Should I Invest in a Primary Residence or a Rental?

Investment properties are usually linked to the purchase of your primary home, possibly by taking out a loan. But sometimes it can also be practical to participate in a rental investment.

That's why it's important to ask the right questions before you get started.

Real estate purchase as part of a rental investment

The rental investment, which consists of buying a property to rent it out, offers the opportunity to build a real estate portfolio with minimal financial effort.

In reality, the rental income gives you the opportunity to finance your primary home purchase project or to make a new rental investment. In addition, a rental home is a good way to prepare for a long-term retirement. Finally, renting real estate is a great way to reduce taxes.

The Pinel Act is one of the measures that allows you to take advantage of a tax advantage. Thanks to the rental of his property for a period of 6, 9 or 12 years, the owner is entitled to a reduction of his taxable base of 12%, 18% or 21% respectively.

To make a successful rental investment, care must be taken in choosing the location of the property to be rented, which must meet different needs (presence of schools, proximity to public transport, etc.). In order to optimize the occupancy rate of the real estate, it is necessary to focus on a dynamic geographical sector with a strong rental demand.

For a first purchase, it is better to go for a studio-style home. It is also important to target the right type of real estate. Cheaper to buy, small spaces are generally more expensive to rent per square foot than large.

The risks of rental housing must be carefully weighed up. Because the investment is profitable, it quickly finds a locator: en logement inoccupé pendant moreieurs mois (la vacancy locative) genere des pertes puisque'il faut payer la taxe foncière et les lasten de copropriété s'il s'agit d'one apartment.

Late payments and non-payment of rent are also among the favorite reasons for every landlord.

Buy your primary home

Although the rental investment is made for a good reason, the acquisition of the main home contains many elements related to love. The choice is also part of a life project: it is really about building a property, securing the future of you and your family.

Whether you are new or old, buying your main home has a number of advantages. First of all, this allows you to stop paying a non-refundable rent every month. In the event that the buyer takes out a mortgage, the property is fully owned by him once the loan has been repaid.

This way you benefit from a home that fully matches your choices (home with garden, loft, etc.) and that you can develop according to your own wishes. Plus, primary residence is a good tax deal, especially because of the tax exemption on any real estate gains realized on resale.

Buying your "home" should be a very well thought out choice. First of all, it comes with many costs associated with the purchase (notary, bank charges, borrower insurance, etc.). It is then about a stable situation, both professional and personal, increasingly complicated by the increasing uncertainties in life (divorce, transfer, dismissal, etc.).

To make the investment profitable, it is often recommended to stay in the home for at least five years. From a tax point of view, the new owner not only has to pay property tax, but he cannot benefit from a tax advantage by purchasing his ordinary home, unlike certain rental investments.

Benefits of combining the purchase of an ordinary home and a rental investment

It is quite possible to make a rental investment at the same time as acquiring your primary home. When you buy a property to rent it, the borrower receives a cash flow that is deducted from the monthly installments of the credit taken out for the purchase of their property. This consequently reduces your effort to repay the bank loan and, de facto, your real debt burden.

Convert your main residence into a rental home

Some owners may also consider renting out their property to tenants when they are transferred and have to move to another city or when the sale of their property does not allow them to generate a capital gain. The income generated can then form a savings solution for your future pension.

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