bare, furnished or seasonal rental… Which solution to choose?

Do you have a rental property project but you don’t know what to choose between furnished, bare or tourist rental? Taxation, administrative procedures or maintenance costs: here are some elements to help you make your choice.

Rental investment is a source of income over the long term and especially at the time of retirement. It is therefore more than normal to be interested in it. But it is not always easy to make a choice on the terms of rental of the property: furnished, bare or even seasonal rental. Here are some answers.

Maintenance costs

By choosing furnished rental over bare rental, you will have to obey certain rules, in particular in terms of furnishings. You will need to have in your accommodation bedding with duvet or blanket, shutters or curtains in the rooms, cooking plates, of the appliance (oven or microwave oven, refrigerator, freezer or freezer compartment), crockery and kitchen utensils, table and chairs, storage shelves, light fixtures and household cleaning equipment.

In addition to these obligations, the very upkeep of the accommodation will cost you more due to the turnover of your tenants and the more frequent repair or updating work.

Taxation: bare or furnished rental?

When you choose to invest in rental property, once your loan has been approved and the property has been chosen, you look at taxation. And depending on whether you opt for bare or furnished rental, the tax advantages are not the same.

Taxation of bare rental. For bare rental, the rents are subject to income tax and social security contributions, 70% height of their amount since the owner benefits from a 30% tax deduction. If the annual rental income is less than 15,000 euros, the lessor is placed under the micro-property regime. Beyond that, it is subject to the real regime and can therefore deduct certain charges such as works, loan interest and insurance. However, acquisition costs commonly called notary fees are not deductible.

Namely: The lessor can choose, even if it generates less than 15000 euros of annual income, the real diet.

Examples:

Mr. Martin rents an empty property and receives 10,000 euros in rent and has had a 30% reduction. Imposs rents are therefore 7000 euros. He opted for the micro-land regime. It is assumed that his tax bracket is 11%. He will pay social security contributions: 7000 * 17.2% = 1204 euros. He will also pay income tax: 7000 * 11% = 770 euros. In total, Mr. Martin will have to pay 1,974 euros in taxes on the rents collected.

Mrs. Durand chose the real regime and received 10,000 euros in rent. She had 6000 euros of deductible expenses. Imposs rents are therefore 4000 euros. It is assumed that his tax bracket is 11%. She will pay social security contributions: 4000 * 17.2% = 688 euros. She will also pay income tax: 4000 * 11% = 440 euros. In total, Ms. Durand will have to pay 1128 euros.

Taxation of rental furniture. For a furnished rental investment, the rents are not not taxable on property income. They are taxed as commercial industrial profits (BIC). For the declaration of his income, the lessor will therefore have the choice between two regimes: real regime or micro-Bic.

The micro-Mic regime, meanwhile, applies if the annual rental income does not exceed 72,600 euros the previous year or the penultimate year, for the entire tax household. You can then benefit from lower taxation thanks to a 50% allowance on gross rental income. Expenses, however, cannot be deducted.

Tax exemption: all the devices to reduce your taxes

Under the real regimeit is possible to deduct the costs such as interest on your home loan, notary fees, local taxes and levies, maintenance and repair costs (running expenses such as painting, plumbing and electrical work) and management fees.

Unlike bare rental, it is possible to depreciate a rented furnished property as soon as it is entered in the balance sheet. Be careful however, accounting depreciation is a tax deductible expense which cannot create or aggravate a deficit, explains Christine Valence, Wealth Engineer BNP Paribas Banque Prive, Moreover, the deduction of charges is more flexible in furnished rentals than in bare rentals.

So-called depreciable expenses relate to notary fees but also the works carried out in the property and the furniture purchased to furnish it on a new or old property purchased for rental purposes. Thus you have the possibility of deducing the depreciation of the value of the property from its rental income over several years. In this way, you reduce his taxable profit and pay less taxes and social security contributions. Acquisition costs and notary fees are generally amortized over a period of 20 to 40 years. The furniture and equipment are they amortized on more varied durations. Here are some examples of amortization periods:

  • 6 years for bedding,
  • 10 years for a living room table, a sofa or painting work,
  • 15 years for parquet

Examples:

Let’s take the situation of Mr. Martin who this time rents a furnished property as a non-professional lessor (rent received less than 23,000 euros per year). He still receives 10,000 euros in rent and his tax bracket is 11%. He received a 50% discount. He will therefore only pay his income taxes for 5000 euros. 5000*11% = 550 euros. Mr. Martin will have to pay 550 euros in all.

