For most people, investing in a rental property (i.e. buying a property to rent out and collect the rent) is perceived as something dangerous. In reality, investing in rental real estate is like anything else: the more you know what you’re doing, the more you know the pitfalls, the more you know what you are doing, the more you know the pitfalls, the less risk there is.
We will see together how to make a good first investment in rental property.
investment. The first of many, putting you and your family in the clear.
Step 1: Don’t think that it’s only for the rich :
“To invest, you need money”. This is true in principle, but not really for rental property investment. Obviously, it would be risky to start without having some money aside, but what you have to understand is that it is the bank, via the credit, that finances your investment. is that it is the bank, via the credit, which finances your investment. And that’s what makes investing in rental property so interesting. You don’t have to save for years to accumulate capital to invest.
Step 2: Understand that you need to make money RIGHT AWAY :
If for your first apartment you have to pay back 600 euros per month for 20 years to the bank and you rent 500 euros per month, your investment costs you money. You have a new monthly charge. But this is not the goal! The real estate investment must make you rich. Not make you spend more money. By doing this, you put yourself in danger, because you don’t know if in the future you will be able to pay.
you will still be able to pay. Moreover, by doing this, you increase your debt ratio, and the banks will lend you much less easily. banks will be much less likely to lend you money for future transactions.
No, you MUST make sure that the rent you receive is much higher than the monthly credit payments AND all the expenses (property tax, insurance, charges). My advice: For a monthly payment of 600 euros to be paid to the bank, the rent received must be at least 900 euros! This is essential.
Step 3: Target a geographical area :
It is very difficult to make a good first rental property investment anywhere. Indeed, it is important to understand that the amount of rent is not proportionally correlated to the price of the property. For example, if a 40m2 apartment rents for 600 euros per month in a city where the price per m2 is 2,000 euros, it will not rent for 4 times that amount in a city where the price per m2 is 4 times more expensive! For example, it will only rent for twice as much. Therefore, investing profitably in the second city will be much more complicated than in the first. You MUST therefore target areas where the price per m2 does not exceed 2 or 3,000 euros. It is therefore sometimes necessary to accept to move away from home. This is not a problem at all! I own properties that are hundreds of kilometers from my home.
Step 4: Find a good deal :
If you want to invest in real estate and really get rich, it’s not about letting your emotions guide you. your emotions. You are not here to indulge yourself, nor to succumb to a crush. You are here to buy square meters, and square meters BELOW the market price. market price. By buying below the market price, you put yourself in a safer position: you know that you will be able to resell more easily. know that you will be able to resell more easily and quickly. To find out the price per square meter, don’t rely on other properties for sale. Remember that a property for sale is a property that has not yet found a buyer! a buyer yet!
Step 5: With very few exceptions, do not buy new :
When we talk about real estate investment, we often talk about new housing. Notably because they offer tax advantages. My message is very clear: except for rare exceptions, do not go there! These properties are, in the vast majority of cases, sold above the market price (the developer has to live). You are not there to make a developer rich. You are there to make YOU rich. You are not investing in real estate to try to lower your taxes. You’re in it to make good business and collect rent. The good deals are, in the vast majority of cases, in “old” real estate, that is to say real estate that is not “new”.
Step 6: Don’t hesitate to start small :
In real estate, buying a garage is like buying a huge building. The process is the same. So why not take it slow. Buying a garage is not a bad idea. It will allow you to get your feet wet, with little risk. You can also aim for a studio. Don’t take any unnecessary risks. When you learn to drive, you don’t go straight to the highway.
Step 7: Renovate at the time of purchase, with money from the bank :
If you become a homeowner and you don’t bring your property up to code:
- You’ll be in trouble all the time with small repairs
- You won’t be able to rent at high prices
- You won’t attract the best tenants.
Renting a property that is not completely renovated is a vicious circle. You must renovate immediately, and with the bank’s money. To do this, negotiate a work envelope within your real estate loan.
Step 8: Don’t settle for a bank rejection :
When you invest in real estate, the bank’s refusal is the norm. Getting financing is the exception. You must not give up after the first “no”. You must go and see several banks, always presenting your file and its interest. I went to 17 different banks to finally get a “yes”. Do not give up!
Step 9: Think about taxes from the start :
Taxation is as important as the investment itself! The wrong tax system can ruin a good investment. The tax system depends on your personal situation but also on the type of rental you are considering you are considering (furnished or bare rental). It is therefore essential to get information from a professional. However, you should know that I will talk to you about taxation in my newsletter and that you will have and that you will have some good tips and tricks!
Step 10: Take out unpaid rent insurance for your tenant :
A tenant who does not pay: it is the nightmare of any investor. The eviction procedure takes two or three years. If you do not have the financial capacity to face, during 2 years, a lack of rent, you will be in difficulty. rent, you will be in trouble.
To avoid this, you must always :
– Either an unpaid rent insurance
– Or a solvent guarantor
Unpaid rent insurance must be taken out BEFORE the tenant takes possession of the apartment. possession of the apartment. It usually costs 3% of the rent. There are criteria (often the rent must not exceed 40% of the tenant’s income). But in case of unpaid rent, the insurance company will pay you, during the whole eviction procedure. You can rest easy. Moreover, such an insurance puts you at ease in your relationship with your tenant: you are protected and therefore much freer to say “no” as you see fit, without You are protected and therefore much freer to say “no” as you see fit, without the threat of having to stop paying the rent.