Investing in real estate, with the purpose to rent it out adresses different objectives. Several ways exist to achieve such a buy-to-let investment. Buying through a company (SCI, SAS, SARL, etc.), through a fund (SCPI / OPCI) or direct will depend on your situation and objectives. One of the main caracteristics of such an investment is the collection of rental income, which makes it appealing to many investors. These revenues can be heavily taxed depending on how you detain the assets.
Objectives
Buy-to-let investment allows particularly to:
- Develop your assets over the long term
- Generate additional income
- Take advantage of the leverage offered by a bank loan
- Benefit from tax advantages through different schemes
- Add complimentary revenues for retirement
Select your property
Real estate is by default a long-term investment asset class: the acquisition costs, as well as the liquidity make it an investment that will be profitable over time.
The selection of the property is thus essential and should address the following criteria :
The location of the property
- Quality of the building and its compliance with environmental standards
- Type of property, comparing the price per square meter to peer properties
- Related costs (current and future charges)
- Direct and indirect taxation
To these “classical” criteria, we should focus on buy-to-let specifics:
- The rental potential of the property: what is the demand for the type of property selected
- The financial burden must be controlled in the event of a rental vacancy / unforeseen cost
- Consider the rental yield, potential tax advantages and the resale potential
- In some cases, the selection of a property manager or operator
Real Estate Investment schemes
SCPI
You want to build up a property estate, SCPI shares allow you to buy managed property, and to receive regular income. This investment can be made in cash or via mortgages. This type of product is particularly interesting for expatriates and non-residents, as well as anyone wishing to diversify their financial assets.
Statut LMNP
LMNP status allows to benefit from an advantageous tax system related to the rental of a furnished property. It is thus a way to avoid real estate taxation, which forces to invest in properties able to accomodate furnished renting.
Loi Pinel
You want to reduce your income tax while making a rental property investment. By acquiring a property as part of the Pinel law, you can then benefit from an income tax reduction. The amount of the tax advantage is proportional to the duration for which you commit to rent out with a ceiling price: 12% for 6 years, 18% for 9 years and 21% for 12 years.
Loi Malraux
The Malraux law offers a tax reduction equivalent to 22% or 30% of expenditure on restoration works depending on the status of the area chosen for the investment. In this way, you make a rental investment as part of a complete restoration of an old building.