The pitfalls of rental investment

Overview of the main pitfalls faced by apprentice landlords

Unsaleable goods because poorly located, tenants to absent subscribers, increased taxation, yield down … Rental investment is less dream than a few years ago. And yet, provided you avoid certain pitfalls, succeeding in a transaction of this type is a good way to build a real estate that will provide you with an income supplement at the time of retirement.

The worst thing for an investor is not to find a tenant. To avoid getting there, we must make sure of the reality of the rental demand. “There are many aspects to consider: the safety of the neighborhood, the existence of shops, the proximity of public transport, the presence of universities, a business park, a hospital or a train station are pledged for a steady stream of rental candidates, ” says Olivier Trit, Director at Cerenicimo.

Peel The Statistics

Also keep in mind that most rented apartments are small areas, that is, studios and two-room apartments. Hence the interest of checking if the supply of these dwellings is abundant in the chosen district and if many singles and young couples reside there. To get an idea, take a look at the statistics of INSEE (the site bestagents.com has compiled many data, such as the number of singles or divorced in a neighborhood, the distribution of housing by the number the proportion of vacant dwellings) and inquire with several real estate agents.

A visit to the town hall to study the land use plan will allow you to know if buildings are likely to grow around. And, of course, walk around the neighborhood before you decide. “When you come out of an environment that you control, you multiply the risks, insists Bertrand de Raymond, manager of the company Capcime. Only a quality location will ensure the durability of the investment, both for rental and resale. ”

Unfortunately, there are other pitfalls. To achieve a satisfactory level of profitability, at least 3% gross per year, it is necessary to avoid the periods of vacancy. In addition to the level of rent, several factors encourage tenants to move. “Do not maintain a property is a miscalculation, insists Sébastien de Lafond, president of Meilleursagents.com, because the rate of rotation of an apartment in poor condition is higher. ”

Similarly, renting furniture to earn more is not necessarily a good idea. “This type of property interests less the most loyal clientele: that of young adults without children,” says de Lafond. Similarly, targeting students is not a martingale: the down payment to acquire a studio is lower, but your property will often be empty in July and August. A studio of 25 m², acquired 100,000 euros and rented 350 euros, offers on paper a yield of 4.2%, but this profit drops to 3.5% if we subtract the summer months.

The Issue Of Unpaid Bills

Another common mistake: do not anticipate work in the common areas. Before buying, check the minutes of the last general meetings of the co-owners to know if work is planned. Also, remember to check that the condominium regulations authorize furnished rentals. And know that it can prevent you from renting a maid’s room to someone who does not belong to the condominium. And if you plan to rent seasonally, you must obtain the agreement of the condominium.

Unpaid debts are the obsession of the lessors. And the numerous testimonies received on L emonde.fr show the acuity of the problem, even if it is not necessary to overestimate it. According to the Ministry of Housing, unpaid bills represent less than 2.5% of all rents collected. But evicting a tenant is a struggle because he has many remedies to regularize his situation, execute the court decision or obtain a debt management.

How to avoid getting there? “There is no quick fix,” warns Bertrand de Raymond. For a small area, I ask a parental guarantee. This is a good protection because it is rare for parents to abandon their children. “For a larger apartment, subscribe a rental risk (GRL) can be a solution, but it will cost 2.75% of the annual rent, taxes and fees included. Please note that the LRG also covers the costs related to a deterioration of housing up to 70 000 euros.

Investing in the new is generally less profitable because the purchase price is 20% to 30% more expensive. Unless to resort to the Duflot tax system, which offsets this additional cost by a tax reduction. But beware, ” this must be the icing on the cake,” says Sacha Rubinski, president of Cyrus Immobiliser. Focusing on this aspect is the best way to buy a poorly located or misaligned property, which will be difficult to sell. “

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