Investing in old real estate

The real estate market represents one of the most interesting sectors in terms of financial investment. However, choosing the type of investment that would be most attractive is the first step to take. In the plethora of possibilities offered by the sector, old rental investment is one of the most advantageous alternatives. However, there are many other parameters that must be taken into account if you want to earn a good return on allaspects ofyour investment.

Investment Real Estate: Why prefer the old one compared to neuf ?

While investing in real estate may seem like a good idea, specializing in the old-fashioned way can bring many more benefits that are not always obvious. Here are some essential elements to help you convince yourself if you opt for this old-fashioned rental investment project.

  • Geographic location

The most important point to be stressed is that an old dwelling is in most cases in an advantageous geographical location. Old buildings and historical heritage are most often located in the city centre, which is already a significant advantage, whatever the objective of your investment project. Accessibility to all services is essential, thus making it faster and easier to satisfy all vital needs. In the private sphere, living downtown puts you close to the amenities you need for your daily life: market, health centre, restaurants, among others. As far as professional life is concerned, you are close to the main administrative blocks and other industrial areas. You will therefore reduce the main expenses related mainly to transport. 

 

In addition, the old property investment market can also be oriented towards historic districts. Of course, before you start there, you should inform yourself about the locality and tax law, if you have the possibility to make any changes. The profitability of the rental will depend on the possible renovation work, if you can make any changes, or if you have to restore everything to its original state if it is a historical heritage site. 

You have two possible types of investment, the patrimonial investment or the investment with high profitability. In the first case, your wish is to develop your assets by investing in city centres, with a generally higher price per square metre at purchase but with a high asset value and with the possibility of setting rents at the high end of the market, your rental income will then be higher. In the second case, you want to invest in order to increase your passive income, so you will move to areas further from the city centre, with a lower price per square metre. For the good management of your project and without the risk of making an investment mistake, get in touch with the competent advisers to finalise the study of your investment project.

  • Potential tenants

After the geographical location comes the typology of tenants likely to make your old rental property investment work. Given the location, investors can count on a wide range of tenants who meet the specific condition of having to limit their movements, or those who need to stay in one place for a sufficiently long time.

Students are the first customers to target, for the profitability of your project. Indeed, many students wish to settle in the city centre to have all their leisure and activities nearby. For shopping or restaurant-bars, proximity is a must, and most of the older accommodation offers them this opportunity. Moreover, the satisfaction of a more emotional need, such as living close to friends, is a strong argument likely to interest these people, and therefore to make your investment project in old property prosper.

In another context, you can also bet on another category of tenants, embodied by young working people. Couples of young working people also represent a strong potential for making this type of investment profitable.

  • Acquisition and operating costs

An important parameter to motivate you also to invest in old rental property is the generally accessible acquisition price for this type of property. Indeed, according to studies carried out by specialists, an old building costs 10 to 20% less than a new building, even with the Pinel system. You therefore keep part of your budget for other projects. In addition, a new building or apartment generally complies with a law and meets drastic building standards. You will therefore need to plan a small sum to pay for all these advantages. On the other hand, you will be able to get an older building for a lower price, especially if you have to plan renovation work.

On the other hand, once you have completed all the repairs, you could benefit from a scheme that could lead to various tax advantages. The most common is a reduction on the various fees, or even the possibility of paying little or no tax for a certain period of time after the work has been done. This possibility ensures a much higher profitability, compared to an investment in a new building, not to mention the possibility of acapital gain in the event of resale. In any case, this video will provide you with a maximum explanation of the advantages of choosing the old rental investment.

Old rentalinvestment : What type of property to choose in a city étudiante ?

Before considering the type of real estate to buy, or delving into the various calculations of the profitability of your investment, you must first of all define the most interesting location for a rental investment project. Knowing that you are looking to buy an old-fashioned property, and that you want income that meets your expectations, a student town is an area to prioritize. There are many reasons to support this idea, starting with the number of potential tenants. Every year, several thousand students travel to the major cities of France to follow a course of study corresponding to the specialization they have chosen, and offered by the universities and grandes écoles located in these places. A rental property investment in such a location already assures you a correct profitability projection.

Like Paris, Lyon is a concrete example of the image of the potential student city. The supply is often lower than the demand for student housing. Indeed, thanks to the existence of numerous university campuses, grandes écoles and specialized training centers in this city in the Auvergne-Rhône-Alpes region, the flow of students remains constant from one year to the next, when it does not increase. Moreover, the proximity of densely populated areas and access roads remains a guarantee of migratory movement, which favours an ever-increasing curve in terms of rental property investment. It remains for you to make the right choice of property to buy with a view to renting. 

In this context, the low purchase price remains an essential criterion offered by old property. Not only does it allow you to avoid committing yourself to a heavy mortgage, but it also helps you to benefit from tax advantages if you meet the conditions for a rental investment. In relation to this objective, you can essentially turn to two types of property.

You can initially opt for a small apartment. A small house, small apartment or studio located in an old part of the city centre will allow you to quickly find a tenant, especially if you are targeting students who only need enough space for their minimum living requirements. However, as it is usually an old building, you should consider several criteria before signing the purchase. First, check whether you need to renovate, how big it will be, and most importantly, what kind of work you can do. 

