surface of the property.
The location and energy performance of the property also plays on the eligibility of the Pinel reduction. Ultimately, the conditions are the same as the Sellierlaw, effective for rental investments made between January 2009 and December 2012.
How does the rental investment work?
For a first rental property purchase, the first step is to define the objective of your investment. The clearer it is, the more you will know what type of new apartment you should buy. Is it to make a capital gain on resale? To reduce your taxes? To create a family heritage and bequeath the property? Buy for a primary or secondary residence once you retire? Depending on your objective, the surface area, the location, the proximity to shops and services will become clear.
Once you are clear about your objective, you will need to determine your borrowing capacity. This is why it is essential to study your financial situation with your bank before you even start looking for a real estate program in Alsace. Depending on your savings, your contribution, and the real estate market where your property is located, banks will be more or less inclined to grant a large loan.
The third step is to find out about and determine the tax measures you wish to take advantage of. To take the example of the Pinel reduction, some properties in new construction are eligible, others are not. Real estate developers generally stipulate which properties are eligible for the Pinel law, but don't hesitate to ask them for information.
Good to know: rental properties are often marketed by real estate developers or banking institutions. Depending on the program, the property may be used solely as a primary residence or may offer additional rental investments.
Once you have found the new apartment that meets your criteria, the purchase of the property will be decided by a reservation contract, then a VEFA deed of sale. This is the same procedure as buying a primary residence. The difference is that you will have to find a tenant to make the investment profitable as soon as your apartment is delivered. To do this, you have the choice between managing these steps yourself or using an agency specialized in rental management.
In case of tax exemption, you will have to fill in the information related to your rental investment in your annual income tax return.
Rental investment in Alsace: our advice
The location is essential if you hope to rent your apartment quickly. It is the assurance to offer a property sought after by tenants and to make a capital gain in case of resale. Economic and university centers naturally attract more young workers and students. Generally speaking, Alsace is a region with a rich historical heritage, which makes it a very attractive tourist destination.
In Alsace, the most popular city is Strasbourg, whose most sought-after neighborhoods are the train station district, Neudorf, the hyper center, the Esplanade for students, and Robertsau and Orangerie for families.
For tenants on a tighter budget, the new districts near Place de l'Etoile and Jardin des Deux-Rives, Lingolsheim, Illkirch-Graffenstaden, and Schiltigheim are ideally located. Public transportation is particularly appreciated in these locations, with direct access to downtown Strasbourg by bus and streetcar.
In the countryside, historical and cultural towns such as Benfeld, Innenheim, Furdenheim, Ergersheim, or Kaysersberg are favored for patrimonial investment. Long-term investments, favoring housing with a superior standing that guarantees the value of the property.
Mulhouse is not to be outdone, with the Rebberg, the station, and the Foundry districts. Riedisheim and Brunstatt, just outside the city, are also sought after. Colmar, ideally located between Strasbourg and Mulhouse, is also in demand!
Beyond the location, pay attention to the exposure and the services of the apartment. The better the quality of the apartment and the more light it has, the more likely you are to rent it and make your purchase profitable. Note that the most sought-after properties are the T2 and T3. Furthermore, if you choose to invest in the heart of the city, the presence of a bicycle room, a garage, and/or a parking space is a real plus.
To assist you, you can turn to real estate developers who offer numerous programs for sale. Choose a local player such as Pierres & Territoires Alsace, which knows the Alsatian real estate market inside out. It is all the more appreciable for the investors located in another region. Our advisors have a real knowledge of the local real estate market and will be able to guide you on the quotation of the housing according to the districts and the housing areas in the whole region.