4 Things to Know About Investing in a Non-Professional Furniture Rental Company (LMNP)

Investing in a furnished classic rental or serviced residence can be a great option for immediate or future income thanks to the credit effect. Our tips for optimizing your wealth strategy.

Investing in rentals creates a legacy

Buying real estate to rent out is a good way to accumulate wealth and earn extra income. Interest rates have begun to rise, so investors can immediately take advantage of leverage to finance their purchase. Keep in mind that depending on the city, the average gross real estate investment return can range from 3.5% to over 10%, compared to 1% for A livery and 1.30% for a Euro life insurance contract fund in 2021. By investing early, the mortgage can be paid off before retirement. Enough to maintain a good standard of living thanks to the rent collected.

The buyer can make a bare rental investment (the property is rented unfurnished) or rent furnished. Whether the lease is furnished, in a classic housing stock, or in a serviced residence for retirees or students, the investor enjoys the tax advantages of being a non-professional furnished rental company (LMNP). The investor can choose to rent alone or entrust the management to an intermediary. For apartments in managed residences, the rental is managed by the Operations Manager.

Furnished rental: two plans, two benefits!

When investing in furnished housing, the buyer has a choice: he can use either the classic LMNP status or the special Censi-Bouvard system, which expires on December 31, 2022. The LMNP status only applies to investors whose rental income must not exceed EUR 23,000 or 50% of their total income. The advantage of the diet is simplicity, especially when accompanied by a professional.

The Censi-Bouvard method only works in the context of furnished home investments. The buyer can choose to purchase from the Nursing Home, Student Residence, or Dependent Residence for the Elderly (Ehpad). Censi-Bouvard will allow you to take advantage of a tax credit equal to 11% of your total rental investment with a rental obligation of at least 9 years. The tax reduction applies up to a ceiling of €300,000 excluding transaction tax, including notary fees (i.e. €33,000 for a maximum of 9 years). It should be noted that this ceiling does not allow for depreciation.

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Attractive tax system

The peculiarity of the classic LMNP status is that it allows you to receive income with a low level of taxation. At the time of filing the tax return, if the investor’s rental income does not exceed 72,600 euros, he is subject to the micro-BIC regime. A fixed discount of 50% is applied to the rental amount. In return, no fees can be deducted (amortization, loan interest, etc.). However, if the investor’s rental income exceeds 72,600 euros per year, or if he requests it, he can take advantage of the de facto regime. This option must be selected by February 1st of the relevant year. It is valid for one year and automatically renews from year to year. There, he can deduct from his rental income all expenses associated with his investment, such as interest on the loan, management fees, accounting, any work, as well as accounting depreciation. They can last from 7 to 10 years for securities and from 25 to 30 years for real estate securities. Accounting depreciation must not exceed the net amount of rent received. However, excess depreciation can be carried forward indefinitely, which can significantly limit or even eliminate the taxation of rental income.

It should be noted that under the LMNP status, the investor, under certain conditions, benefits from a VAT refund on his property, that is, a savings of 20%. It is in his power to keep it for at least 20 years.

Choosing the Right Manager

By investing in a serviced residence, the investor entrusts his property to a professional property manager. It is he who takes over the entire management of the lease of property and finances, in accordance with the concluded commercial lease agreement, all or part of the maintenance work related to housing. Choosing the latter is essential to maintaining your rental income. A player who has been on the market for a very long time will often rhyme with the quality of the service provided. The investor can also ask the accountant to review the deal made with the manager. It is better to choose active managers in many residences in the territory, which is a guarantee of brand solidity.

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