What are the steps to invest in real estate?
Choosing a rental method, defining a budget, selecting the perfect location, calculating the profitability of the rental investment, renting your property, declaring the revenues and having your property managed are the steps to succeed in your real estate investment.
What are the steps to invest in real estate?
Step 1: Choose your rental method
Using empty leasing guarantees stability (leases have a duration of 3, 6 or 9 years) and little management. In addition to its long duration, housing management is less.
Renting your furnished apartment is:
According to the Tourism Code, seasonal rentals correspond to "furnished villas, apartments, or studios, for the exclusive use of the tenant, offered for rent to a transient clientele who makes a stay characterized by a rental by the day, week or month, and who does not elect domicile there".
This can be the rental of your main residence or second home. Most of the time, this type of rental is concluded either:
Seasonal rentals are defined as short-term rentals.
Step 2: Define a budget, its borrowing capacity
Before taking out a mortgage, the bank or credit institution must provide you with a pre-contractual information sheet (FIP). This sheet must contain:
Every quarter, the Bank of France establishes the average of the rates charged by the banks and the average rate increased by one third corresponds to the rate of usury valid for the following three months.
> Useful link : What do you need to know before making a mortgage?
Step 3: Which tax system to choose?
Non-professional furnished rental :
1. The micro BIC scheme
You will have to mention your gross receipts (professional furnished rentals)
A flat-rate allowance of 50% is automatically applied.
2. The real regime
> All charges can be deducted.
It will be necessary to report the tax result determined on the declaration n ° 2031 filed:
> if you have only one furnished rental property, to the Business Tax Service (SIE) on which the furnished property depends, or,
> if you have several properties, to the SIE on which your most important furnished accommodation depends.
Professional furnished rental :
The Pinel device or the Censi-Bouvard device allow you to benefit from a tax reduction in return for a rental commitment.
Step 4: What elements should be considered when determining profitability?
The rental yield is a performance indicator that is calculated from the income generated by a rental compared to the purchase price.
The rental yield is different from the rental profitability. The two terms are similar but the rental yield is expressed as a percentage and only captures performance. While rental profitability encompasses the return that is appreciated throughout the investment, and also includes a potential resale (and capital gain).
Certain factors can have a greater impact on performance such as the purchase price, "rental vacancy" (the absence of a tenant) or taxation.
Step 5: the location of the property
Step 6: rent your property
A1 Real Estate takes care of every detail:
Step 7: Revenue reporting
The rents received are subject to a tax instalment calculated on the basis of the taxable rents of the previous year. This deposit is debited monthly or quarterly.
It takes into account expenses, deductible and depreciation costs, as well as deductions (flat-rate allowances).
Step 8: rental management
Rental management consists of entrusting the administration of your property to a management agent, a practice that relieves landlords of the sometimes time-consuming tasks related to renting.
The benefits are not only limited to saving time and energy. Indeed, property management also requires legal knowledge and a good mastery of the local real estate market.
The support of a professional ensures that owners bring their property up to standard in the face of changes in legislation.
Using empty leasing guarantees stability (leases have a duration of 3, 6 or 9 years) and little management. In addition to its long duration, housing management is less.
Renting your furnished apartment is:
- Recover the apartment more easily
- Less risk
- Better profitability
- Higher rent due to additional benefits
- More advantageous taxation
- Use an agency for the management of the property
According to the Tourism Code, seasonal rentals correspond to "furnished villas, apartments, or studios, for the exclusive use of the tenant, offered for rent to a transient clientele who makes a stay characterized by a rental by the day, week or month, and who does not elect domicile there".
This can be the rental of your main residence or second home. Most of the time, this type of rental is concluded either:
- through a real estate agency
- from individual to individual
- via rental platforms such as Airbnb
Seasonal rentals are defined as short-term rentals.
Step 2: Define a budget, its borrowing capacity
- Calculate its borrowing capacity: the maximum amount that a bank agrees to lend (vis-à-vis income, personal contribution and the debt ratio of the borrower)
- Choose your mortgage. What should you look at before signing for a mortgage?
Before taking out a mortgage, the bank or credit institution must provide you with a pre-contractual information sheet (FIP). This sheet must contain:
- The type of credit, amount, duration and rate
- The APRC (annualized percentage rate of charge).
Every quarter, the Bank of France establishes the average of the rates charged by the banks and the average rate increased by one third corresponds to the rate of usury valid for the following three months.
- Compulsory insurance and their amount, including borrower insurance
- Repayment deadlines
- Application fees
- Indemnities and risks of termination in case of delay
- The withdrawal periods and the contact details of the lender and the borrower
> Useful link : What do you need to know before making a mortgage?
