The Post-Covid-19: Investing in Rental Real Estate in 2021, a Good Idea?

[A Guide To Invest]

Investing in Rental Real Estate in 2021, A Good Idea?

Yes! Because while the health crisis is having serious consequences on many economic sectors, the rental property market, for its part, promises to be more spared. It should continue to offer secure investment opportunities to its investors.

Interest rates are still low at the start of the year, and prices are expected to rise again at the end of the year

Admittedly, the weeks of confinement have temporarily slowed down real estate transactions ... But not the desire to invest of the French, many of whom took advantage of this period to develop or refine their real estate projects for 2021, for rent as well as for purchase. In particular with a view to changing the living environment in favor of:

This dynamic has already enabled market prices to hold up despite the crisis. Prices have even experienced a notable increase since the second half of 2020 according to the Notaries of UK. Whether you want to buy a home to live in or to make a rental investment, it's time to finalize your project, especially since interest rates are still very competitive.

In fact, aided by the provisions of the European Central Bank (ECB) - whose emergency asset purchases made it possible to lower interest rates - banking establishments are offering rates of 0.78% in 2021 at Approximately 1.16% depending on the duration (from 10 to 25 years).

Rental Investment, A Safe Haven That Will Continue In 2021

 

As business failures abound and even the largest of them bear the brunt of the pandemic, rental property investing offers even more security compared to financial investments.

 

Rental yields should also continue to be supported by the low cost of mortgage loans in 2021, combined with the tax exemption measures still in force:

Pinel

Censi- Bouvard

and advantageous tax regimes for furnished rental companies.

While many city dwellers today dream of countryside and space, investing in the urban periphery in 2021 can increase the profitability of your real estate investment.

By anticipating demand that will grow in the coming months, this strategy may indeed represent a real opportunity. To do this, bet in particular:

on the peri-urban ring

or the nearby countryside of large metropolises

but also in medium-sized towns that are part of the Cœur de Ville scheme, eligible for the Denormandie tax reduction, such as Anger, Colmar, Pau, Arles, and even Valenciennes.

What are the reasons for investing in rental property?

If you are looking for a profitable and secure investment to build up assets and ensure your future and that of your loved ones, real estate investment appears to be the most suitable solution. Here are 6 good reasons to get started!

1. Rental property: to benefit from a safe and profitable investment

Unlike stock market investments, real estate investment is less impacted by economic conditions. Unless you encounter exceptional circumstances (radical change in the environment of the property, significant deterioration of the buildings, etc.), it is rare to see a property depreciate in the medium or long term, on the contrary. The profitability of real estate transactions also benefits from numerous tax exemption systems.

Since January 2021, borrowing rates have continued to decline, depending on the repayment term chosen. The opportunity for all investors, whatever their socio-professional category, to apply for a loan to acquire real estate.

 

With a real estate agency, you benefit from the leverage effect of credit, especially if you plan to rent your home! It can thus be partially or totally reimbursed by the rent collected. Especially since the rental investment offers a good return, which can go up to 7% according to the estimates of market players.

2. Real estate investment: to optimize the budget allocated to your main residence

 

By investing in real estate, you can choose to own your home. The amount of money you spend each month on housing is thus allocated to creating or increasing your wealth.

Also, note that the total abolition of the housing tax will also reduce the final bill.

Another advantage of investing in rental property to become an owner: you have full control of your home.

You undertake the work you want, you resell when you want and you are no longer subject to the vagaries of the rental lease, such as vacation.

3. Invest in real estate to build up a lasting heritage

Rental property investment is one of the most attractive investments for building up a lasting asset, without having an income of an exceptional level. The first stone in the building is most often the purchase of its main residence, extended by other rental properties ... or a second home.

The leverage effect of credit and the various tax advantages associated with leasing allow you to build up wealth without making a significant savings effort. Also more secure than financial products listed on the stock exchange, real estate investment offers a better return on investment than savings products.

The yield on life insurance is currently below 2% net of social security contributions, while that on a rental property can climb to 7%.

4. Invest in rental property to calmly prepare for your retirement

 

Retirement generally rhymes with lower income, on average around 25%. At the same time, daily expenses are increasing, especially those related to health costs. To anticipate the future and obtain additional income upon retirement, real estate investment is an ideal solution.

 

Most often, the mortgage is repaid before retirement. Keeping the home purchased, therefore, makes it possible either to find accommodation without paying rent or to make rental property investment and rent it out in order to receive additional income.

And if you are not yet a homeowner, know that it is still possible to apply for a mortgage to invest in rental property, even if you are over 55! In particular, you can finance it in part with retirement savings acquired in a company or through a banking product. Real estate tax exemption systems, such as the Pinel law, also help finance your acquisition, as does the collection of rents if the property is rented out.

The patrimony built up throughout working life via a real estate investment can also be resold to free up capital. You also have the possibility of bringing it to an SCI and transmitting it to your heirs in the form of shares, with a reduction in the tax burden by the game of donations.

5. Real estate investing: to protect your family

 

Rental property investment is an alternative provident solution, financed by the rents collected and optimized by tax savings, it allows you to build up assets while protecting your family from the vagaries of life.

As a safe haven, real estate is more resistant to deteriorating economic conditions and inflation. The property is therefore bound to increase in value over the years. And the risk-taking of rental London Properties investment is less for those close to them as lending banks require investors to take out loan insurance to cover the repayment of monthly payments or capital in the event of death or disability. The heirs of this real estate investment will therefore not have to pay any possible debt on the property.

Finally, thanks to tax exemption schemes, you can take advantage of a tax reduction while renting the property to a loved one. Real estate investment is therefore ideal for giving a boost to a child who is starting out in the workforce, or to ascendants enjoying a modest retirement.

6. Invest in Rental Property To Reduce Your Taxes

Finally, if real estate investment is among the favorite investments of the French, it is because it allows for substantial savings thanks to income tax reduction measures. These are aimed at all investor profiles and for all projects.

With a rental investment in a new real estate program, for example, you can get up to a 21% tax reduction over a 12-year period thanks to the Pinel scheme. The Censi-Bouvard law allows you to save 11% on the cost price of a furnished property in serviced residences.

If you are considering renovation work, you can opt for the Malraux or Historic Monuments devices, which allow tax deductions and exemption from inheritance tax.