This building was then composed of several fairly similar dwellings. Since then, the term has continued to refer to any purchase of a set of lots of the same property. He is opposed to the end of the co-ownership where several owners own one or more lots of this building.
We also rarely speak of a “rental hotel”, a “rental property” or even a “rental property”. All these terms refer to the same thing: the possession by the same owner (natural or legal person) of an entire building with the aim of renting each of the lots that make it up in order to generate recurring rents which allow the latter to earn money. Recommendation before investing in an investment property
Please note, it is highly preferable not to start directly with an investment project of this type without experience in rental property.
Never replace practice
Even after having invested essential time in theoretical training on taxation, administrative management (management of tenants, management of the tax return, etc.) and all the elements to know and optimize for an owner-lessor, this will never replace practice and confrontation with the reality on the ground.
It is better to create experience by investing first in small accommodation or parking spaces (less training on all the constraints, but allows you to set foot in the stirrup easily).
Ideally you can start by buying a studio on a fairly tight budget. Help yourself, make your first mistakes!
Even with good preparation, you will do like everyone else. These will have limited financial impact as the investment is. You will be able to use this first training rental project so as not to reproduce more costly errors on a larger project.
Then, once more armed, you can embark on the purchase of an investment property and benefit from its many advantages.
The advantages of buying an entire building completely and leasing it in batches
Why favor an investment in a rental property rather than the purchase of a large apartment or several distant dwellings (called “dry housing” by contrast)?
Here is a list of the main benefits of such an investment:
Lower purchase price and operating costs
One of the first qualities of an investment property is that it is generally less expensive than several separate purchases of different properties for rent:
The purchase price per square meter will be lower for a set of lots sold to a single buyer (bulk purchase) than for the same homes sold separately to different buyers.
There will only be one transaction with one seller. This therefore means that the bank or broker’s administrative fees will only have to be paid once for a single financing.
You will only have to pay the notary once: see the details of the calculation of the notary fees to understand the usefulness of a single large payment rather than several small ones.
There will also only be one real estate agent’s commission to pay: usually they charge a lower percentage on a large sale than on several small ones.
All of this makes it possible to have a cost of buying an investment property that is much lower than buying the same goods one by one.
There will also be lower running costs for this particular type of investment:
Property taxes are generally lower on the entire building than on the sum of the lots taken separately.
There is no need for a condominium trustee because you will be the sole owner and lessor. However, their fees can be quite high and for several years have been on a much stronger upward trend than inflation.
You can group the work of your craftsmen. With several interventions on the same place at the same time, you will have more leeway to negotiate the prices of your craftsmen (more substantial and more practical work for them).
These less costs will therefore also allow you to reduce management costs.
Better overall rental profitability
For your tenants, it makes no difference that you are the sole owner of the entire building. The prices of each housing, business or office for rent will remain the same. You will thus have the same level of land income as for the purchase of several dry dwellings.
As you had a lower purchase price and you also have lower management costs, you get better rental profitability.
Do the math. This can very quickly bring a not insignificant surplus of return. There are some great tools out there for calculating your rental yield and optimizing it all.
Simplification of management
It is undeniable that your management of this set of rental properties will be simplified:
There is no need to manage a condominium. This means that you will be the sole decision-maker of all decisions to be made about renovation or improvement work, operating rules, etc.
You will also be free to carry out the work at your own pace, as you want or can, by choosing yourself the service providers and the way to carry them out.
As we have seen below, a single large property to buy requires only a single visit to the banker or broker, a single visit to the notary, a single intermediary real estate agent, etc. This not only provides savings on the costs of all these interlocutors, but it also saves you a lot of time by limiting the number of meetings and various exchanges.
The same location for all the lots to be managed also saves time and appreciable constraints for the manager of these rentals. Either you do it yourself and it makes your life easier. Either you have it managed by a real estate agency and this can reduce the cost because it simplifies their management. It will be the same for the craftsmen or any other professional having to intervene on this building.
Risk distribution over several lots
The risk of default and problems with a tenant is spread over different assets. If this distribution of risk is the same as for several separate dwellings, it can nevertheless be a plus for the bank that gives you a mortgage. Indeed, it will be several different rents that will cover the needs to pay the repayment of your mortgage. There is therefore less risk in paying your monthly installments because several tenants provide you with regular cash flow for the property she has financed.
In addition, you also have the option of choosing a building that allows you to mix the uses on the different lots: homes, commercial premises, offices, parking lots, garages, etc.
Possibility of gradually selling the lots at a better price
When you want to sell this investment property, you will have the choice of selling the whole set or selling it lot by lot. This then leaves you the possibility of keeping those who have the best profitability compared to their current value in the real estate market.
A sale of each property individually would allow you a better profit because they will be sold more expensive separately than all together to a single purchaser.
However, to achieve this, he carefully studies the work and costs necessary before being able to sell each lot separately:
Work will probably be necessary to properly separate the lots and all their accesses, particularly with regard to fluids (water, electricity, gas, etc.).
Costs and efforts to be expected for the creation of a condominium.
The investment property also has some drawbacks
In addition to all these advantages of the apartment building, there are also some disadvantages that are good to know:
Lower competition for the purchase but more qualified
The investment property sales market is a very specific market, much smaller. There will be few supplies and the demand is also much lower.
