Rental yield Paris: secrets to making your project profitable!

Rental yield Paris offers interesting prospects, despite the high real estate prices in the capital. Paris, with its real estate market among the most prestigious in the world, attracts investors from all over the world. Paris attracts investors thanks to its global reputation, its economic dynamism, and its high rental demand, fueled by a constantly growing student and professional population. In addition, the capital offers investment security with a stable real estate valuation in the long term, despite market fluctuations.

However, rental yield in the capital remains a real challenge. In 2024, the average price per square meter in the capital is around €10,500. With a gross rental yield rate generally ranging from 2.5% to 3.5% in the most sought-after neighborhoods, investors must be strategic to maximize their profitability. However, some less central or rapidly changing neighborhoods, such as the 19th arrondissement, can offer yields of up to 4.5%, which exceeds the Parisian average. With this in mind, knowing the secrets to making your real estate project profitable in Paris becomes essential to get the most out of this investment in such a competitive market. 

Calculation of rental yield in Paris in 2024

In the world, there are several cities that bear the name Paris, but the most famous is the capital of France. It has countless advantages in rental property investment with an interesting profitability.

Gross rental yield of a Parisian real estate investment

In Paris, the real estate market is not developing enough, because building land is becoming increasingly rare. This lack of supply therefore amplifies the demand for rental housing, which the city can no longer meet. Added to this is the massive arrival of students, young workers and job seekers, thus giving rise to a tight real estate market. Indeed, an apartment is rented quickly, between 24 and 48 hours.

Apart from that, the price of real estate has fallen in the city of Paris . Enough to encourage investors to make a very interesting rental purchase. According to the real estate experts' barometer, the cost will fall below €10,000/m2 in 2024. Are you wondering what is causing the decline in the price of Parisian housing? The reasons are inflation, the increase in the interest rate on real estate loans and the tightening of measures in favor of the energy transition. The capital of France therefore refers to one of the French cities where you should make a real estate investment in 2024.

It must be said that every rental property investment in Paris rhymes with success. To be convinced of this, you can refer to the gross rental yield that this city in France proudly displays in 2024. For the calculation, it is advisable to follow the formula given previously. In practice, the monthly rent per meter in Paris amounts to €31. Then, multiply this cost by 12 and divide the result by the real estate price per square meter, namely €9,644. Finally, multiply the whole by 100 to obtain 3.85. According to this calculation, the gross rental yield rate in the city of Paris is around 3.85%.

Net rental yield of a Parisian real estate investment

However, to see the reality of the performance of the real estate project, calculate the so-called net profitability. The latter takes into account all the charges to be paid during the rental of your property. Here is the formula for the operation: 

Net rental yield = (monthly rental amount × 12) × 100 - (rental charges) / purchase price

If your real estate investment in Paris required taking out a loan, then the loan interest is deducted from your income. The amount of the monthly payments is therefore included in the rental charges and the calculation of the net rental profitability.

In addition to these 2 calculation methods, there is the net rental yield. This is the most real and relevant indicator for studying the interest of a rental property investment in Paris. To calculate the net rental yield , it is necessary to take into account any tax benefits, social security contributions on the total amount of rent, unpaid insurance, etc.

What is the average rental yield of an investment in Paris?

The average rental yield in Paris, while attractive to many investors, remains relatively low compared to other French cities due to high real estate prices. In 2024, the gross rental yield in the capital generally fluctuates between 2.5% and 3.5% , depending on the neighborhood and the type of property. In central arrondissements such as the 6th or 7th, where the price per square meter often exceeds €13,000, the yield can be even lower, around 2% to 2.5% . On the other hand, some peripheral arrondissements, such as the 18th or 19th, offer slightly higher yields, which can reach 4% to 4.5% . These differences can be explained by the diversity of real estate prices and rents practiced from one neighborhood to another. To maximize their rental yield, investors must therefore target areas undergoing rapid development or properties requiring renovation to increase their rental value.

4 tips to maximize your rental yield in Paris in 2024

The goal of rental property investors is to keep their project afloat, regardless of the economic context in France. For the city of Paris, here are some practical tips to maximize the profitability of this type of investment.

Choosing the right rental property

Paris or city of light, city of love, capital of fashion, etc., so many nicknames that characterize it as an active territory and favorable to rental real estate investment. However, when you visit an apartment to buy and then rent it out, keep in mind the profile of the client you are targeting. By doing so, your property will find a buyer and generate considerable income, or even significant profitability quickly.

Small apartments (1-room, 2-room or 3-room) will appeal to the many young professionals and students in Paris. You can also invest in student housing or buy a studio in Paris . The only thing is that the real estate assets are close to schools and public transport. In addition, some young professionals do not stay in Paris for the long term. In this case, it is interesting to invest in furnished rentals. This practice often involves looking for new tenants, but it also explains the fairly high rent and therefore better profitability.

When investing in family housing, make sure that it is not far from schools. Also, be aware that certain parameters may force you to lower the rent, such as noise pollution. So buy a property in a quiet area that has all the amenities useful for daily life (local shops and services).