Mrs. Durand bought a property for 100,000 euros and added 10,000 euros of furniture. The depreciation of the property is possible over 20 years, ie a deduction of 100,000 / 20 = 5,000 euros per year. The furniture is amortized over 5 years, i.e. 10,000 / 5 = 2,000 euros per year. Mrs. Durand rents the furnished property and receives 10,000 euros in rent. In addition, she paid 500 euros in loan interest and 1,000 euros in property tax. With the actual regime, Mrs. Durand will be taxed on a basis of 10,000 5,000 2,000 1,000 500 = 1,500 euros. 1500*11% = 165. She will have to pay 165 euros in all.

Rental property: Pinel, Denormandie or Loc’Avantages, which device to choose?

Principal residence or seasonal rental?

To choose between main residence or seasonal rental, you must first ask yourself about the city in which you want to rent your property. Everything is a question of the market, whether bare or furnished, confirms Christine Valence. If you turn to tourist or seasonal rental, you will have to look for tenants regularly.

In addition, for movable tourist rentals located in a city of more than 200,000 inhabitants, a prior authorization for change of use for transition to tourist furniture is required. This is particularly the case for Paris, Annecy, Aix-en-Provence, Biarritz, Bordeaux, Cannes, Lyon, Nice, Strasbourg, Toulouse and Tours. In the other municipalities, it will still be necessary to make a declaration of furnished tourist accommodation.

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Rental of tourist furniture requires, in certain cities such as Paris or Biarritz, not only a declaration of tourist furniture, but also prior authorizations for change of use to seasonal and tourist furniture, which can be difficult to obtain. It is essential to inquire with the municipality before starting, adds Christine Valence.

Finally the rental terms are not the same. When your tourist rental cannot be rented by the same customer for more than 90 days per year (monthly, weekly or daily), the lease of the empty slot is of 3 years minimum and 1 year minimum for that of furnished accommodation (renewable). The gymnastics to find new tenants depending on the case is therefore not the same.

Bare, furnished or seasonal rental: which is the most profitable?

The rental profitability of your property is obviously taken into account when making your choice. According Individual Individual, net profitability varies between 2 and 7%, all types of rental combined. To be able to calculate your rental profitability, you will need to define your rent, which may differ depending on the rental terms. Not to mention that the rent control applies in certain areas.

According to Seloger, today, the average rent in France for a furnished apartment is 709 euros against 671 euros for a bare rental. Regarding seasonal rentals, prices vary depending on the location of the property and the capacity. If your property is located near a ski slope or the sea, the rental price will be higher. Accommodation that can accommodate at least 7 people will also be rented at a higher price since it can be rented by several families (or by friends) who will share the costs.

Finally, more than just the gross yield (easily obtained by dividing the rents by the purchase price, deed in hand), it is interesting to also look at profitability, an indicator that includes the discounted capital gain of the resale of the property, recalls Bevouac. In a recent study, this specialist in turnkey rental investment in old buildings noted, for example, that the Mrignac yield was only 3.36%, but that prices rose by 55.5% over the last decade. An investment in Mrignac in 2013 would therefore have yielded a low return, but an excellent final return. Unlike Mulhouse where the yield reaches 10.40%, but where prices have lost 13.6% in 10 years, illustrates Bvouac.

Rental real estate: beware of overly attractive promises of gain with Pinel

If the furniture rental offers you more attractive tax advantages than the bare rentalit still has constraints, particularly in terms of maintenance costs.

The tourist furniture will be more expensive to rent and therefore the financial advantages may be greater than for renting as a main residence. However, the steps can be tedious.

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