However, other competing buyers will also be much better informed and experienced in rental investment. Finding such a profitable investment is therefore not an easy and affordable task without effort. It is indeed a market of highly qualified professionals or individuals.
Substantial investment requiring liquidity
By definition, it will be a much heavier investment than on a single apartment. An investment property may well have only two properties for rent (two lots), but it may also have many more.
The risks are therefore higher in the event of a problem that is not covered by insurance. This requires having more cash reserve in case of unforeseen works, urgent problems with the building itself, etc.
To reduce this danger, you have the possibility of investing in a building of report to several via an SCI (Société Civile Immobilière. This allows to have only one owner (the SCI), but several people who have shares. of this company and who can therefore intervene in the event of difficulties or to raise the significant funds necessary for the purchase.
Risk taking on the frame of a single building
When you invest in different homes or other real estate located in different buildings, it helps to separate the risks associated with problems on the building as a whole.
A serious problem on a building, as we can often see in the news (fire, zone that has become at risk, etc.) on your investment property will directly impact all your properties rented at the same time. If you don’t have good insurance for this, you will need to be able to cope with this delicate period.
Finally, it is therefore necessary to have excellent knowledge of buildings in general. If this is not the case, you must be able to be accompanied by a professional competent in this field to assess all the elements of this building:
The foundations
The roof
Insulation
Updates to electrical standards
Etc.
Preparing for the purchase: where to find properties for sale?
Here are various things to know before considering an investment in a complete building for rental purposes:
Search on major ad sites: the major real estate ad sites (LeBonCoin, SeLoger, LogicImmo, PAP, etc.) offer the possibility of directly selecting the properties for sale. This is a good opportunity to filter directly on this particular type of asset.
However, additional research should not be completely neglected. All the seller owners of a house made up of (or cut into) several lots will only be visible with a search on the “house” category?
Building up a network of informants: ad sites are great, but they won’t allow you to find a building that will soon appear on the sales market before others do. Build a network of informants.
In many professions related to real estate, there are people who obtain information about a property that will soon be sold before any communication: notaries, real estate agents, bankers, brokers, insurers, etc.
This is where you can make all the difference, just like any real estate purchase. By being the first to know, you can cut the grass under the side of other investors who are also looking for this kind of investment and thus avoid overbids.
Check prices and rents precisely: research your specific sector to properly predict the expected profitability. Don’t settle for a few rough estimates or check out a few ad sites. This is because actual selling prices and current rents may be significantly different. Here’s how you find out about real estate prices in your city and how to start researching your local rental market.
Find out about the individualization of the meter: which says block building, sometimes says several lots for rent with a single electricity meter or a single heating meter (gas, fuel or other), etc. It’s up to you to check if everything is managed in a global or individualized way. In the first case, it will be up to you to pay the bills before finding a solution to distribute the charges to your tenants.
location: as with any property, the 3 preferred criteria are location, location and location. Not only must the goods have a strong solvent rental demand in the district, but they must also be able to resell them easily if necessary. There is nothing better than a quality location that will always attract buyers.
Pay particular attention to ensuring that all types of property to be rented out are adapted to the needs of this locality (no housing that is too small when there is no demand in the area, commercial premises where there will be easily customers, etc.).
Take all the time to properly estimate the general condition of the building: whether it is for the roof, electricity, etc., do not sign anything until you have all the necessary information. Try to quantify fairly precisely the amount of work to be expected upon purchase or during the first years of management. This will allow you to prepare your budget and adjust the price of your offer to purchase accordingly (and conditions precedent if necessary, for example if doubts persist on a specific point and this requires a later response).
Neglecting any important information: questioning the seller at length about recent work, current rental costs and charges, current rental contracts if one or more lots of this building are already rented, etc. An investment in a rental property cannot be improvised.
Make sure the lots are in order: with the help of your notary, check that all the lots have been declared and are known to the tax authorities. It may happen that some batch cutting was not done properly.
Pay attention to the tax bill
Finally, as with any investment of money, it is essential to know what the taxation or tax rules will be in case of different types of rental property that will apply to your investment.
Make the right choice between buying directly as an individual, buying through an SCI, or even through a holding company. An accountant or a notary can study this project with you and give you the advantages and disadvantages of each of the possibilities. To choose well, you will need to have a fairly precise idea of your goals with this purchase and your directions for the years to come.
Depending on the possibilities of the different lots and the interest of a particular type of property in your geographic area, it will also be necessary to determine the best options in terms of rental. For example, the taxation of the LMNP is currently more favorable than a simple classic bare rental. It may also be interesting to study the opportunities to set up a shared apartment in a large apartment, etc. Don’t overlook any optimization solution.
Finally, after having calculated in a fairly precise way the rents to be collected, the charges and various costs (on purchase but also the non-recoverable rental charges, maintenance / repair, etc.), you will have to estimate the taxes on your property income.
Depending on your setup and the type of rental, there are many scenarios to consider. The amount of social security contributions, taxes on these rents, even the IFI can quickly become very important. It is essential to plan for them to ensure that the cash flow will be sufficient and not to miss out on such a large investment. Remember that currently the rental of real estate is highly taxed in France, especially if you have a high marginal tax bracket.
To conclude: with these various tips and information on buying an investment property, you have all the right questions to ask yourself in order to get the most out of your investment. This will allow you to optimize your profitability while limiting the various risks inherent in this type of rental project.
