Investing in a rental real estate property will involve buying a home to rent out to receive additional income and build wealth.
Investments can be optimized through tax breaks that reduce income taxes. The legislator or the government will authorize tax deductions in exchange for a rental commitment. Any taxpayer who pays taxes can benefit from adapted tax exemption solutions. The rental investment is the only investment that will build wealth financed on credit, less paid by the tenant, and the balance is regulated by a tax saving and a reduced savings effort.
Select a promising geographic area for your rental investment and study the market
Choose a city characterized by a continuous increase in population, a district well served by public transport, a municipality with commercial infrastructures, etc. Before buying four rooms, for example, check the proximity of schools or even universities to offer it to rent to a family or colocation students.
Check the listings for vacancy rates in the selected neighborhood and rental rates. A property that is too expensive is more difficult to rent compared to less expensive properties. Also, consider the large industries that can be located nearby as this can be a guarantee to rent your property.
As in any rental property investment, the fundamental rule to follow is the strategic choice of the location of the property: it must be a sector where the rental demand is strong, the only way to sustain the investment regarding occupancy and surplus-value on resale. Compare the perspectives of surplus-value between the regions as they may be less interested in some areas where the price of m2 is already high at the time of the acquisition.
Buy a home
Do not involve your emotions in the selection of your property. The residence that you choose to rent out will not be your main residence. Becoming emotionally attached to the property can cause you to lose sight of the primary objective: the search for a profitable income. Beware of properties in a disaster zone. The prices may be attractive, but you will lose money in the end. Be sure to go on-site before buying.
diversify your investments
Your monthly effort must remain low with a reduced contribution (10%) and a loan limited to 20 years. The price per square meter of smaller areas will be higher for purchase as well as renting. This precaution, combined with diversification of investments, will easily handle problems such as unpaid rents.
Regarding real estate investment, remember that the added value is made on the purchase price and not on the resale price! It is therefore essential to buy well!
Do not look for excessive profitability and think tax exemption instead
Given the performance of conventional investments, a return of 3 to 4% is very suitable. Also, a real estate investment is always worth the long-term. With the Pinel system, you will deduct a portion of your taxes over six, nine, or twelve years: an interesting calculation, even if the rents of these dwellings, capped, are a little lower than the average. The financial packages will then allow you to study the interest rates, the different types of loans, use the various laws of property tax exemption, as well as find the appropriate investment taking into account the possible hazards (especially in the investment in the old, works are often expected).
Select your tenant and your promoter
To find the “good” tenant who will regularly pay his rent, the landlord must ask for certain supporting documents to minimize the risks. This will help give you the proper knowledge you need to make a decision.
For rent less than one-third of the income, you can ask for a joint guarantee. In the case of a roommate, ask for a deposit for the entire rent from each tenant.
Put your rental investment into management
Rental management is a service that comes under the jurisdiction of real estate agencies, notaries, or trustees. It can be defined as all activities that aim to optimize a real estate asset’s economic return. Hiring an agency will help relieve you of worries and help with procedures more efficiently.
Subscribe a guarantee
The Rental Guarantee is insurance that guarantees the payment of the rents of your property. You are thus assured of making your investment profitable.
You must take out a Rental Guarantee for each property you wish to insure. You can opt for classic unpaid rent insurance or the new universal guarantee of rental risks. Contact an insurance company and plan to spend 1.5 to 2.5% of your rent on it.
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