Prefer furnished rentals as an expatriate
Rental: Prefer furnished rentals as an expatriate
When a French expatriate wants to invest in a rental property, they should go for a more profitable option. Thus, they’re better off leasing out a furnished rental than an unfurnished (empty) property.
Better flexibility and greater profitability in furnished rentals
For a furnished rental, the maximum duration of the lease is 12 months, tacitly renewable. This allows the owner greater flexibility. They can either:
- Renew the lease to the same tenant
- Change the tenant if necessary
- Resell the property.
And if the property is their main residence in France, the owners will be sure to have the opportunity to live there when they return.
To make a rental investment, a property resale can be facilitated at any time with this type of lease. Especially in the event of a change in strategy, thereby promoting adaptability. Adaptability can be a significant factor in any uncertain period (i.e. the Covid-19 pandemic), wherein the situation can lead to many life changes. Some French expatriates may seek to lighten their charges temporarily or hypothetically consider selling their property too.
Simulation of 5000€ of tax savings per year on an investment
Let's say a French expatriate buys a property for €300,000.00.
They get a mortgage loan of €200,000.00 at a rate of 1.1% over 20 years and repay €13,920.00/year including €2,400.00 in loan interest, €600.00/year in borrower insurance, and €100/year in non-occupant owner insurance. With condominium fees amounting to €900.00/ year.
In this situation, they can lease out the property as an unfurnished rental at €900.00/ month. But as a furnished rental, they can get €1,100.00 /month in rent. They will need to invest around €4,000.00 in furniture, however, but this will also save them €5,000.00/year in taxes.
Manage your rental investment remotely as an expatriate?
As they live abroad, French expatriates invest in local real estate investment remotely and delegate the purchase of the property to acquaintances or a real estate agency.
In this situation, it's better to go for the latter. Hiring a local real estate agent allows the expatriate to benefit from the professional's expertise and knowledge. And in the case of a rental, there's also rental management that the agent can take on too.
How is income taxed for people domiciled outside France?
- At the minimum rate of 20% for net taxable income of less than €27,519.00 per year.
- At the rate of 30% for net taxable income of more than €27,519.00 per year.
For those who reside outside of Europe, their cumulative social security contributions are currently set at a rate of 17.2%. As a result, the total tax rates range from 37.2% to 47.2%.
As the rate is applied to one's rental income in France, real estate investments often lead to high taxation for expatriates. However, “rental income” is not equivalent to the “sum of rents.” So by choosing furnished rentals, the “rental income” can possibly be “fiscally” zero, thus allowing the preparation of their return to France and/or retirement.
- French expatriates can enjoy greater flexibility and high profitability when they invest in furnished rentals.
- They can also benefit from rental management and enjoy lower taxes.
You want to
to sell in Paris or its surroundings ?
Posted on 21/10/2021 by
Andy LECUYER
