Choosing to invest in Furnished Rentals means investing in identified sectors based on solid market fundamentals offering strong long-term visibility.
4 sectors to invest in managed service residences:
- The healthcare sector
- The student sector (In France we lack student accommodation, by 2027, France will have 2.8 million students)
- The senior residences sector (A constantly growing category)
Advantages of investing in serviced residences:
- High rental profitability
- No rental vacancy(the investor entrusts the property by commercial lease to a professional operator who assumes the operating constraints alone)
- A possibility of financing (on credit or in fine)
- Management comfort (the property is managed by a professional operator who is responsible for the maintenance and upkeep of the property)
- A long-term firm lease: GUARANTEED RENTS (the investor benefits from a firm rental commitment from the manager-operator for a period of 1 to 12 years)
- Income almost net of tax (furnished rentals, falling under the category of BIC, benefits from the depreciation of the property allowing to reduce for a very long period income tax from this rental activity)
- Real estate VAT at the rate of 20% recoverable by the investor (and loan interest deductible from rents extending the low tax period)
Furnished Rental is considered for tax purposes as a commercial activity which is subject to income tax, in the category of Industrial and Commercial Profits (BIC) (and not property income), defined in article 34 of the CGI . According to article 39 C of the CGI, accounting depreciation is deductible up to the amount of the difference between the rents and the rental charges relating to the property; for the balance, they can be carried forward indefinitely and deductible from future results.
VAT and rents
Rents are subject to VAT when the tenant operator offers, in addition to accommodation, at least three of the following four services:
- regular cleaning of the premises
- the supply of household linen
- reception and reception of customers
Furnished rental and LMNP status:
The tax status of non-professional furnished rental company (LMNP) allows investors to benefit from advantageous taxation with little or no taxed income.
Advantages of LMNP status:
- Flexibility with regard to rents, vacancies, and notices
- Rental profitability, higher than that of bare rental
- Taxation because the rents from furnished rentals are industrial and commercial profits. This makes it possible to deduct not only maintenance-related charges and expenses, but also depreciation accounting, which, by reducing the tax base, leads to low or zero taxation of rental income over a long period.