Investing in real estate in France is more profitable than abroad: Transcript

During these periods of inflation, many French people living in France or abroad are wondering about accommodation and investment. Invest in France or abroad? What is the most interesting? What are the advantages and disadvantages of investing in rentals in France and abroad?

Do investments abroad have real advantages over France?

Some countries attract the French, in particular because of the tax system, which might seem more interesting, but some variables are often not taken into account, even if they have a real impact on investment.

Investment in rental housing

Investment in Europe (Germany, Spain and Portugal), what are the advantages and disadvantages?

The first variable to consider when investing abroad includes all conditions and obligations.

FROM interest rate typically between 1.3% and 2.5%, in France this figure is lower than in Spain and Portugal. They charge both fixed and variable rates. Spain generally offers a flat rate of 1.75% to 2.75% with an increase of 0.2% to 0.4% for expatriates.

Using flat rates in Portugal can be quite tricky as it is not a common practice. Indeed, banks are in favor of a floating interest rate on loans based on the Euribor (one of the main base rates of the money market in the euro area). As for Germany, although it also offers Euribor-dependent variable rates, investors will also have access to fixed rates ranging from 2.8% to 5%. Loan terms tend to be longer for residents of Spain and Portugal (40 years and 30 years respectively). Meanwhile, the required contribution of a French emigrant abroad does not differ much between countries, since it is between 30% and 40% of the loan amount.

Except taxation related to taxable income Based on the chosen tax system, there are no significant rules in France. Income tax (rent or property) in other European countries either at a flat rate of 19% (Spain) or 25% (non-Portugal residents) or at a progressive rate up to 45% (Germany). In addition, a property transfer tax has been introduced.

A lot of additional expenses should be taken into account since certain procedures require registration fees, translation of documents or the systematic use of a lawyer in Spain.

Investment in rental housing

United States, Indonesia and Mexico what are the disadvantages?

issuance of credit in these countries is very difficult. In Bali, the possibility of obtaining a loan is practically non-existent, and the rates charged in the US and Mexico exceed 5%. The fee requested as a non-resident is usually over 35% and can be as high as 50% in Mexico.

administrative procedures to obtain the property are such that an escort is needed. In the United States, there are many costs and obligations to consider, such as the costs of checking and registering, or even obtaining an ITIN (Taxpayer Identification Number).

In order to legally purchase a property in Indonesia, the buyer will have to enter into a so-called “lease” agreement with an Indonesian or, more commonly, set up a capital company. Indeed, only Indonesians have property rights. In the case of the creation of a so-called PMA company, the buyer will have to pay the costs associated with its creation.

On the other hand, a trust permit (fideicomiso) is required in the Mexican state. This permit, valid for 50 years and transferable, corresponds to a “contract” made with a Mexican bank that transfers the right to manage the property, but remains the real owner.

L’investment in rental property is a lever to create an attractive annual income. When we take into account the possibilities of financing, taxation, or costs associated with administrative procedures, the balance becomes heavier. Therefore, it is important to learn about the pros and cons of each country and make a real comparison.

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