Real estate investing is probably the most well-known way to invest money. There are many ways to invest in real estate, and sometimes it’s hard to know which method is best for your situation.
In this guide, we will detail how to invest in real estate in 2021, the different ways to invest, and we will also explain why to invest in real estate by detailing the advantages and disadvantages of this type of investment.
Choosing your investment
To choose your investment, you must first make a choice that makes sense for your budget and your objective. It is recommended to invest according to your needs. Do not rush, it is more interesting to wait to invest in a move with a greater return rather than to rush to make a move that will not be too beneficial.
What is the real estate market?
The real estate market refers to residential or commercial properties that can be rented, bought or sold. We often talk about “buying stone” in France when we want to invest our money in real estate.
We will go into more detail later in this guide, but we can already stress that the main advantage of real estate investment is relative security. Indeed, a real estate property will always have a value and a utility, contrary to a share whose value can fall to zero if the company goes bankrupt.
The other advantage is the leverage obtained through real estate loans. Indeed, the contribution for a real estate purchase generally represents a fraction of the value of the good, the remainder being lent by a bank.
Rental investment: a reassuring investment
Rental investment is reassuring especially in times of crisis. The French appreciate this type of investment whose yields exceed those of regulated savings and life insurance. With real estate rates very low, many buyers are turning to rental investments to save on taxes or build up their assets. It remains to be seen how the market will behave once the health crisis is over.
The choice of investment, a key step
But one does not launch oneself anyhow in an investment that represents an investment of several tens of thousands of euros. Because a bad investment can quickly become a financial abyss, especially if you do not find a tenant… You want to make a rental investment this year but you don’t know which type of property to choose. Here are some tips to remember when searching for a property.
Anticipate expenses and benefits
The rental investment must be decided in all objectivity. A good decision results from your ability to anticipate everything: find out about the local market prices, in order to objectively evaluate the rent that you can expect while remaining vigilant about the purchase price of the property.
The objective is to quickly amortize your investment through the rents you receive.
It is therefore important to estimate the amount of rent realistically, the tax savings that you will make according to the tax exemption scheme that you have chosen beforehand.
You must know that the purchase price of your house or apartment will depend on the other expenses that you will have to pay for this purchase.
The surface of the property
You are looking at the classified ads and you are hesitating between a studio and a T3 for your rental investment? If this is your first transaction, it’s best to go for a studio or two-bedroom apartment. The small surfaces are generally rented more expensive per m² than the large ones
“There is an eternal rule of thumb: the smaller the apartment, the more expensive it will be per square meter. The same is true for the sale, the smaller it is, the more expensive it is.
The return on a rental investment
During your real estate research, remember to calculate the gross and net yields. These calculations will allow you to compare the yield between two real estate acquisitions.
However, be careful when choosing the tax system, since in all cases, you will be taxed on your rental income. It is better to be advised by a professional for this choice in order to avoid paying too high taxes on your landed income. The calculation of the net-net yield will give you a more precise idea of the real profitability after taxes and tax deductions.
