Do you want to build up a solid heritage? How about buying an investment property or rental housing? We tell you all about this efficient way to put your savings into a profitable project.
What is an investment property?
The investment property designates the purchase of a complete building only for rental purposes. The term « investment property » is linked to a practice that dates back to the 18th century, when it was more common to own your own house. Rented buildings made their appearance during this period: during the construction of a building, we constituted lots that belonged to the same person which then rented them out to meet the growing needs of the population, who needed housing in good conditions. The needs subsequently evolved and people wishing to invest in real estate saw a real opportunity.
This period preceded the co-ownership development, and this is where the main difference is. The co-ownership brings together several owners while a building of report concerns only one owner of several lots. By renting these homes, the owner benefits from a contribution: the monthly loan payments are therefore repayable thanks to the rents received. When the loans are fully repaid, the rents then become a very interesting pension for the owner.
Why choose to invest in an investment property?
The acquisition of an investment property is very advantageous for an investor.
Less costs when buying a building
By investing in a complete building, the costs associated with the acquisition are paradoxically much lower than for the purchase of several apartments in different buildings. The costs are decreasing by opting for the acquisition of a complete building: the purchase price per square meter is much more attractive. Moreover, the notary fees are lower, just like taxes. It is also not necessary to foresee any costs of trustee.
It is also a particularly interesting system for considering work: the owner decides on the contractors, selects the companies he trusts and allows them to work on the whole lot without having to travel. It is therefore possible to negotiate rates, because the intervention will be carried out on several dwellings in the same place.
It is also much easier for rental management to concentrate several apartments in the same place rather than in different parts of a city, or even in several different municipalities.
If you do without the services of a rental management agency, the return on these assets will be even greater. We can count on a profitability which often exceeds 8 to 9% and can sometimes equal 10%. It is therefore much more profitable to place your savings in an investment property rather than putting them in any savings book. By spreading the investment over several apartments, this avoids wasting money with a large room that may be vacant for some time. You ensure a turnover so that at least 70% of the units are occupied. It is also a way of reassuring the bank, which will understand that your loan is spread over several sources of rent. If one of the rents is not paid, the risks are therefore less important for the banking establishment.
Who decides to invest in an investment property?
The investment in an investment property is an acquisition which requires a real reflection, because it requires a substantial financial contribution. Financial capacity must be proven and banking institutions must be confident. This is to see if you are able to acquire the investment property, but also to carry out any work to rehabilitate the housing and assume the charges.
It is a more or less long-term investment depending on your repayment capacities, often a good way to prepare for retirement. Having rental income is ideal to supplement declining income with the change of status. The investment can be made by a natural or legal person, by founding an SCI (Société Civile Immobilière) for example. Individuals and property dealers are often interested in an investment property.
How to best select your investment property?
If you want your investment to be really interesting, it is essential to choose the right property to acquire. To be sure that your acquisition is profitable, make sure of several things:
Do you have any knowledge in the field of works? It is essential to be able to carry out certain works by yourself. And you will also have better readability concerning the quotes of the work that the contractors will do for you.
The investment property must have individual counters in order to distribute the charges over all the apartments you are going to let.
Go for a well placed building : it must have access to all amenities and a good public transport network. Make sure that the place is attractive, that it is not too noisy, that it does not suffer any inconvenience such as a foul odor or the customers of a bar which could generate nuisances. Are there infrastructures such as schools, places to live, associations or even supermarkets in the surroundings?
Choose an investment property close to where you live or work, especially if you take care of the rental management yourself. If you need to get there, you can do it easily.
Opt for an investment property in good repair or be sure that you can do a large part of the work at a lower cost.
If you have limited means, choose a small bustling town rather than a bigger, more expensive city.
Find out about the rents in the area you are targeting. This will give you an idea of the rent that you can hope for. It is better to base your investment on realistic estimates so as not to lose money. The best is that the rents make it possible to repay the loan by taking into account the work to be done.