Real estate is one of the favourite investments of the French, at least for those who can afford it. So certainly, for some of us, building a heritage can be part of the dream domain. Real estate is not a priori the most affordable investment, yet there are solutions to expose yourself to it and achieve returns equivalent to a rental investment without having to put several hundred thousand euros on the table. So how can you benefit from the performance of stone according to your budget?
Direct investment: unlimited choices
Direct real estate investment is the first solution that comes to mind. To do this, owning a principal residence is an asset since it will make it easier for you to borrow, and you will also feel more secure in terms of wealth than investing in the stock market. On the other hand, it is not always the best financial transaction to carry out.
Compare the cost of rent to the cost of the mortgage required to complete your acquisition. You may be surprised by the result, it can sometimes be more interesting to buy a small area to rent and rent your own home rather than own it.
Real estate investment has grown strongly in recent years, in particular thanks to the tax exemption mechanisms that contribute to the attractiveness of these formulas. In addition to the classic apartment in large cities, it is also possible to buy seasonally rented accommodation in tourist attractions, forest or agricultural areas, commercial premises and even parking spaces.
All these properties have different entry tickets, risk and remuneration profiles. Taxation must also be taken into account, not only according to the tax exemption operations, but also for the relationship between yield and appreciation potential.
On the other hand, direct investment suffers from higher risks due to the lack of diversification. If you only have one or two properties, you will cut off a large part of your regular income in the event of a change of tenant, a disaster or simply a renovation.
In addition, it may be more difficult and costly to resell your assets at an attractive price in case of urgent need. It will also be difficult to release part of the blocked liquid assets (10% of the value of the property, for example), unless you make a loan by mortgaging part of your assets.
Real estate within everyone’s reach: SCPI and Crowdfunding
Real estate investment trusts (REITs) are structures similar to mutual funds but with a strong real estate orientation. These vehicles have the particularity of having to pay at least 90% of their income in the form of dividends.
There are two capital structures, open-ended companies that accept new funds on a permanent basis (subject to certain limits) and closed-end companies that raise capital only in increases decided by shareholders and aimed at purchasing new real estate.
It is important to distinguish between several price concepts in order not to get your brushes tangled up. Listed real estate companies treat themselves like conventional shares, so their price is much more volatile than their market value, also known as their realizable value.
On the other hand, to buy unlisted SCPIs, you will have to pay the subscription price composed of the nominal value and an issue premium including subscription fees (approximately 10%) and the estimated increase in the value of the assets in relation to the nominal value of the share.
Finally, the popularity of FinTech, companies that combine finance and new technologies to present innovative solutions, has also affected the real estate world. For once, France benefits from a rather accommodating framework that has made it possible to multiply collaborative investment formulas in real estate.
For example, you can finance new projects carried out by developers, but you can also take shares in rental investment or grant a mortgage loan to households in difficulty. As always with participatory financing platforms, check that the company organising the fundraising is an investment service provider regulated and approved by the French authorities.
Even more than any other financial investment, real estate therefore requires a thorough study of your asset situation. These projects are often intended to be passed on as an inheritance or at least to remain within the family for the long term, the formation of a Société Civile Immobilière (S.C.I.) can then be a vehicle that is both flexible and tax-optimized.
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