how to make a profitable investment in Lyon

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With 160,000 students, the metropolis of Lyon has one of the most dynamic markets for small room rentals in France. According to forecasts, the number of students is set to rise to 195,000 by 2030. A population, which from June on real estate with small areas like studios, T1, T1 up and throws more and more T2. Despite the health crisis, the real estate market in Lyon remains dynamic, especially in terms of small spaces. The city was even ranked as the second best city for students.
by Le Figaro Étudiant.

High rent

The small rental market in Lyon is clearly to the advantage of landlords. During the visits the students do not have time to think and the donors know. According to SeLoger, the average rent in Lyon is € 20.70 / m² for a T1 and € 15.80 / m² for a T2 for an unfurnished apartment. These average rents rise to € 24.30 / m² and € 17.90 / m² for a furnished apartment.

High purchase prices

According to the Notaires du Rhône, the average purchase price of a studio T1 of just under 30 m² rose between 2009 and 2019 from € 81,000 to € 131,800 in Lyon. Or 2,960 € / m² compared to 4,950 € / m²! For one-room apartments with an average area of ​​48 m², the average price drops from € 129,500 to € 197,400 over the same period (€ 2,690 / m² compared to € 4,370 / m²). Therefore, before investing, you need to consider all of the components of the Lyon market to come up with a solid financing plan.

Low profitability

You shouldnt be blinded by the high rents in Lyon. So remember to accurately calculate your profitability (gross, net and net-net). To keep calm. With high purchase prices, your profitability will not explode despite substantial rents. Depending on the industry, between 2.5 and 5{7d3485657e94c2a51293ca186d4450b2f27c317aa7ee3509dac6c8bbf5461118} count ... maximum!

(c) progress

The value of inheritance

However, investing in real estate does not necessarily mean seeking immediate profitability at all costs. The metropolis of Lyon remains a safe bet where real estate has value. The lack of exceptional profitability, therefore, should not obscure the main interest of investing in Lyon: building assets in a metropolis with a very tight rental market. Take advantage of low interest rates to leverage credit and build your wealth.

Its up to you to choose the strategy that suits you: bet on properties that are a bit remote or less suitable to lower the price per square meter and get a little more profitability. or bet on a property in a hypercentre or near universities to build assets over time.

Aside from the concepts of profitability and purchase price, taxing your investment is certainly the most important factor in the long-term success of your project.

Reduce your taxes with Pinels Law

Regardless of the new product, you can benefit from the Pinel device. This system allows an annual tax reduction of 2{7d3485657e94c2a51293ca186d4450b2f27c317aa7ee3509dac6c8bbf5461118} of the gainful employment for 6, 9 or 12 years. Either a tax saving of 12, 18 or 21{7d3485657e94c2a51293ca186d4450b2f27c317aa7ee3509dac6c8bbf5461118} of the investment amount. In return, this tax reduction is calculated on a maximum investment of 300,000 € and a maximum investment of 5,500 € / m². And the Pinel law also provides for an upper rent limit based on zoning. Lyon is located in Zone A, which means that the rent may not exceed € 12.95 / m² excluding charges.

Optimize the old with furnished rental properties

The old one with no work does not represent a major tax interest in the purchase. Rented naked, the tax authorities apply a fixed 30{7d3485657e94c2a51293ca186d4450b2f27c317aa7ee3509dac6c8bbf5461118} allowance to land income and work and fees are not deductible. It is therefore interesting to prefer the furnished rental agreement.

With the formula, you can rent at least 20{7d3485657e94c2a51293ca186d4450b2f27c317aa7ee3509dac6c8bbf5461118} more expensive on average than with a mere rental agreement. Above all, however, the income from furnished rents is taxable in industrial and commercial profits (BIC) and not in real estate income. If this income does not exceed € 23,000 per year, and if this income does not exceed the other income from your household activity, you can benefit from the status of non-professionally furnished rental (LMNP). With the Micro-BIC regime, the tax authorities grant a 50{7d3485657e94c2a51293ca186d4450b2f27c317aa7ee3509dac6c8bbf5461118} reduction: You are therefore only taxed on half of your rental income.

Take advantage of the land deficit

The uncertainties involved in renovating can put more than one investor off. However, the operation has an interesting tax advantage: the land deficit mechanism. In connection with renting out an unfurnished property at the end of the year, if the rents received are lower than the fees (e.g. renovations), then you are in a land deficit situation. You can offset the amount of the deficit against your investment income for up to ten years. This means that at the time of your property tax return you will delete this income and thus lower your taxation.

Three methods of calculating rental profitability

To establish a good financing plan before investing in a property to rent, it is important to assess the propertys potential profitability. But be careful, we often only talk to you about gross profitability. Rely on other indicators by fully understanding the different returns:

- The gross profitability equals the purchase price of the home divided by 12 monthly rent multiplied by 100

- The net profitability resumes the previous calculation, but by deducting various fees (property tax, non-refundable fees and administrative fees) from the 12 months of rental.

- The net-net profitability is the profitability minus any charges and with the tax benefits.

You will understand that profitability can melt from one calculation to the next and undermine your financial plan.