Investing your money in a real estate investment company (SCPI) can be an interesting investment. Before you decide, you should choose the type of SCPI that best meets your expectations. This done, it is important to balance the advantages and disadvantages of this type of investment and to measure the share of risk it entails.
What is an SCPI?
A SCPI is a investment fund, whose specialty is investment in rental real estate. In other words, when you acquire a share in one of these companies, you become the owner of a portion, proportional to your contribution, of the real estate owned by the investment fund. Your income then comes from a share of the rents collected. From these rents, the management company retains its expenses, operating, personnel and investment, and pays you the excess.
By investing in bare ownership, it is also possible to pay less for its share. In return, you must agree to receive your income only at the end of a determined period.
It exists several forms of SCPI. Yield SCPI is the most common. Its purpose is to provide you with regular income. For its part, the capital gain SCPI allows you to grow your capital by reselling your shares at a higher price than the one at which you acquired them. Finally, if you want to reduce your taxes, opt for a tax SCPI instead. As part of legislative provisions, such as the Malraux or Pinel laws, participation in some of these SCPIs entitles you to various tax deductions.
How does it work?
The real estate assets grouped together in the civil real estate investment company are made up of a wide variety of buildings, which can be residences, businesses or even offices.
These buildings are managed by the large management companies that have acquired them. They are approved and controlled by financial regulatory authorities. These are the companies that are responsible for choosing the tenants. They also take care of the maintenance of the buildings and undertake renovation work, which is likely to give more value to the building stock. Finally, it is these companies that collect the rents.
This investment has such advantages that a real estate consultant will be able to recommend it to you. One of the most notable benefits of this investment is the peace of mind it gives you.
You are indeed rid of the hassles that often disturb the daily lives of owners. The management companies take care of everything. It is up to them to choose the buildings to acquire and to carry out the necessary maintenance and embellishment work. It is still these companies that select the tenants, collect the rents and take care of the problems of unpaid bills.
On the other hand, the variety of tenants and buildings, often spread over several cities, guarantees you a safe investment. Moreover, this investment allows you to acquire a share of goods that are sometimes not very accessible and thus to diversify your assets.
To invest in this device, you also do not need a large sum. Your contribution can also be all the more limited as you will not have to pay notary fees.
Similarly, the tax benefits associated with investing in an SCPI should not be overlooked. It should be noted, in this respect, that these bodies are not subject to corporation tax.
Finally, investors have certain guarantees. In addition to the approval of the management company by a financial authority, and its control by a supervisory board, the company’s accounts are checked by an auditor. Subscribers are also associated, through their participation in general meetings, with the making of the most important decisions.
As with any real estate investment, there is no guarantee of systematic valuation of the units invested in an SCPI. Housing occupancy can be particularly problematic.
Similarly, an investment in an SCPI must, to be profitable, be made over a fairly long term. So you shouldn’t rely on immediate availability.
At the end of this long period, you will also have to pay relatively high exit fees.
If certain tax advantages distinguish investment in an SCPI, it is sometimes subject to heavier taxation. This is particularly the case for the taxation of real estate capital gains.
What are the risks ?
Finally, investing in an SCPI may present certain risks, which must be taken into account.
First, you risk seeing the income from your units decline. Changes in the real estate market and legislation can indeed lead to lower rents. Despite the diversity of the property of the SCPI, which tends to reduce this risk of poor performance, the decrease in the value of the shares is never to be excluded.
It is also possible that the company responsible for managing the SCPI encounters management problems. A significant drop in rental income can indeed put a short-sighted SCPI in a difficult situation. Once the management and maintenance fees, as well as the taxes, have been paid, it may in fact experience difficulties in paying their income to the shareholders.
However, it is expected that, in this case, another management company will take charge of the SCPI. In order to reassure investors, this new company must in turn be approved by an official financial authority.