Step 3: Which tax system to choose?
- In empty rental: rental income is considered as property income.
- Micro diet or real diet?
Non-professional furnished rental :
1. The micro BIC scheme
You will have to mention your gross receipts (professional furnished rentals)
A flat-rate allowance of 50% is automatically applied.
2. The real regime
> All charges can be deducted.
It will be necessary to report the tax result determined on the declaration n ° 2031 filed:
> if you have only one furnished rental property, to the Business Tax Service (SIE) on which the furnished property depends, or,
> if you have several properties, to the SIE on which your most important furnished accommodation depends.
Professional furnished rental :
- The micro-bic diet
- Simple to set up regime,
- Possible reduction of 50% of gross income (including expenses), and 71% in the case of furnished tourist accommodation.
- Simply indicate the amount of revenue collected during the year on the general tax return (form n°2042 C PRO) in the Industrial and commercial profits section.
- Ceiling of €72,600
- Tax base: flat-rate
- Social security contributions: 17.2%
- The real regime
- Simply file for each of the financial years, a bundle n ° 2031 to the corporate tax services (SIE) which manages the place of geographical location of the furnished if you have a single property, or several furnished rental on which depends either on the main residence or the most important furnished housing.
- Declaration on Forms 2031 and Annexes 2033
- With income of more than € 72,600, the rental activity must be declared to the simplified real regime
- Constitutes a tax saving
- Rent including charges - costs and interest - depreciation
- Social security contributions: 17.2%
- Tax exemption schemes
The Pinel device or the Censi-Bouvard device allow you to benefit from a tax reduction in return for a rental commitment.
Step 4: What elements should be considered when determining profitability?
The rental yield is a performance indicator that is calculated from the income generated by a rental compared to the purchase price.
The rental yield is different from the rental profitability. The two terms are similar but the rental yield is expressed as a percentage and only captures performance. While rental profitability encompasses the return that is appreciated throughout the investment, and also includes a potential resale (and capital gain).
Certain factors can have a greater impact on performance such as the purchase price, "rental vacancy" (the absence of a tenant) or taxation.
Step 5: the location of the property
- It would be wise to choose a city where demand is greater than supply
- In order to decide where to settle in Paris, the selection of the district and district in Paris must be done carefully (close to a university for students, a pool of jobs for workers, schools, shops and public transport, etc.). For this, A1 Real Estate has set up a Paris Guide.
Step 6: rent your property
A1 Real Estate takes care of every detail:
- Write and publish real estate listings on over 100+ real estate portals worldwide
- Planning and conducting in-person visits
- Selection of profiles and rental files of potential tenant candidates, with guarantees of solvency
- Establishment of a mobility lease, a civil code lease, a secondary residence lease or a business housing lease
- Realization of the inventory of the property with photos
Step 7: Revenue reporting
The rents received are subject to a tax instalment calculated on the basis of the taxable rents of the previous year. This deposit is debited monthly or quarterly.
It takes into account expenses, deductible and depreciation costs, as well as deductions (flat-rate allowances).
Step 8: rental management
Rental management consists of entrusting the administration of your property to a management agent, a practice that relieves landlords of the sometimes time-consuming tasks related to renting.
The benefits are not only limited to saving time and energy. Indeed, property management also requires legal knowledge and a good mastery of the local real estate market.
The support of a professional ensures that owners bring their property up to standard in the face of changes in legislation.
What are the pitfalls of rental investment?
- Overvaluing rents
- Neglecting rental management: managing a property requires time and sometimes being close to it.
- Don't think about reselling
- Do not take out insurance to protect your investment: there are unpaid rent insurance or the Visal guarantee.
Having a guarantor is not mandatory but almost systematically requested by the owners.
A1 Real Estate takes into account all the provisions, and guarantees, in order to carefully choose the best files and profiles.
These files are eligible with guarantee organizations, rental guarantors.
For those who do not have a guarantor, it is possible to ask their bank to apply for a bank guarantee or paid solutions such as garantme.fr.
Ce qu’il faut retenir :
- Choosing a rental method, defining a budget, selecting the perfect location, calculating the profitability of the rental investment, renting your property, declaring the revenues and having your property managed are the steps to succeed in your real estate investment.
- Be careful, some pitfalls are to be avoided: overvaluing rents, neglecting rental management, not thinking about resale, not taking insurance to protect your investment
- A1 Real Estate takes into account all the provisions, and guarantees, in order to carefully choose the best files and profiles.
- These files are eligible with guarantee organizations, rental guarantors.
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Posted on 30/05/2023 by
Andy LECUYER