Investing in the neighborhoods or districts of the future

To make a rental property investment in Paris, it is advisable to focus on neighborhoods or districts that are subject to high profitability . It is not by choosing the most beautiful avenues in the city that you will necessarily obtain a better return. Even with high rents, it is difficult to amortize the very high purchase price per square meter.

Why not choose a property located in a less expensive area or district, but with high development potential? Indeed, year after year, your assets will become attractive to tenants. Also, the cost of the investment will be less expensive and the rental profitability more interesting. You can also buy an old property, renovate it to give it value and rent it at a considerable price, after work.

To enjoy an attractive rental yield in Paris, make your investment in the district or arrondissement of:

• Pont de Flandre (Paris 19th arrondissement): average property price of €7,529/m2,

• Olympiades-Choisy (Paris 13th arrondissement): average property price of €7,182/m2,

• La Chapelle (Paris 18th arrondissement): average property price of €7,570/m2.

Indeed, these purchase costs, which are quite low compared to other Parisian sectors, guarantee you significant rental profitability.

Prioritize old housing

The old real estate market is particularly dynamic in most cities in France, especially in the City of Light. After the renovation work and rental, the housing will generate income for the owners.

On this subject, there are many studios and 2-room apartments to renovate in Paris. To limit your initial outlay, make a real estate investment in an old property, the purchase prices of which are relatively cheaper than those in a new property . In addition, you can take advantage of the tax benefits of various schemes set up by the State. Indeed, you will benefit from a tax reduction proportional to the expenses incurred in the context of the renovation work. This will optimize your profitability.

Reduce taxes through tax measures

When buying an apartment to rent out in Paris, think about the impact of your rental income on your taxes. Fortunately, there are various tax exemption schemes to support your real estate investment.

The Pinel law

Rental investment in Paris in 2024 is looking good. As the city is located in zone A Bis, it is eligible for the Pinel law. This system helps you reduce your taxes at a rate of 10.5% for renting out the property for 6 years, 15% for 9 years and 17.5% for 12 years. The savings amount to €52,500.

The Pinel law offers the same tax advantage for an investment in old properties. However, you must carry out renovation work on the property and then offer it for rental. Apart from that, as many students are looking for accommodation, you can invest in transforming premises into student residences. The Pinel system takes this type of project into account.

LMNP status

In Paris, real estate investment under the LMNP (non-professional furnished rental) status increases rental profitability. This is because it is a special tax regime that gives the right to attractive tax benefits, such as tax reduction and VAT (Value Added Tax) recovery.

Concretely, how does this system guarantee a significant return on rental property investment in Paris? By opting for LMNP status, your rental income is taxed under Industrial and Commercial Profits (BIC). To benefit from the tax advantages, you must declare your income under the micro-BIC regime or the actual one.

The first LMNP scheme allows you to benefit from a 50% tax reduction on your rental income . In addition, the tax exemption rate is 71% for furnished tourist rentals. The second scheme helps you to deduct from your taxes the estimated amount of the loss in value of the property due to wear and tear over time. Similarly, the costs of work carried out and the purchase of furniture are deducted from your taxes. This is how LMNP status ensures you good performance in terms of yield.

À titre indicatif, le statut LMNP profite aux propriétaires de logement en résidences de services, notamment :

• the student residence,

• la résidence senior non médicalisée et médicalisée (Établissements hospitaliers pour personnes âgées dépendantes ou EHPAD),

• the business residence.

It is also aimed at tourist residences.

The Malraux law

In Paris and the cities of the region, use the Malraux law for a high-yield rental property investment. It offers a 30% tax reduction if your property is located in a degraded old district (QAD) or in a sector covered by the new national urban renewal program. For your rental property investment to benefit from this tax niche, the price of the renovation work must rise to €100,000 per year for 4 years.

Delegate rental management to an expert real estate agency

Good rental management in Paris remains the guarantee of a real estate investment with an interesting return. It includes different missions such as collecting rent, monitoring unpaid rent and reviewing monthly payments. Managing your rental property yourself when you do not have any legal skills and great availability impacts the profitability of your investment. It is therefore wise to entrust the rental management of your assets to a rental property expert.

Beyond autonomous rental management, there are:

• delegated rental management: the investor entrusts the entire management of the rental apartment to a real estate agency;
• semi-delegated rental management: the investor delegates part of the administration of the real estate to a company.

By choosing one of the 2 options, you benefit from professional support. This assistance presents a major advantage for your rental property investment. The agent ensures that the risks of rental vacancies are reduced, thus allowing you to receive regular rents. Also, he ensures the good condition of the accommodation and the revision of rents at the best rate to optimize your rental profitability.

Rental yield in Paris: key points to remember

Rental yield in Paris presents unique challenges, but also significant opportunities for savvy investors. In a city where rental demand is supported by a vibrant and diverse population, a well-thought-out investment strategy can generate stable income and long-term appreciation. To maximize rental yield, it is crucial to target up-and-coming neighborhoods, focus on renovating older properties, and take advantage of available tax incentives. Ultimately, Paris remains a compelling investment destination for those looking to combine prestige with profitability.