If you want to see bigger, you can embark on a more ambitious project, by acquiring an entire old building. Of course, everything will depend above all on the purchase price and the terms of the mortgage you are about to take out. The charges relating to the setting to the standards can weigh in your finances. In order to provide good energy performance to a building located in an old district for example, you will have to carry out substantial administrative and financial procedures. However, property income will allow you to quickly get out of the financial red zone, knowing that the greater your investment, the more favourable the returns will be. Indeed, unlike a single studio apartment, you have several apartments that you can rent to several students. You even have the possibility of offering each apartment to them individually or as a shared apartment. The latter is usually the preferred option for your target clientele, namely students. This gives you the opportunity to accelerate your return on investment. By focusing only on the practical and psychological aspects, it will always be easier and faster to offer a shared apartment to three students for 700 euros per person, instead of offering the whole apartment for 2100 euros. You insure your rental income by dispersing the risk. You then just have to transpose this principle to the number ofapartments or housing units available in your building to see the profitability of your investment.

Investing in old real estate:How to get a good return locatif ?

Like other investors in rental real estate, you ultimately expect to generate a palpable return on your income. However, profitability in the purchase of older properties is mainly a long-term matter. This is due to the fact that you will initially have to incur substantial expenses before you can gradually recoup everything through the rents you receive. At the same time, you will not be able to escape the various charges that you have to pay as an owner. But despite these conditions, investing in old rental property can allow you to quickly reach your return objectives, by respecting certain procedures.

First of all, the old one already gives you a major advantage when you go on the market: the geographical location, and the proximity of amenities. However, you must choose the ideal location that will correspond to the category of tenants you are targeting, once you have acquired the property. Since older units can appeal to a wide range of potential customers, you need to put yourself in the shoes of those for whom the location would be attractive. 

In correlation with the location, you must then determine the type of property to be purchased, always according to the category of customers you expect. Assuming that you have made your choice of location in the student city, it is clear that your main targets will be the student population that will migrate to this agglomeration. However, you will logically have to opt for rental housing adapted to this kind of profile. Indeed, it would be unwise to invest in a single-family home and hope to benefit from it in relation to this type of target. You will gain more by choosing a two-room apartment or even a studio apartment, in which the tenants will find their privacy respected, while benefiting from the required minimum subsistence, according to the standards in force.

Once you have decided on the definition of the location and the property, the next step is to negotiate the terms of your rental investment project with a financing organisation. Indeed, even if the prices can be relatively low to acquire an old property, it is always preferable to take out a loan for this type of project. You thus limit the various risks that could, at certain times, constitute a blockage in the progress of the work in the event of renovation. 

With this in mind, you can facilitate the tasks in the different stages of your old rental business project. All you need to do is contact a professional in the field of historic rental investment for advice, or even for assistance incarrying out the various procedures.

Investment inold rentalproperty: details and advantages of LMNP status

To make your old rental property investment profitable, you must logically choose the tax system that will bring you the most advantages. In the context of old rental property, LMNP is one of the best statuses to achieve this objective.

 By definition, LMNP ancien means Non Professional Furniture Renter. In other words, by opting for this tax status, you commit yourself to a purchase of an old property in the first instance. The latter is defined as a dwelling, apartment or an entire building that has already been used, unlike a new one which will be used for the first time. Furthermore, the term "old" also refers to a building that is at least 15 years old and for which you will have to undertake renovation or restoration work. Finally, to complete your LMNP status, you must commit, once the work has been carried out, to putting your property up for rent furnished for a fixed period. This depends on the tax system you have chosen, as the main residence for its tenant.

To benefit from LMNP status in the eyes of the tax authorities, the purpose of your old rental housing project must first and foremost meet certain conditions. The availability and the respect of a list of the elements of furniture of a furnished dwelling, as indicated in the provisions of the Alur law, in the decree of July 31, 2015 is part of it. In addition, the annual income generated must not exceed an amount of 23 000 euros, nor exceed 50% of the income of your tax household. Otherwise, your taxation will be calculated on the basis of an LMP. Finally, the main condition indicates that you must not be registered with the RCS, in relation to your former property rental activity. 

Once you have met all these conditions, you will be able to enjoy the benefits of LMNP status. Already, the price of the furnished rental will always be more profitable compared to the unfurnished one, thanks to a higher rent. In addition, you will benefit from greater flexibility in terms of the duration of the lease, which can be as short as 9 months for each rental contract, especially if the tenants are mainly students. At the same time, the period of notice is also shortened to one month in the event of breach of contract by the tenant. Finally, the tax regime in the LMNP status grants you a lump-sum allowance of 50% of your taxes, by application of the micro-BIC regime (Industrial and Commercial Profits) on which the taxation of your income is based. We advise you the real regime, which will allow you to benefit from the reduction of your expenses and thus the possibility of not paying taxes for 10 years. By respecting all the necessary conditions, the return on your old rental investment can only be assured. If necessary, take the time to carry out all the preliminary studies with a rental investment advisor.

 

editor's photo
  • Mickael ZONTA
  • President, Investissement-Locatif.com

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