Good Reasons to Invest in Real Estate

Do you want to build a safe and profitable property? Rental properties meet these goals and offer additional benefits.

If you want to build your wealth without taking on too high a capital risk, a rental property is a solution. The advantage of this type of investment: If you do not have the necessary liquidity to buy an apartment, you can borrow money. Real estate is the only investment available on credit, and it is even advisable to finance your purchase with a loan (read our real estate advice in detail at monconseillerimmo.com), as you will benefit from the exceptional financing conditions that currently exist. Moreover, you will benefit from the leverage effect of the loan, meaning that by investing a small amount initially, you will build substantial wealth in the long term once your loan is repaid. The savings efforts remain sustainable, as the monthly payments of your loan are largely covered by the rents you earn. Additionally, you optimize your business from a tax perspective, as the interest on the loan is deductible from your rental income.

However, be careful, despite its advantages, a real estate investment should be considered long-term, at least ten years, in order to amortize acquisition costs and hope for a capital gain. If you are still hesitant before investing in real estate, here are three good reasons.

1. an attractive total return

While very low interest rates are good news for borrowers, they are not so great for investors. Indeed, it is currently difficult to find a financial investment that offers a return higher than 2% unless you accept a dose of risk. By investing in real estate, you can achieve a much more interesting return. Depending on the type of investment, they currently range between 1.5% and 5% with moderate risk, and double for a riskier investment in real estate.

Be aware that once all taxes are paid, the net return of a real estate investment will be lower. You may even have to pay the IFI (real estate wealth tax). Furthermore, property income is taxed each year at the marginal rate with your other income, and you must pay social contributions of 17.2%. Not to mention the specific taxes related to this type of asset: transfer taxes when purchasing a property, capital gains tax upon resale, and annual property tax.

2. the possibility of diversifying your assets across multiple markets

By investing in real estate, you can widely diversify your assets. First, because real estate markets do not develop in the same way as financial markets. Second, because you can combine different rental markets depending on the type of assets you choose. For example, if you choose “safe assets” in the hyper-urban areas of major cities, you secure your return without taking too many risks. On the other hand, by focusing on the neighborhoods of the future in rapidly changing cities, you increase your profitability and can hope for significant capital gains in the long term, but you also expose yourself to a higher rental risk.

Note: shares of yield SCPI that invest in commercial real estate (offices, shops, hotels, parking lots, etc.) allow you to benefit from the growth of markets very different from residential real estate. These products thus allow you to diversify the portion of your wealth invested in real estate.

3. securing part of your assets

In the long term, real estate remains the least risky investment, provided you choose your investment wisely from the start. Because even in the event of a serious crisis, prices will adjust slowly downward without collapsing in a few days. The only downside: during turbulent times, it is more complicated and takes longer to sell real estate than financial investments. So you should always have a little cash in your portfolio to avoid a hard hit.

Final point: never invest in a property that is too large for your budget. Contrary to popular belief that investing in real estate is not “self-financing,” you need funds to pay for all the extras, including taxes.

Good Reasons to Invest in Real Estate