Thanks to its characteristics, the SCPI is one of the best real estate investments on the market. It has many advantages and is suitable for the greatest number. Overview of the essentials to know to invest in SCPI.
Summary
General information on the SCPI
The SCPI or real estate investment company is an excellent way to diversify your assets. If you are wondering how to invest in SCPIs, this savings plan, also known as a « paper stone » investment, consists of acquire shares of a global real estate portfolio belonging to SCPI. Compared to a direct real estate investment, this investment therefore offers more flexibility.
Who is investing in SCPIs for?
The SCPI is accessible to all, companies as well as individuals, because the mandatory minimum in terms of investment includes a few shares, and the capital contribution amounts to between 500 and 1,000 euros. The case is different for a classic real estate investment which can require hundreds of thousands of euros. Also, it fits all your heritage projects, whether it is the constitution of a heritage, the perception of additional income or a tax reduction. Investment in SCPI is for those who wish to invest in real estate, but who do not have the means to become owners and who do not want to have to manage a property.
The operation of the SCPI
A SCPI is an undertaking for collective investment whose objective is exclusively to acquire and manage a rental property portfolio. Its operation is relatively simple. Savers combine their savings with the aim ofobtain shares of well-located offices or rental properties. Investment in SCPIs is the responsibility of the Financial Markets Authority (AMF). Under these regulations, you will receive an annual report of your investments every year and a newsletter every 3 months.
Investing in SCPIs frees you from cash flow and rental management constraints, since the rents paid by tenants are paid net of management fees (property tax, maintenance, etc.). Instead of buying a house or an apartment and owning thousandths of it, you buy shares in different buildings managed, rented and maintained by the management company. You can buy these units on credit or for cash and resell them at any time. However, taking into account the costs, we recommend that you invest at least 20,000 euros over a period of 8 to 10 years in order to make your investment profitable.
How to choose an SCPI?
SCPIs are a simple way to access professional real estate for a low initial amount. To choose the one that suits you, clearly define its investment objectives, its investor profile and its investment period. When making your choice, be vigilant about SCPIs that are too specialized or that focus on a single sector of activity in particular.
Maintenance of income and rental potential
Investing in SCPIs presents risks in terms of liquidity, non-guaranteed return, bankruptcy and obsolescence. To avoid them as much as possible, it is better to invest in an attractive and reliable SCPI. Always prefer a reference actor which has been present and active in the market for a long time, but which also has a significant real estate portfolio. Also consider the ability of the partnership to maintain the income given to the partners. Be vigilant if the non-trading investment company has too often recourse to capital gain reserves as well as retained earnings. Also make sure that the rental potential of the SCPI as well as the financial occupancy rate is above 90%.
The distribution of dividends, management fees and diversity of assets
When choosing an SCPI, attach importance to the evolution of the distribution of dividends. If they drop significantly over several years, don’t. As for the management fees, they must be reduced and between 10 and 13% to guarantee the return of the civil investment company that you plan to choose. The net return of the latter will be weakened if the fees are too high. Also make sure that the SCPI has a sufficiently diversified heritage. If the total outstanding amount of the latter exceeds 300 million euros, it is perfectly satisfactory. This fact also reduces the consequences of a default by one of the lessors.
The interest and advantages of the SCPI
The SCPI allows you to invest in a real estate project according to your financing capacity. If, conversely, you own shares, you can sell part of them if you wish, something impossible in the case of housing.
Ease of access and pooling of risk
The SCPI has its own advantages, including ease of access. Indeed, investment in business real estate requires a significant financing effort from the saver. Conversely, the SCPI allows the latter to access the commercial real estate market with a less substantial sum. In addition, as a buyer, you do not need to use a notary. Thanks to this system, the risks are pooled on several tenants and buildings due to the sectoral and geographical distribution of the assets. The investment is spread over several assets of different natures (shops, offices, warehouses, etc.). It happens that one of the assets held by an SCPI encounters a difficulty (claim, unpaid rent, bankruptcy of the tenant, etc.). In this case, the income from other rental properties offsets the impact for the owner of the units.
The profitability, tenant stability and rent creation
The SCPI is one of the most lucrative real estate investments with a rental return of between 5 and 6% net of charges. For comparison, that of a small studio is between 3.5 and 4.5 net. The duration of a commercial lease (3.6 or 9 years) justifies the tenant stability of a building in SCPI. Indeed, they sign a contract with the owners and the lease guarantees the latter to receive income for a certain time. The SCPI is also perfect for preparing for your retirement, because it allows you to receive a large sum of money regularly.
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