With entry and management fees that flirt with 10 to 12% (including tax) on average, civil real estate investment companies (SCPIs) are among the most cost-intensive investments. Here’s why.
It’s a fact: rock-paper flat more than ever. As of December 31, 2021, the capitalization of SCPIs reached 78 billion eurosits all-time high, up by 10% over a year. A dynamism that the SCPI owes for a lot of their excellent yields. With an average payout rate of 4.45% in 2021, SCPIs are indeed one of the few effective investments to protect against inflation, close to 4.5% over one year, according to the latest estimates from INSEE. The only downside: high fees, which often arouse the astonishment, even the anger of investors. Wrong or right? To better understand these fees and their amount, MoneyVox conducted the survey.
Invest in real estate from €1,000. Our rankings of the best SCPIs
Incompressible costs
It is not uncommon to have to pay entry fees when subscribing to a new savings product. Some life insurance policies, for example, charge membership fees, as well as payout fees. However, the amount of the latter is capped 5% by the Insurance Code. In contrast, SCPIs collect on average 10.47% (including tax) from subscription feesaccording to a Rock’n-data study (1)and up 12.72% in the case of SCPI Activimmo.
So… Are SCPI grants too greedy? Far from it. To pay returns to their subscribers, SCPIs must indeed build up real estate assets. And, like any real estate purchase, the acquisition of offices, warehouses or buildings is accompanied by legal feesoften incompressible: notary fees, transfer duties…
To this are added the exploration costs SCPIs. Management companies call upon asset managersreal estate experts whose job is to identify high potential real estate, much like an individual might call on a real estate agency which, of course, charges fees, explains Stphane van Huffel, co-founder of NetInvestissement.
Result of the accounts? By combining these costs, it is very easy to 10% invested capital. Difficult to do less, observes Stphane van Huffel. However, some SCPIs do not charge no subscription fees, the image of Novaxia NEO and Iroko Zen. So should we rush to these new players? It all depends on your investment horizon, because these SCPIs generally make up for it by charging management fees higher. The investor is therefore a winner in the first years, but not if he keeps his shares longer, decrypts Jonathan Dhiver, founder of MeilleurSCPI.com.
Real estate: what hides the excellent returns of SCPIs in 2021
Common interests
Not to mention that subscription fees also serve another purpose. Most often, you have to keep your shares at least 8 years to amortize these costs, continues Jonathan Dhiver. Once the partners have bought shares, they are therefore in a way “linked” to the SCPI, because they know that if they sell too early, the operation will not be not profitable. What to reinforce the resilience SCPIs in times of crisis. If everyone decides to sell at the same time, the SCPI could find itself in difficulty. The existence of subscription fees makes it possible to limit this risk, according to the manager.
Another important subtlety: unlike the fees charged for life insurance, SCPI subscription fees are deducted at the time of the resale of the shares. A major advantage, since thanks to this, the entire capital works for the entire life of the investment. Concretely, if you invest 1000 euros in an SCPI with a distribution rate (DR) of 5%, you will therefore receive 50 euros in rental income per year, and you will only pay the subscription fees when you leave.
Above all, the amount of these costs will depend on the price of your shares at the time of resale. In other words, the SCPI has every interest in increasing the value of your shares in order to receive a higher commission. The interests of the manager are aligned with those of the partnersconfirms Jonathan Dhiver.
Real estate: evaluating the returns of SCPIs becomes (a little) simpler
Associates, not clients
What about management fees? Their amount averaged 11.35% in 2021, according to Rock’n-data estimates. Again, this amount could at first sight discourage some. And yet. In fact, these costs do not really matter to investors, insofar as the SCPI distribution rate is always present. net of feesrecalls Stphane van Huffel.
These costs break down into two parts, according to the Rock’n-data study. The costs under the administrative management cover all the office and staff costs necessary for the company (accounting, keeping of the register of shareholders, office and staff, etc.) and the distribution of profits, while the management costs relating to theexploitation of heritage represent costs not paid by tenants and therefore borne by the manager (expenses paid for vacant premises, for example).
Management fees are invoiced each year by the SCPI. Important point: they are calculated according to the amount of rent collected. In other words, the greater the rental income of the SCPI, the more it generates a significant return for its partners, and the more the management fees bring in money.
This model encourages SCPI managers to adopt a efficient rental management, observes Stphane van Huffel. Here again, partners and managers therefore share the same interest. A point that savers sometimes tend to forget, according to the expert. Too bad, because to meet the expectations of investors, several SCPIs have embarked on a race lower fees. The problem? By buying shares in an SCPI, you become the owner of a fragment of the management company. But if the costs drop, you reduce the resources of the SCPI, which can weaken it. It’s as if an entrepreneur refuses to invest in his own company.
SCPI: What yield? How to invest? Our advices
(1) Study dated April 2021, carried out on a sample of 96 SCPIs for management fees, and 97 SCPIs for subscription fees.