Are you looking for a relatively safe investment, with a reasonable initial outlay and, on arrival, capital or regular income upon retirement? Look no further: buy an apartment and rent it out. “Real estate has many advantages, provided you choose a dynamic city where rental demand is strong,” says Pierre Brunet, wealth management advisor at Alter Invest. It is also the only investment that can be financed on credit.
This year, however, your budget will be a little tighter with the rising cost of credit. “For a twenty-year loan, we went from an average rate excluding insurance of 1.2% in March 2022 to 3.2% in March 2023”, notes Ludovic Huzieux, founder of the mortgage broker Artémis courtage. But this new financial situation is also good: it has caused demand to fall. If you buy today, you will therefore face less competition and benefit from falling prices. “It is not a collapse, but rather a slight erosion,” said Charles Marinakis, president of the Century 21 France real estate agency network.
To optimize your investment, take an interest in Loc’Avantages. Still little known, this tax system has just celebrated its first year of existence. Concretely, it imposes to rent accommodation after having signed an agreement with the National Housing Agency (Anah). The property must be rented for at least six years, with a bare lease (unfurnished), to middle-class households or those with modest or very modest incomes. All at a capped rent set city by city, and not by large geographical area as with the Pinel system.
Rent discount against tax reduction
With Loc’Avantages, the lessor therefore accepts a rent discount, but benefits, in return, from a tax reduction. The principle is as follows: the lower the rent, the greater the tax advantage. The model comes in three tiers, with the resource caps for eligible tenants being higher for the first, then decreasing for the second and third. In Loc1 (intermediate rental), the discount on rents is 15% and the tax reduction is 15% on rents collected; in Loc2 (social rental), these rates are 30% and 35% respectively. As a bonus, if the rental is carried out through a real estate agency with a social vocation (AIVS) or if the tenant is an association approved by the State (Emmaus Foundation, Habitat and Humanism, etc.), the reduction rates taxes are increased to 20% (for Loc1) and 40% (for Loc2) respectively.
These two types of rental also allow access to Loc3 (very social rental), with a rent discount of 45% and a tax reduction of 65%. However, if you are a neophyte investor, it is better to avoid this formula, which is more complex and risky, because tenants have more fragile profiles and sometimes require social monitoring. You should also know that, whatever the formula chosen, the tax reduction falls within the cap on tax loopholes of 10,000 euros per year.
If the sacrifice seems important on paper, it is not so much in reality, provided you choose the city and the accommodation well. Because, as with Pinel, the Loc’Avantages rent ceilings apply to an “increased” area. The latter takes into account not only the area of the apartment, but also that of its balcony and its cellar, the whole being weighted by a complex formula. In practice, the smaller the accommodation, the more the coefficient increases the rental area (up to 20%). However, it is on the latter that the discounted rent applies. Thus, in some areas, the Loc’Avantages ceiling almost corresponds to the free market rent! For example, a 39 m² two-room apartment with a 3 m² balcony in good condition located in Boulogne-Billancourt center (Hauts-de-Seine) can be rented for 1,100 euros per month, while Anah sets a Loc1 ceiling at… 1,104 euros per month.
© / The Express
However, Loc’Avantages is not reserved for large cities. This device therefore also makes it possible to invest in an average city with lower purchase prices, which boosts the profitability of your operation. In addition, it is open to investors who have just acquired a home as well as to those who already own one.
Get an extra bonus
In addition to the tax reduction, you can benefit, subject to conditions, from an intermediation bonus which further improves the profitability of your investment. It is paid only once when the agreement is signed with Anah, and only to owners who opt for Loc2 or Loc3. It amounts to 1,000 euros if the property is rented to an association and rises to 2,000 euros if the rental management is provided by an AIVS. In both cases, an additional increase of 1,000 euros is granted for apartments of less than 40 m². Thus, if you rent out a small area, you can collect between 1,000 and 3,000 euros the first year, depending on the option chosen. “This makes it possible to very significantly improve the cash flow necessary for this type of operation”, underlines Pierre Brunet of Alter Invest.
If renovation work is necessary, you will also be able to receive aid from Anah. They amount to 25% of the amount (excluding taxes) for energy improvements, up to a limit of 15,000 euros, and 35% of the invoice, up to a limit of 28,000 euros, for major renovation (rehabilitation, health , securing, adaptation, etc.) with, in both cases, ceilings per square meter and type of work.
These bonuses will allow you to renovate, at a lower cost, a home that belongs to you and which will then be rented much more easily. If you are planning to invest now, aiming for a thermal strainer in order to modernize it via this device can be a good idea, especially in a large metropolis. In fact, the value of energy-intensive apartments is now falling faster and stronger than that of other properties. “Buyers systematically negotiate the price of housing whose energy performance diagnosis is higher than D”, confirms Jean-Michel Moutinho, director of Guy Hiccups Lyon 5 and Tassin-la-Demi-Lune.
Carrying out major rehabilitations also entitles you to an additional tax benefit. Indeed, the works are considered as charges and, as such, deductible from property income. The first year, if their amount exceeds that of the rents collected, the operation generates a “property deficit” which can be reported on the overall income (salaries, unemployment benefits, retirement pensions, etc.), which lowers the tax base of the lessor and therefore its taxes. New for 2023, 2024 and 2025: energy renovation work is chargeable to this overall income up to 21,400 euros instead of 10,700 euros for other renovations (provided that the property can achieve an energy performance diagnosis between A and D). Better: if the entire deficit exceeds this ceiling and cannot be charged to the overall income, “the remainder can still be carried over to the property income for the following ten years”, specifies Bernard Carlier, founder of Joptimiz.com, an online wealth assistance platform. This, again, reduces your future tax burden.