Investing in real estate to build future income when you retire is a frequently used technique. However, it has two major drawbacks. The first: receiving heavily taxed rents during your working life. The second: having to manage a rental property. The dismemberment of shares in real estate investment companies (SCPI) makes it possible to overcome these two obstacles.
These so-called stone-paper products provide access to a diversified real estate portfolio, managed by a specialized company, and regularly pay dividends corresponding to your share of the rent. Dismemberment, for its part, makes it possible to acquire sole ownership of the SCPI in exchange for a discount on the share price. Throughout the duration of the dismemberment, the rents are paid to another investor, the usufructuary. As a result, the bare owner has no income tax. Furthermore, the investment is not subject to real estate wealth tax! At the end of the dismemberment period, you become full owners of the SCPI again and you will then receive the benefits. The beauty of the operation? Buying cheaper allows, for a given capital, to acquire more shares, and thus to receive ultimately more income.
In order to prepare for retirement, you must make the end of the dismemberment period coincide with the moment when you would like to start benefiting from additional income. An operation which, in theory, can last from three to twenty years. “In practice, we have many files between five and ten years old and rarely exceed fifteen years,” reports Pierre Garin, director of the real estate division of the online broker Linxea.
A rebate that grows over time
The price discount increases over this period of time. For example, it is of the order of 20% over five years and 35% over ten years, but these figures vary marginally depending on each product. “The discount is calculated based on the shortfall in rental income. So, the more an SCPI distributes, the greater it is,” explains Raphaël Oziel, wealth management advisor and founder of La Boutique des Placements. Count 32% for Immorente, from Sofidy, and 36% for Vendôme Régions, from Norma Capital.
Before getting started, however, you must carefully assess your needs and means. In fact, the money is blocked for the entire duration of the dismemberment. It is very complicated to close a transaction prematurely and without financial losses. Even in the event of death, the dismemberment continues with the heirs! “This is why I recommend to my clients not to go beyond ten years or to make several investments over different durations, especially if they do not have much visibility on their needs,” indicates Raphaël Oziel. Same recommendation of caution on the amounts: it is better to adopt a conservative approach and keep cash to face an unforeseen event.
Second advice: opt for solid SCPIs because you remain exposed to the risk of seeing the share value decline in the coming years. In this scenario, the operation loses much of its interest because the discount will be eaten up by the depreciation of the SCPI. However, real estate prices are currently under pressure. Diversified products (which acquire offices as well as businesses or warehouses), recent and growing, will be the most resilient in the coming years because they will be able to acquire property under more favorable conditions. The safest way, however, is to compose a bouquet of several SCPIs in order to diversify your investment.