Roche & Cie

Real estate: what to know before investing to rent

Before a real estate investment, it would be better to know the rules governing this type of investment, which can be particularly difficult.
In a real estate investment intended for rental, the general scheme applies to new and old houses, rented bare, as well as to car parks. The lease generates income from land.

The capital

No, you are not immune to an evolution of the real estate market resulting in a price decrease. Choosing a good location, in a high rental rental area, is the best protection for this type of investment.

How much does it pay?

Depending on the geographical area of ​​the property and its characteristics, the yield can vary between 3 and 6%. Plus a possible added value.

What is the tax rule?

Land revenues are taxable on income tax under two different regimes.

The micro-land applies as of right if your property income does not exceed 15 000 euros in the year. In addition, you must not own property under one of the specific tax regimes, excluding Duflot-Pinel, Scellier or Malraux tax reduction. Rents are taxable on 70% of their amount on the progressive scale of the income tax and subject to social levies at a rate of 15.5%.

Other Plan: actual costs. It is compulsory if you have more than 15 000 euros in receipts and, optionally, for a minimum of three years for those with less than 15 000 euros in rent. When these exceed the amount of your rental income, you generate a real estate deficit. The portion of the deficit from borrowing interest can be carried forward for ten years. The deficit resulting from other expenses is charged to the total income of the taxpayer up to a maximum of € 10,700 per year. Your investment saves you tax. The surplus deficit is deducted from the real estate profits realized over the next ten years.

Real estate gains are taxable at the rate of 19% plus 15.5% of social security contributions. That is a total of 34.5%. After twenty-two years of possession of the property, it is exempt (thirty years for social levies).

In practice: deductible expenses

In the system of actual costs, the tax authorities have drawn up a list of deductible expenses. It includes: interest on the loan taken out to purchase the property – to be deducted in priority – expenses for works, provisions for co-ownership charges, eviction and relocation expenses, management fees and, more generally, the remuneration of a third party such as a lawyer or bailiff, insurance premiums, property tax excluding municipal waste.
Make your accounts: all these expenses can weigh more than 30% of the amount of rents collected. You will therefore benefit from opting for the actual scheme. But, in this case, you will have to keep all the proofs of expenses.

Watch our video to go further on the subject.


Source : Votre Argent


Cabinet Roche & Cie, English speaking accountant in Lyon, France.
Specialist in Real-Estate and Non-resident taxation.