Investment in Pinel: how to optimize income after the end of tax cuts?

The Pinel system, which is often frowned upon by investors due to poor profitability, will evolve in the coming months. If the current tax cut rates are maintained until December 31, 2022, then the situation will change from 2023. The system will indeed continue for 2023 and 2024, but with regressive tax cuts. Thus, you have several months to take advantage of the full tax credits of the Pinel system (12%, 18% and 21%, depending on the rental period of the property). Since the term of obligations under the Pinel scheme is limited to 12 years, investors have a question. What is the best way to make your property profitable after the “Pinel period”?

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In a study for the French Rental Investment Agency, Primeview performed a simulation that aims to estimate the return on investment in Pinel over the period 2022-2041, depending on the option chosen after 12 years of Pinel lease. The three scenarios studied by Primeview start as follows: An individual buys a €191,220 property financed with a loan at 1.86% over 20 years to rent out with a Pinel device over 12 years. As such, our investor is required to offer fixed rent in hard-to-reach areas during the period 2022-2034 in order to benefit from tax cuts. Then for the period 2034-2041. scenarios diverge.

Three scenarios studied

In the first scenario, our investor maintains intermediate rental rates., in order to continue to enjoy tax benefits (example 1). In the second scenario, he abandons the Pinel system and rents out his property with an unlimited rent (20% more than the intermediate rent). Finally, in the third scenario, our investor uses the Loc’Avantages system, which allows him to receive an income tax rebate by providing a fixed rent and unfurnished housing. In the latter case, Primeview assumes that the Loc’Avantages system will still be in place in 2041, which is obviously not guaranteed. In all three scenarios, the property will be resold at the end of 2041, assuming that property prices increase by 1% per year.

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The results of these three simulations are as follows. In case 1 (interim rent), the annual rental income is estimated at 1.48%. This is the least profitable option for our investor. Cases 2 (common law leases) and 3 (Loc’Avantages scheme) offer slightly higher rates, namely 1.63% and 1.64% respectively. If these returns are not necessarily spectacular, for the moment it remains more interesting to invest in rentals using the Pinel system (1.4% to 1.6% return) rather than investing in a “correct ordinary” (average 0.6%) . that is, no rent ceiling or tax credits. This observation is mainly due to the amount of the tax reduction, which amounts to a total of 31,231 euros (for three scenarios) over 12 years of lease through the Pinel system.

Yields will collapse in 2023

If you are planning to invest with a Pinel device, it is highly recommended to get started before the end of the year. From 2023, yields will automatically fall due to the regressive nature of tax cuts. Thus, according to Primeview’s modeling, it will be possible to receive a tax benefit of “only” €24,427 if the house is purchased in 2023 and €17,635 if it is purchased in 2024. leased in 2023 under the Pinel system will be 1.32% (option 1), 1.50% (option 2) and 1.51% (option 3). From 2024, the fall will be even more significant: 1.19% (option 1), 1.37% (option 2) and 1.38% (option 3).

To avoid this drop in profitability, it will always be possible to upgrade to a new device called Pinel+, which will be launched in 2023. an obligation to rent a property that meets certain energy efficiency and area restrictions.