Real estate investment is an investment for the future. It is a long-term investment that allows you to feel secure and increase your net worth. People who invest in real estate will have better longevity, lower debt, and higher lifetime income than those who don’t. The best time to invest in real estate would be now!
In 2022, it will be possible to acquire a property for 6 million euros, with a maximum rent of 300,000 euros per year for 9 years.
In 2023, the tax refund for property rental increases to 18% and that to 22% for 9 years.
By 2026, the tax reduction would be 12% and 15% on average (minimum) over the life of a rental property.
You can buy your favorite good at an affordable price by investing less than €500 per month every year!
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The Pinel law: how does it work and what are the advantages?
A Pinel law is a type of tax which is calculated within the framework of the French tax system, it is operated in three different ways:
1. If you pay taxes at the end of the year, you can get a refund of 5% of your taxable income.
2. If you pay taxes at the end of the year but not at the beginning, you receive a refund of 6% of your taxable income in return.
3. if you pay taxes and do not pay taxes at the end, but only at the beginning, then you can recover 10% tax on your real estate investment in France up to 3 million euros (100k€) per year, and this deduction will be taken half. If you are a resident or non-resident owner with an investment of less than one million euros per year and you invest more than 3 million euros in France (300k€), then only half (50%) will be compensated by this deduction for these 2 years.
4. if you are resident or non-resident but you do not invest, but you rent it to someone who does (or rent it more than 3 times/year to someone who does), then this amount will be carried forward until 2024 when it will again be deducted from your taxable income on January 1 of each year, with 5% as before;
5. if your rental property is rented more than 2 times/year without being used for real professional purposes (for example: rental of an apartment) and not for residential purposes (dwelling), then this amount will be deferred until in 2024 where it will have to be added to your taxable income on January 1 of each year at 15%.
How to take advantage of the Pinel law before it disappears?
The Pinel law is a law that was introduced in France in 1922 and applies to real estate rentals of less than 20 years. It imposes a tax reduction of 12% for purchases made between 2022 and 2024, 18% for purchases between 2025 and 2027 and 24% for purchases from 2028. The reduction will be effective from January 1 2020, unless the change is canceled by a new law to be passed by the French Parliament in 2022.
The Pinel law is more than an average tax deduction. It introduces a six-year annual vacation period for rentals, which will allow you to maximize the rent reduction. To avoid any uncertainty, we recommend working with tenants who have lived there for more than five years; they already know their landlord’s rules and regulations. We also recommend that you take advantage of rental holidays to rent your property during the summer holiday season or during the winter season (in France it is possible to rent your property during the winter months only if you have installed the heating or air conditioning). You can also take advantage of holidays like Christmas Eve or New Year’s Eve, when there may not be any guests at home. But remember that even if there are no guests at home on Christmas or New Year’s Eve, we will continue to offer our services!
The advantages of furnished rental investment
Invest in a furnished real estate offers significant advantages, particularly from a tax perspective. By opting for this type of investment, you can benefit from the status of Non-professional furnished rental company (LMNP), which allows you to depreciate your property and its equipment over a defined period, thus reducing your tax base. In addition, the rents received can be taxed less thanks to the micro-BIC regime or the real regime, depending on your tax choices.
Diversify your investments with SCPIs
If you want to diversify your investments without having to manage a physical asset, Civil Real Estate Investment Companies (SCPI) are an option to consider. By investing in an SCPI, you become the owner of a share of real estate assets managed by professionals, while receiving regular income from rent. The main advantage? You don’t have to worry about rental management, making it an ideal solution for investors looking for a passive and less restrictive.
International real estate investment
The year 2022 also offers interesting opportunities for those who wish to invest internationally. The real estate markets of certain countries, such as Portugal or Spain, present advantageous taxes and competitive real estate prices. Investing abroad allows you to diversify your assets while taking advantage of attractive rental yields and potential capital gains in the long term, depending on local economic developments.
Take the time to carefully evaluate your options and adapt your strategy according to your investor profile. Every year can bring great opportunities… stay tuned!