Invest in rental real estate: the advantages of serviced residences!

Service residences are on the rise, whether they be student residences, long-term care homes or tourist residences. Tenant demand is strong, and tenants provide a number of benefits to the homeowner.

The benefits of investing in serviced residences

Investment in residential services has been popular for a few years and for good reason- check this site https://offshorecitizen.net/citizenship-by-investment/residency-by-investment/! First, the rental yield is attractive, since it amounts to an average of 4-5%. In addition, it is not the tenants who miss, especially as the residences services actually correspond to very different establishments, for which the demand is strong. First of all, these are student residences, then EHPADs that welcome dependent elderly people and finally tourist residences. But the other great interest of these residences services is the tax advantage enjoyed by investors.

The recovery of VAT, under conditions

The first tax advantage when buying a home in a services home is the recovery of VAT, which means that you will only pay the price excluding taxes of the property. This only applies to new or off-plan housing located in serviced residences, whether they are student-assisted residences, senior citizens, business travelers or tourists. But this recovery of VAT is subject to conditions:

You must opt for the status LMP (Rented Furnished Professional) or LMNP (rental Furnished Not Professional).

You must entrust the rental management of your property to a professional manager for at least 9 years.

Finally, you must keep the property at least 20 years old.

Good to know

If you resell the property before the deadline, you will have to refund the VAT in proportion to the period during which you owned.

The Censi-Bouvard tax exemption scheme

By investing in a home located in a residence for students or for seniors with services, you can benefit from an 11% tax reduction on the purchase price of the property, as part of the Censi-Bouvard scheme. To benefit, you must rent the property at least 9 years and tax exemption can be carried over the next 6 years. Be aware that the amount of your purchases under this scheme is capped at € 300,000 per year per tax household, but this allows you to save more than € 33,000 on your taxes.

The LLIN status and its tax allowances

If you rent a furnished apartment, including a service residence, you can opt for the Leaseback status. To benefit from this, your rental income must not exceed € 23,000 or 50% of the income of your tax household, as this implies that it is not your main activity. This status allows you to choose between two schemes:

The micro-BIC scheme that grants you a 50% discount.

The real simplified scheme, which allows you to deduct the expenses and depreciation of rental income reported.

Good to know

Note that the amortized LPCA cannot be cumulated with the 11% tax reduction of the Censi-Bouvard Act.

Things to consider before investing in residence services

Admittedly, the rental yield from investment in a service residence is attractive, but this investment presents certain risks. For starters, it is better to take time to choose reference players and not to embark on investments that are too attractive, at the risk of being faced with an operational failure. You will also have more perspective on the quality of management and reputation of the company. You should not expect to be able to increase rents during the rental period of the property and it is rare to gain value over time at the time of resale. Know that it is even likely that you are forced to lower the rent during the period of detention of the property. 

Tips

If you buy a home in a senior residence, you must choose a residence located in the city center of a large city because it is the guarantee to undergo the least possible vacancy.

How to invest in residence services?

If you want to start investing in residential services, start by studying the rental demand in the area where you want to buy a property. Be that as it may, choose a large metropolitan area and always focus on the city center, but be aware that rental demand varies from city to city and depending on whether it is a student, tourist or still a city that offers different infrastructures for the elderly. Contact a company specializing in rental investment in serviced residences and choose a well-known and established actor for some time. Opt for the tax system which corresponds to the income you receive, but also according to the expenses you incur: if your expenses and depreciation are high, it will be more advantageous to opt for the real scheme than for the micro-BIC.

European Commission: residence in exchange for investment – EU security risk

The European Commission for the first time presented a report on the practices of granting foreigners citizenship or residency in the European Union in exchange for investments. These schemes pose risks to EU security, the commission concluded.

Three EU countries offer citizenship to foreigners in exchange for investments (“golden passports”), and 20 EU countries – residence permits in exchange for investments (“golden visas”). These programs create risks in terms of potential money laundering, tax evasion, and corruption, according to a report issued by the European Commission on January 23, RBC reports.

The report does not provide for specific measures to close or limit such programs – the European Commission will only “monitor the steps of the EU states to ensure transparency and good governance in the implementation of these schemes.”

Bulgaria, Cyprus, and Malta from 2005, 2007 and 2013, respectively, issued to the foreigners “golden passports”.

In Bulgaria for this you need to invest a million euros; 

in Cyprus – from two million plus purchase property on the island; 

in Malta, it is required to contribute 650,000 euros to the national investment fund, to additionally invest 150,000 euros to the economy and to buy or rent real estate. In these three countries, the applicant does not even need an actual residence in the country.

In addition, residence permit programs in exchange for investments are in place in 20 EU countries. The investment threshold varies from very low (about 13.5 thousand euros for Croatia) to very high (over 5 million euros in Slovakia and Luxembourg). A residence permit in any EU country makes it possible to travel freely within the Schengen zone for 90 days during any 180-day period.

The European Commission believes that such schemes pose risks to the security of the European Union, including the possibility of infiltration of organized criminal groups in the EU.