Tax reduction provided for by the Pinel law is significant, but must not be the decisive element of a rental investment. The calculation of profitability, the choice of city and place, but also the duration of the rent must be taken into account. Here are 5 tips to invest in the right Pinel Law.
Plan de l'article
- 1- Compare rent in Pinel law with real rents
- 2- Choose your location
- 3- Comparison of the profitability of rent
- 4- Determine when the tax refund will come
- 5- Selecting the duration of the rent
1- Compare rent in Pinel law with real rents
Pay attention to covered rents
A person who purchases an apartment to rent it through the Pinel device must respect rental coverage . But this cover coincides with the average rents nearby? Because if the rent is located in the area below the Pinel ceiling, the yield will not be shown by the developer.
Therefore, it is advisable to compare the expected rent with the average of what is practiced in the environment.
Calculation of the accommodation Pinel
To calculate the rent of an apartment according to the law Pinel, we first take the ceiling:
- 17,43 €/sqm in area A up.
- 12,95 €/m² in Area A.
- 10,44 €/m² in Area B1.
- 9.07 €/m² in zone B2 (only after approval).
Note that sales contracts signed in B2 can apply to the Pinel tax exemption, but only after approval.
Use the Housing Action search engine to determine the area you are looking for.
Then, as an owner, you have the opportunity to apply a multiplier without exceeding 1.2. This coefficient is calculated according to this formula:
Pinel multiplier coefficient = 0.7 (19/range)
For an apartment of 40 m²this gives 1.17. Inklar, a rental investment of 40 m² in Pinel law can be 1.17 times more expensive than the planned ceiling can be rented. If the coveted land is located in area B1, you can rent it up to 488€ (10.44 €/m² x 1,17 x 40 = 488€).
Compare Pinel car rental with current rental
The Clameur Observatory (Knowing Annuities and Analyzing Urban and Rural Markets) allows you to consult rents in the main metropolises of France . Go to their website and search for the average rent.
For example, in Nantes (44 Zone B1) old apartments are rented on average 12,30 €/m² . The lease of an apartment of 40 m² is signed for an average of 492€ . According to the Pinel law, the investor would rent this area for €417,75below the average of the private park. He could even use his multiplier to calculate €488/month while retaining his chances of finding a buyer.
But here’s a counter-example. In Villejuif (94 Zone A to) the average rent is 17,8 €/m² or 712€ for a 40 m² . In this area are the Pinel rents 17,43 €/m², which would allow to rent the same area for 697€ . If the investor applies his multiplier, he could theoretically rent up to €815. At €100 more than the market, he may have difficulty finding a buyer.
For information: Some organizers show their prices outside the car park. Parking spaces can be included in the loan if they are part of the real estate program. In the case, on the contrary, it is necessary to finance them separately.
2- Choose your location
One of the advantages of renting real estate investments in Pinel law, is that it aims at housing in tense areas. These areas are urban areas where demand exceeds the offer.
In this regard, the investor is almost guaranteed to find tenants . Although only those whose income does not exceed a ceiling are maintained, this limit is representative of the average population.
Prefer cities where it is good to live
Today, the best cities seem to invest, to be those that have a real urban project. These include Nantes, Bordeauxor the outskirts of Lyonand Toulouse .
Also, let’s not forget about employee mobility. Online tools allow many households to work remotely so they can move to a city where it’s a good place to live. Consider quality of life : ecology, public transport, pedestrian streets and public spaces are undoubted assets. The ranking 2020 of the association Cities and Villages could help you make your choice.
But be careful: you will not live there, but invest in it. And at this point, the market could give you unpleasant surprises .
Choose a city where prices per m² are realistic
In terms of quality of life, few large cities reach the ankle of Nice (06). At 2 hours from the best ski resorts, a few steps from the best diving spots, the capital of the Alps Maritimes has everything for Please.
To such an extent that the average rent of the free space increases to 16.4 €/m², which656/month for a 40 m² apartment would do. But Nice is located in zone A, the owner will not be able to exceed 596€ per month according to the Pinel law, after applying the multiplier coefficient.
Or a 40 m² apartment on the Nice metropolis French Riviera costs:
- 166,000 € in the old (source: LPI barometer, published in January 2020),
- 225,000 € in the nine (source: Observatory FPI 3rd quarter 2019).
The investor in the Pinel law would therefore buy more in Nice than in the free sector, all this cheaper to rent. The yield could be better in the old one.
Choice where to invest in the city
Today, the owner is in a position of strength, because the rental offer is lower than demand. But this can not be the case in 10 years. Therefore, it is better to use your location based on the long termcriteria such as proximity to shops and services to choose from.
The advantages of a good location:
- The nearest tram stop is just a few minutes’ walk away.
- Shopping centers are just a few stops away.
- Schools are close to the real estate program.
- The venue is set 10 minutes’ walk from city center.
- The view from the living room window does not have a view of the highway.
3- Comparison of the profitability of rent
Let’s be clear, the Pinel law has many competitors. It is possible to invest in SCPI shares, buy an EHPAD or even turn to the former deficit of cooperation and land.
There are a lot of offers on the Internet, all showing excessive rent yield . The same developer also proposesseveral sizes of apartments, oriented and located differently. Before signing, it is preferable for the investor to calculate the return on his bet.
Borrow Malin offers a rental income calculator, one of the few to consider:
- The cost of interest on credit,
- the burden of taxes and social contributions.
4- Determine when the tax refund will come
Pinel tax does not automatically apply La to rental investments made during the year. The tax reduction is valid for the rental year.
If a household wants to reduce their income tax this year, they must:
- acquire a built and delivered apartment;
- collect their first rent before December 31.
For example, suppose an investor buys an apartment in March 2020. Suppose delivery in the 4th trimester of 2021takes place. Suppose that his tenant will settle in January 2022 . In this case, he can only apply his tax refund to his income until 2022.
The Ministry of Finance pays him his tax reduction twice a year by cheque upon his return to the tax authorities.
5- Selecting the duration of the rent
Although the rental period imposed by the Pinel Act is flexible, it remains relentless. The taxpayer is obliged to rent during this period , otherwise he would have to refund the tax cuts collected by the Department of Finance.
However, only 6 years, 9 years or 12 yearscan be rented . We cannot rent 5 years, 7 years or 10 years.
Take the example that parents buy a new studio in a university city, waiting for the study of their elders . Let’s take that these studies will arrive in eight years . Parents must rent for at least 6 years.
If they decide to rent the 7th year, they can not apply for a tax reduction in the 7th year, otherwise they are obliged to rent until the 9th grade.
However, it should be noted that the Pinel Act allows them to rent to a parent, provided that the parent meets the conditions. You will then be able to give the tenant’s current vacation, in accordance with the Housing Code.