Investment for rent: cities where profits collapsed during the year

Landlords, how to choose the right place to make the right investment in rent? There is a ratio called gross margin, which allows you to estimate the potential financial results (before taxes, fees, work and various contingencies) of the place. This ratio very simply compares the price at which a landlord can buy a house with the average annual rent he can expect to receive the property. The higher the ratio, the more likely it is that the prospective landlord will make a profitable transaction. Provided, apparently, to target a place where he can find tenant candidates to occupy his property.

However, since the beginning of the pandemic, real estate prices have tended to rise very rapidly in certain areas, more precisely in medium-sized cities and suburbs of large cities. For the owners of these municipalities, this is great news: they can resell their house at a higher price and get a nice increase in capital compared to the price at which they bought real estate in the past. On the other hand, this is a problem for new candidates for rental investment. As rents are not rising as fast as prices, the profitability they have been promised so far is collapsing! Thus, according to a study conducted by the network of agencies Guy Hoquet with the support of real estate specialist Yanport, gross rental income in France fell by an average of 4.6% in the first quarter of 2021 to 4.4% in the first quarter of 2022.

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“The increase from 4.6% to 4.4% is not alarming,” said Stefan Fritz, president of Guy Hiccups. More than 3.5% yields do not remain bad. However, this downward trend means that landlords will have to slightly increase rents in the future if they want to maintain such profitability. And this, of course, risks attracting fewer tenant candidates. “The search for high yields, of course, is often associated with a higher risk of vacancies. If you want to invest in rent, prefer housing near transport lines or administrative centers, “- advises Stefan Fritz.

>> Read also – The detrimental effect of the arrival of metropolitans in medium-sized cities

Decreased profitability in most cities

To continue its analysis, Guy Hockey’s network estimated gross profits and development in 37 major cities. Of course, we will never be able to do it again enough: an informed landlord must not only focus on these gross profits to make his choice. Among the questions he must ask himself: will he easily find new tenants interested in the target area? What is the condition of the house in which the apartment is located? Are there costs (local taxes, co-ownership fees, etc.) that the landlord should expect to be significant? Will it be easy to resell the target housing in the future in the hope of added value? If these questions cannot be answered other than by case-by-case approach, we can still offer you a map that will allow you to determine the potential profitability of agglomerations missed under the Guy Hockey scanner, as well as trends in these cities. .

Thus, through this map, we see that in the vast majority of cities marked with a red arrow, the gross profit promised to donors is collapsing. “Rental levels for rental investments tend to decline slightly. In most of the cities surveyed, the decline remains very measured, with the exception of Marseilles, ”commented Guy Hockey. If we talk, in Marseille, as in Amiens, profitability for the year fell by 0.5 points. Profitability also declined rapidly for landlords in Clermont-Ferrand (-0.4 points in one year) and Grenoble (-0.6 points).

However, there are a few exceptions to this general trend: in Paris, for example, the gross profit observed by Guy Gicaps remains stable. Due to the stagnation of prices in some cities, it even improved slightly in Lyon (+0.1 points), Bordeaux (+0.3 points), Po (+0.1 points), Toulouse (+0.1 points), La Rochelle (+0.1 points). point) or Nantes (+0.2 points).

>> Our complete guide for investors. Why invest in real estate? What are the tax benefits? How to get the best return on rent?