2022 complete guide to invest in real estate

The problem is that real estate investment remains paradoxically still quite misunderstood . And we often forget that it is still possible to make very bad investments in real estate when you are not sufficiently prepared.

Also, we easily tend to think that investing in real estate comes down to buying a property. In reality, there are plenty of different ways to invest your euros in stone.

In this article, I’ll tell you how to invest in real estate today – and the mistakes to avoid.

Why invest in real estate?

As I told you, the French are particularly fond of real estate.

In addition to being a country in which we save a lot , we tend to want to place our savings in stone.

And there are several reasons that motivate us:

  • The fact that your investment can also allow you to stay if necessary
  • Less volatility than stock market investments
  • Can generate additional income
  • The “tangible” side of real estate
  • Another big advantage of real estate : the possibility of taking out a loan to invest. This is called the leverage effect (I go into detail on this point later in the article).
  • But beware: real estate is not a perfect investment. And even less an investment without any risk (despite what some try to make you believe).
  • Above all, this is a project that must be carefully thought out. And for that, it is essential to know the different ways of investing in real estate.

·         The different ways to invest in real estate

  • I want to start with this point because it is often misunderstood.
  • We have the impression that the only way to invest in real estate is to buy your main residence or an apartment to rent.
  • In reality, there are plenty of different ways to invest in stone, each with its pros and cons.

Rental investment

This is the image we have most of the time when we think of real estate investment: buying a property to rent it out .

Here you have the opportunity to earn money in two ways:

  1. With the rental income that you collect each month (simply the rents)
  2. At the time of resale if your property has increased in value (known as making a capital gain)

Rental investment can be a very interesting investment… provided that you get (very) good information before you start.

On the other hand, what we often ignore is that there are many different ways to make rental investment . One of the worst things to do when looking for how to invest in rental real estate is to get started without having explored all the options that exist.

Here’s a little preview.

Bare or furnished, you have to choose

This is one of the first questions to ask:

Choose a bare or furnished rental?

This is a choice that is important to consider carefully, because it is not only the comfort of your tenant that is at stake, but also the taxes you will pay . Yes yes.

And that’s not all. There are other differences between a bare or furnished rental investment, such as the mandatory furniture, the duration of the lease and the notice period, the rents to be expected, etc.

👉 Naked rental

It’s a bit like the “default” option for rental property investment. The problem is that it is not necessarily the most interesting. Especially because this is where you risk having to pay the most taxes.

Overall, your income will fall here in what is called property income . They are taxable according to your income tax rate.

There are some exceptions, but overall it’s a pretty heavily taxed system (especially if you’re in a high marginal tax rate).

👉 Furnished rental

Here, as I know that you are particularly perceptive, you will have understood that it is a question of offering for rent a property with furniture.

You can furnish your property more or less as you wish, provided you respect a list of furniture and compulsory equipment , defined by the State.

One of the big advantages of furnished rental is that it can allow you to obtain the status of LMNP (Non-Professional Furnished Rental Company) .

You can enjoy LMNP status if:

  • Rental income (the money you earn from your rents) is less than €23,000 per year
  • or if they represent less than half of your overall income

Otherwise, you will be considered as a Professional Furnished Rental Company (LMP).

In both cases, your income does not fall into the category of land income, but in that of Industrial and Commercial Profits (BIC) . Taxation is then more favourable.

In fact, the LMNP is today a tax loophole which many people are not aware of, and which they therefore do not take advantage of. And that’s a shame.

So before rushing on a bare rental, take the time to do some research and compare to see what will be the most interesting for you.

Of course, you will have understood it: making rental investment requires involvement, time, and probably a little passion too . Especially if you want to handle everything yourself.

It is therefore quite different from investing in the stock market, which can be done in a much more passive way.

But if you don’t want to do everything yourself (especially for your first property), you can also turn to turnkey rental investment solutions.

Turnkey rental investment

Maybe you’re one of those people who would theoretically be interested in buy-to-let investing, but don’t have the time or inclination to handle it all yourself.

For those who find the project interesting, real estate investment can be exciting.

But for those who would like to be interested in it but have a lot of brakes to start on their own, the turnkey rental investment solution may be worth considering.

Turnkey rental investment is offered by platforms that aim to help you find and manage your property for you .

Depending on the platform, they can take on several missions:

  • Find a property (according to your situation, your criteria, your desires, etc.)
  • Accompany you to obtain attractive financing
  • Organize and carry out the necessary work
  • Furnish and decorate the property
  • Manage the rental, from the choice and installation of a tenant to the daily management of the property (sending of rent receipts, questions from tenants, management of possible problems and emergencies, etc.)

In return, you pay management fees each year on the amount of your rents . This is the price to pay for taking care of almost nothing.

Among the turnkey rental investment platforms that I like the most is Beanstock .

They have a marketplace of very interesting properties (with really detailed presentations of each property) and support you on all the points mentioned above.

Why classic rental investment can be so interesting?

Historically, in terms of returns, stock market investment is in the lead (often surprising information).

And while the reverse is also true, real estate investing has several advantages that the stock market does not .

And one of its biggest advantages is being able to invest on credit.

I say “can”, but in most cases it is also “must”. Because it’s often quite rare to be able to buy a good in cash as if you were buying a pair of pillowcases during white week.

But the thing is, having to borrow has its perks too (to the point that you can debate the advisability of buying cash even if you can afford it).

And more precisely, the big advantage is to be able to take advantage of what is called the leverage effect .

Leverage is when you use credit to invest. Thanks to him, you can buy a property that you could not necessarily afford to buy cash.

The big advantage of leverage is that it can multiply a project’s potential returns. Its big disadvantage is that it also multiplies the risk (oops) .

And when you want to make rental investment, that’s where it becomes all the more interesting. In this case, the rents that you collect every month will be able to repay all or part of your monthly mortgage payments .

The choice of good

When you want to invest in rental property, choosing the right property is essential .

The goal is not to buy a property that you find pretty near your home simply because “in any case, real estate is going up” .

The choice of accommodation is the most important step. Especially for one of the biggest purchases of our life in terms of amount (second only to Coke in the mountain resort).

There are many very important criteria to take into account:

  • The location of the property . There’s an old joke in the world of real estate investing that the 3 most important things in choosing a property are location , location , and location . This tells you how essential it is.
  • The surface . Generally, small surfaces are rented more expensive per m2 than large ones. But again, it all depends on what you want to do and what your goals are.
  • New or old . Here too, it is also a question of taxation. We won’t go into detail in this article, but pay close attention to tax exemption schemes (like Pinel, which I won’t mention), which are far from always the good plan that Pinel sellers would have you believe. .

Another thing to take into account: the return on your investment . Before doing anything, calculate the gross, net and “net net” return of your potential investment to be able to compare different options with each other.

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