Investing in a rental property can be a great opportunity, but it is important to know the pros and cons before you start. In addition, renting out a property is an important decision that needs to be carefully considered. There are several factors to consider, such as formalities, maintenance of the property and managing tenants. This article will help you to see more clearly and make the best decision for your situation.
The advantages of renting out property
Demand is high:
There are always more applicants than offers, which means you're likely to have less trouble finding a tenant for your property.
Rents can rise:
Depending on the location and improvements to the property, rents can be increased over time to realise greater appreciation.
Attractive return:
If you make a good investment, you can earn an attractive annual return, higher than conventional investments.
Tax deductions:
If you invest in rental properties under the Pinède law, you can claim tax reductions for up to 12 years and 63,000 euros in tax credits.
Additional income:
If the property is vacant for a long period of time, you can rent it out furnished to generate additional income. This can be particularly interesting if you have a spacious property with a good geographical location. However, beware of the rental risks associated with furnished accommodation (deterioration of furniture, damage by tenants, etc.). Depending on the type of rental management, the additional income will vary depending on whether you opt for a short or long term rental.
The disadvantages of renting out property
Maintenance of the building:
It is up to you to carry out maintenance and renovation work on the property (roofing work, facade renovation, etc.). This work can represent a significant cost if the building is old or requires major improvements. Beware also of the constraints linked to the work (in some areas, it is for example forbidden to carry out work at the weekend).
Unpaid rent:
Despite a solid deposit and/or insurance against unpaid rent, there is always a risk that the tenant does not pay his rent or that he damages the accommodation. If this happens, you will have to take legal action to get your money back and/or to get the property returned in good condition. This process can take several months and can be very expensive (lawyer's fees, bailiff's fees, etc.).
Lease management:
Generally entrusted to a professional (property manager or agency), the management of the lease represents a cost (management fees of between 5% and 10% of the rent received). However, these costs are deductible from taxable property income.
Renting out your property has certain significant advantages, but is not without risks. It is therefore advisable to weigh up the pros and cons before embarking on this adventure. If you finally decide that renting out your property is for you, make sure you choose your investment location and property manager carefully to minimise the rental risks!
What are the formalities for renting out a property?
Renting out a property requires several formalities. Firstly, you must ensure that the property complies with building and housing standards. Secondly, a lease must be drawn up with the rental conditions and signed with the tenant. It is also important to take out home insurance to cover any damage caused by the tenant.
If you are a tenant, you must obtain the agreement of your landlord before you can rent out your property. Then you will have to draw up a rental agreement and sign it with the future tenant.
If you are a landlord, you will also need to draw up a tenancy agreement, but you will not need to obtain the agreement of the tenant as you are the owner of the property.
You will then need to use an estate agent to manage the letting of your property. The agency will take care of all the formalities involved in letting your property and will also promote your property on the property market.
Living in your rental investment
There are a number of reasons why you might want or need to live in your rental property. Perhaps you've relocated for work and need a place to stay while you look for a permanent home. Or perhaps you are going through a divorce and need a temporary place to live while you get back on your feet. Whatever the reason, there are a few things you should keep in mind if you're thinking of living in your rental property.
Firstly, give your tenants as much notice as possible that they will have to move out; most leases require 30 days' notice before terminating the lease.
You should also make an inventory of all the furniture and personal belongings that will be stored or with you to avoid any misunderstandings later on.
Finally, be prepared for the possibility that your tenants may try to sue you for wrongful eviction; having everything documented and being transparent will help protect you from any legal action they may take.
The best thing to do is to plan for the possibility of living in your rental investment by including a clause stating that the landlord can terminate the tenancy at any time if necessary. It is also important to communicate well with the tenant to avoid potential conflicts.
Renting out your property yourself or through an agency?
There are two ways to rent out your property: by yourself or through an estate agent.
Renting out your property yourself can save you a few euros, but it requires a lot of time and investment. In addition, you need to have a good knowledge of the local property market in order to be able to draw up a lease and find a trustworthy tenant.
The easiest and least time-consuming option is therefore to go through an estate agent. Agencies usually have a database of potential tenants and can take care of all the formalities involved in letting the property. However, it should be noted that estate agents usually charge a commission on the amount of rent received.
Conclusion:
Renting out a property is a decision that should not be taken lightly. There are different ways to rent out a property (for example by yourself or via an estate agent) and it is important to take the time to choose the one that best suits your personal or professional situation. Do not hesitate to contact us (link to contact form).