10 reasons to invest in rental property

What are the reasons for investing in rental property?

Do you want to invest your money in a safe and concrete investment? What if you invest in real estate? Faced with the decline in interest rate of the main savings accounts, more and more French people are now considering investing in rental property in order to create a heritage. Discover 10 good reasons to get started.

10 reasons to invest in rental property
10 reasons to invest in rental property

1. A simple and accessible placement

Today it is possible to invest your money in various types of investments, some with their share of risks and required knowledge, like the financial markets.

The first advantage of rental investment is that it does not require, or very little, specific knowledge. Of course, you need to have some knowledge of the real estate market, and know your financial capacity well before getting started, but this remains within everyone's reach. Even the rental management of a property on a daily basis does not require any specific knowledge, or can be entrusted to an agency or a concierge depending on the type of rental desired. Often, it is above all a question of using common sense: buying an attractive property, in a city where rental demand is high, and renting it at market price. Added to this accessibility is the concrete aspect of this investment “in stone”, which is more reassuring for novice investors.

2. The possibility of being financed by a loan

Most financial investments involve mobilizing your own resources. Conversely, a rental investment is the only investment that can be made with a loan. 

This not only makes it possible to invest a larger sum, but also to benefit from the famous leverage effect which consists, to put it simply, in getting rich thanks to the money loaned by the bank. Of course, you have to respect a few rules to be able to truly benefit from this leverage effect, in particular obtaining a profitability greater than the cost of credit. It is therefore necessary to take the time to carry out simulations in order to base your calculations on a mortgage estimate realistic.

The other advantage of the mortgage loan is that it includes compulsory insurance, with at least one death and disability guarantee that protects co-borrowers and their descendants.

3. The possibility of tax exemption

Certain rental investments can allow buyers to benefit from significant tax advantages, such as the Pinel and Denormandie tax exemption systems. In order to truly benefit from these devices, it is advisable to be well informed about the different conditions and rules to be respected, in particular in terms of duration and type of rental. 

4. An almost self-financed investment

While it is rare to be able to fully finance a rental investment through a loan, particularly because it is necessary to be able to bring a personal contribution, it is possible to finance a good part of your investment thanks to the rents collected. You just need to have low enough monthly payments to be covered by the rent paid each month by your tenants!

5. Rental property is rather profitable

The profitability of a rental investment is generally better than that of traditional savings products, but also of certain riskier financial products. In addition to the property income generated by the rental, there is a possible capital gain at the time of resale, which boosts the profitability of its investment over the long term. If you make the right decisions when choosing the city and property in which to invest your money, you have every chance of making a profitable investment.

6. A limited risk

Rental property is one of the safest investments, since its object is a physical asset. Of course, there are risks of loss of value, vacations or bad debts that must be taken into account. But they can be greatly reduced if the investment has been carefully considered upstream, particularly in terms of attractiveness and rental demand. On the side of unpaid bills, specific insurance and guarantees make it possible to guard against this risk, like the Visale deposit.

7. An investment that you can manage yourself

By making a rental investment, you have the choice to entrust the management of your property to professionals, or on the contrary, to keep control of your investment. You can completely manage the rental of your property and the declaration of your property income alone if that is what you prefer! Moreover, even if you entrust the management of your property to an agency, it is you alone who decide on the management of your property.

8. You and your family members can dispose of the property

Even if you buy to rent, your rental investment remains your property. Beyond the commitments imposed by certain tax measures, you can completely withdraw your property from the rental market to rent it to a member of your family, to live there, or to reclassify it as a second home. Moreover, it is possible to rent your property to a member of your family even as part of a Pinel or Denormandie investment.

It is then possible to achieve a double blow, for example by buying a studio for the studies of his child before placing it on the rental market, or conversely, to rent a property for several years before transforming it into a holiday home.

9. A good way to prepare for retirement

It is normal that your rental investment does not bring you much at the beginning, since the rents collected are mainly used to cover the monthly loan payments. Once the loan has been repaid, these rents then become a not insignificant additional income, which can compensate for the loss of income generated by a retirement. 

10. A heritage that is passed on

Real estate assets, even when constituted as part of a rental investment, can be passed on simply to their descendants. It is even possible to prepare and optimize this transmission by creating a Société Civile Immobilière (SCI familial).