Investing in bricks and mortar can be a profitable and low-risk transaction. But there are many ways of going about it and this safe haven also has some drawbacks that must be taken into account.
Along with life insurance and the A savings account, real estate remains one of the three favourite investments for French people. While rental yield certainly offers an interesting return, significant amounts are required at the outset, hence the importance of being well prepared and informed. You don't buy an apartment, a house or a garage unit like you buy a baguette! Birdee takes stock of the various investment possibilities to help you invest your money in the best way.
Bricks and mortar, investors' guilty pleasure?
Investing in real estate is the holy grail of budding investors. But why does less than one person in four take action? It is true that the pandemic crisis has (somewhat) tightened the conditions for obtaining credit, but among the main reasons claimed that hinder this type of investment, we can also mention:
- The supposedly difficult process (bank loan, notarised deed of sale, etc.),
- The fear of not being able to get credit.
- The feeling that you have to have significant start-up capital.
- The potential consequences on your tax return.
If you hesitate to take the plunge into bricks and mortar for one of the following reasons (or others!), we recommend that you be accompanied by a broker who will know how to wrestle with certain myths that remain thick-skinned. Because the game can be really worthwhile! Provided, there again, that you know what you would like to invest in.
Multiple solutions that meet a different need or budget
The conventional rental investment. This is in essence the first solution that comes to mind when you want to invest in bricks and mortar. What could be nicer than to benefit from a fixed income (the rent) that covers the monthly loan repayments and perhaps resell the property one day to realise a nice capital gain? The proposal is enticing, but there are some arguments that need to be taken into account.
Rental income is subject to tax and taxation, which can sometimes be heavy depending on the amounts released and your personal situation. In addition, profitability varies enormously from one city to another and remains quite limited in all sectors, in particular because of the high purchase prices compared to rents. Be fully informed before jumping in!
Furnished rental investment. Rather than a bare rental, why not offer furnished accommodation? Admittedly, you will have to spend a little more money up front to equip the accommodation (some furniture from Ikea will do!), but there are many benefits for you. The rent for this type of housing is generally higher than for empty apartments and the taxes are lower. This is a solution that adapts well to small areas (studios or one bedroom), therefore more suited to students or young workers, people who offer quite reassuring solvency guarantees (often parents).
Bet on business real estate! This is an original investment that we don't always think about. However, businesses and merchants will always need premises! Turnover is very high in this type of sector, and the vacancy rate is correspondingly low (between 4 and 5%) and the yield attractive (between 5 and 10%).
A box or a garage, the ideal solution for small budgets. Parking spaces are a bit like the makis that you order on a Saturday night in front of Netflix, there are never enough! That's why investing in this type of real estate, which can be either a box or a garage, is a very good calculation. Not only is demand very strong (both in the suburbs and the big cities), but it can be acquired for quite reasonable sums, from EUR 10,000 in France, and for a few thousand euros more in Belgium and Luxembourg.
Return is also excellent (between 5% and 10%) and the administrative and tax formalities are less burdensome in these three countries. However, do not let anyone reside there, because it is totally prohibited. This solution can be a good way to start building up real estate wealth.
Purchasing shares. This is the principle of the SCPI (Real Estate Investment Company), which consists of buying "stone-paper". Now we are not talking about housing that will crumble at the first overly powerful gust, but taking ownership in a property complex administered by a specific company. Basically, you share in a building with other people who have done like you, and the income you receive is proportionate to what you have invested.
The entrance ticket is also very interesting, since it is generally EUR 5,000. Other types of investment, such as crowdfunding platforms, allow you to invest EUR 1,000! By buying shares you pool everything, both the risks and the benefits. Be aware, however, that this type of investment is mainly interesting from a long-term perspective (10-15 years).
Seasonal rental. If you are lucky enough to own a second home in a place with high tourist traffic, you may want to rent it out via platforms such as Airbnb, Abritel, etc. Several parameters must be taken into account before starting. Admittedly, the risk of unpaid bills are practically nil (the accommodation is generally paid for upon reservation!) and the return is very interesting, but the regulations are becoming more and more severe in order to put an end to the scarcity of conventional rentals.
So be careful not to exceed the planned rental period for the year if you want to remain a non-professional furnished landlord, and management of the accommodation can be restrictive (cleaning, management of departures and arrivals, etc.).
To conclude, real estate investment will depend on your personal situation, because several parameters are taken into account and will determine what it is better to invest in: budget, taxation, availability, etc. If necessary, don't hesitate to ask for the help of an expert who will be able to support you and make the decisions that best suit your profile.
It's a great project, which can nonetheless require preparation and, of course, a little money on the side. That's why our investment solutions can allow you to accumulate capital that you will use later to acquire the desired property and de facto reduce the amount of the loan. Click on this link to learn about our solutions related to responsible investing and start raising capital now!