Investing in Pinel Law: Keys to Optimizing Return

Until the end of 2024, the Pinel Act allows you to buy new real estate, receiving a large tax bonus. However, the operation is subject to strict conditions, which have been tightened by recent finance laws: the exclusion of homes from 2021 and, with some exceptions, a reduction in the tax reduction rate from 2023. This means that it is better not to hang if you want to take full advantage of this device. However, be careful with the price and the appropriate rental rates: modeling sellers is often very flattering, but the return on such investments is never guaranteed.

Tax benefit

You do not need to start if it does not exceed the statutory rent reduction. You will receive a tax reduction of 12, 18 or 21% of the purchase price (up to a limit of 300,000 euros and 5,500 euros per square meter), depending on whether you rent your property for 6, 9 or 12 years. It is enough to erase up to 63,000 euros of tax. Rent ceilings should be 10-15% lower than the market, but there is no need to start if this difference is not compensated by tax revenue.

And station: these rates of decline will be maintained only after 2022 for real estate in the “priority” areas or with a high level of comfort (enhanced insulation, minimal surfaces, balcony). For other properties, these rates will be reduced depending on the lease term to 10.5%, 15% and 17.5% in 2023 and to 9%, 12% and 14% in 2024.

Precautions when buying

Avoid new programs that are completely dedicated to the Pinel device. Tax profit is not a guarantee of success of the transaction: the price of real estate should not be too high (no more than 30% higher than the old) to avoid any risk of loss on resale. Think about the terms of the lease, make sure that realtors are in demand, but do not forget about resale.

So beware of studio programs entirely dedicated to investors who often do not care about the maintenance of the premises and who will sell at the same time: and beware of capital losses there!

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Limitation

One of your children is allowed to rent only if they are no longer part of your tax family. According to the law, Pinel investors have a number of legal obligations. Apart from the purchase of housing that meets minimum energy efficiency standards and is located in a residential area with a tight rental market, tenants’ income and rents are limited (for the latter, the maximum applied in 2022 ranges from 10.51 to 17.55 euros per month per square meter). depending on the region).

Finally, the owner must rent out his property continuously for at least 6, 9 or 12 years, knowing that it is not possible to place parents or children there if they are part of his tax economy.

>> Our service – Discover all the new exemption and tax exemption programs currently sold in France

Rate of return

Allow 4 to 5% per year after deducting all condominium fees. Get more than 6% of your annual revenue from Pinel, as some marketers promise? This is impossible at current stone prices. The explanation is that their calculation is incorrect. It not only includes tax benefits, but also ignores many recurring costs: maintenance of common areas, real estate tax, repair of equipment (electrical systems, plumbing, windows, etc.), common property costs and periods of freedom of property. (consider one month every five years) during which you do not touch anything.

However, these recurring expenses reduce rental income by at least 15%. Instead, expect 4-5% per year, which is not so bad compared to guaranteed financial investments, such as life insurance in euros, which now pays three times less.

Profit of almost 4.5% due to tax leverage

Capital

(1) Zone A: Іle-de-France (except Paris), Cote d’Azur, Lille, Lyon, Marseille, Montpellier, French part of Geneva.

(2) Taking into account tax benefits and deductible payments.