There are several ways to invest in a rental: directly or through SCPI. What is the best solution for your profile?
Leasing investments are very popular among French people who want to secure their assets. A safe haven, the stone is perceived as an opportunity for additional income, even in retirement.
Direct investment in real estate
Despite the enthusiasm, direct investment in real estate is not without its limitations. For example, this can lead to: significant debt for the investor, risk of non-payment, having to incur various fees and taxes… ultimately, a financial situation that can quickly become delicate when expenses outweigh the importance of income.
It’s a fact, managing a lease can quickly become time consuming, however it’s important to be able to free up time to take care of it. In addition, this type of investment also requires regulatory relevance (evolution of taxation, changes in real estate laws, etc.), which is not always to the taste of the average investor… will effectively close the doors to other high-yielding asset classes such as businesses, offices, warehouses, clinics, etc.
SCPI, how does it work, what’s the interest?
SCPI (Société Civile de Placement Immobilier) is an investment vehicle assembled and managed by a management company. This is a collection of funds from investors for the purchase of commercial premises in which investors own part of the assets (shares, in proportion to the amount of investment). They leave property management to SCPI, who in turn pays them a regular income. In addition, the SCPI real estate portfolio consists of diversified assets both typologically and geographically.
Paper stone has serious arguments, such as:
- the investor does not need to worry about issues related to heritage management, as it is supported by the SCPI;
- rental risk is distributed among different tenants, therefore, is minimized;
- the management company reports on all elements related to the life of the OIR;
- every quarter the investor receives a rent with a detailed assessment of the management of their real estate portfolio.
However, it is important to keep in mind that investing is not without risk and performance is not always guaranteed. Thus, the shares owned by the investor may depreciate. In addition, stock overselling correlates with market fluctuations, which can be bullish or bearish. Therefore, it is important to prioritize highly capitalized SCPIs that will benefit from an efficient supply/demand relationship to make the sale of shares profitable, for example, in the event of an accident in life.
SCPI vs renting an apartment, what to choose?
Excellent performance! SCPI prevalence averaged 4.45% in 2021, despite the financial impact of the pandemic. They remained resilient and competitive in the face of direct real estate… Serenity on top of that.
By investing in SCPI, you are not investing in one property, but dozens at once. Thus, the risk of choosing an unsuccessful location is significantly reduced, just like when renting a vacancy.
SCPI is much more affordable than straight real estate. Today you can invest in stocks for less than 200 euros.
(often) better taxation
Depending on your marginal tax rate, it may be interesting to invest in European SCPIs and thus benefit from more attractive taxation in the country.
Finally, holding SCPI shares allows investors to increase their savings while reducing risk due to the size of SCPI’s assets.
To prioritize investing in “real stone” means putting all your eggs in one basket. Conversely, investing in SCPI means deciding to become co-owners of hundreds of buildings. Whether it’s office real estate, retail space, housing or healthcare, the sector is performing very well.