Real estate investment: what you need to know Vousfinancer
|Real estate investment|
Real estate investment consists of acquiring a property not to live in it, but as saving, investment to earn an income from it. For this reason, investing in real estate is not a trivial act: you must know enough about the state of the market and the different investment possibilities to avoid investing your money in risky options. This section of the Real Estate
Why invest in real estate?
- There are several reasons why you might want to invest in real estate:
- To build up a tangible and lasting asset;
- To finance a property to make it your main residence later on, through rental investment;
- Seek to improve one's purchasing power by collecting additional income;
- Offer a home to family members for an attractive rent (which is now possible under the Pinel law).
For several years, many tax measures (Pinel for rental investment, Bouvard-Censi for service residences, Malraux for real estate investment in the old with work, etc.) accompany the candidates who wish to invest in real estate, whatever their goal. It is therefore particularly advantageous, today, to embark on the adventure. But what type of investment should you choose? And how to finance your project?
Real estate investment: the different possibilities
Investing in real estate: yes, but in what exactly? Here are 5 ideas for a successful real estate investment, in 5 very different styles.
(Investing in rental property
Particularly popular with households in recent years, the rental investment solution offers ideal conditions for investing in real estate without taking too much risk.
Indeed, the rental real estate investment consists in financing the purchase of a good (apartment or house) thanks to the rents perceived monthly by the tenants, rents which must compensate for the payment of the monthly repayments of the loan. Through the Pinel scheme, the legislator favors this type of investment by proposing to deduct from taxes up to 21% of the cost over 12 years, in return for renting the property and capping the rents.
Betting on corporate real estate
Have you ever thought about investing in commercial real estate? This original investment, which individuals do not necessarily think about, is nevertheless very safe and offers very attractive returns.
This market, which is represented by 70% of tertiary offices, generates lower management costs than rental investments, benefits from less restrictive legislation, and enjoys stable demand (with a vacancy rate that fluctuates between 4 and 5%, a much lower percentage than that of residential rental). Add to this a yield of 4.5 to 8% in the Paris region, and you will understand that investing in commercial real estate is an option to be taken seriously.
Why limit yourself to France for your real estate investment project? Sure, by putting your money in another country, you won't benefit from the national tax advantages - but you will, in return, enjoy the privileges offered by the governments of your adopted country.
To take just one example: what about investing in real estate in Portugal? More than 25,000 French people took the plunge between 2013 and 2016, especially in Lisbon or the outskirts of the capital. Attractive real estate prices ($ 3,000 per square meter for old buildings in the city center), a pleasant living environment that is much less expensive than in France (up to 30% less), tourist conditions that are favorable to rental investments, and attractive taxation (newcomers are exempt from paying income tax for 10 years). Enough to convince the most reluctant!
Going through an SCPI
Investing in real estate through an SCPI (Société Civile de Placement Immobilier) consists in buying "paper stone", i.e. shares in a real estate complex managed by a specific company. Here, it is not a question of putting money into a property to live in during your vacations or to rent out: you only hold shares, therefore only a part of the property, which does not belong to you.
On the other hand, you benefit from the profitability of this property according to the number of shares that you own. And with an average annual return of close to 5%, investing in real estate in SCPI remains one of the most interesting savings investments of recent years. Take a look here to learn more.
Opting for an atypical property
There is not only real estate in life: there are also niche products considered as real estates such as parking spaces, garages, or storage boxes. Take the parking space: low purchase cost, simplified legal regime, low charges, and yield between 5 and 10%: you won't be able to live in it, but you'll get interesting income from it!
Financing your real estate investment
Unless you have an unlimited budget, investing in real estate requires obtaining a loan from a bank or any other lending institution. However, if the lending institutions are rather receptive to the idea of financing a property to be rented out, for example, you will have to make calculations beforehand to demonstrate the viability of your project.
Estimate your monthly payments
Start by calculating the amount of credit needed to complete your purchase, taking into account the price of the property, the additional costs, the agency commission (if you go through a professional). Subtract your contributions, if it exists. And you get the amount to borrow for your real estate investment! Use the Vousfinancer simulator to estimate your monthly payments.
In the context of a rental investment, the bank will want to know your estimated gross and net return. Estimate the rental value of housing by a professional, then establish a certificate. Calculate the gross rent that you will be able to collect, then the net rent (after payment of charges): since the amount of charges is variable, the banks generally estimate that this amount is equal to 30% of the rental value. For example, for a rental value of 1 200 $, the estimated net rent will be 840 $. Your debt ratio should not exceed this amount (the monthly payments - alall-inclusive should be lower than this amount).
Finding the best return for your project
We can see that the potential return on your rental investment is an important factor when it comes to taking out a loan to invest in real estate. The rental yield is the ratio that measures the gross income that the property will bring in compared to its purchase price and its cost price.
Under these conditions, there is no question of choosing the location of your real estate investment at random. You will have to ask yourself where to invest and find the city and the type of property that will allow you to make the best possible investment. The rest of this guide will help you find the perfect property!