In the current economic climate, rental investment enables one person to protect its legacy while perceiving revenues. Thus, this tangible and reassuring asset which has increased its value over decades has become essential in asset management.
Between the attractiveness of a strong rental demand, high profitability, lenient tax regimes or even the flexibility in lease management; furnished rental has a wide range of advantages.
However, it is important to consider several legal and financial aspects.
Renting furnished: a concentrate of advantages as an owner
- An increased profitability: the furnished rental sector is flourishing. In fact, its offer has doubled in 30 years. A genuine seductive option, renting furnished allows the investors to rent an average of 10% to 30% more than an unfurnished property.
In addition, furnished rentals enables you to reduce the risks of vacancy (providing that you manage the leases succession wisely) because it targets students and professionals on the move for whom the demand is higher.
As for holidaymakers, they prefer the comfort and conviviality of furnished accommodation over the impersonal side and the price of hotel rooms.
Thus, the rental of furnished rentals is high: the rent increases and the high rate of tenant turnover is greater than the costs generated by the maintenance of the equipment.
In addition, these costs are quickly absorbed via the deduction of charges and depreciation which reduce or even cancel the tax result.
- The period of notice: in furnished rentals, the lessor is subject to a notice period of 3 months before the end of the lease against 6 months in unfurnished rentals. The advantage is that the owner can enjoy his property faster than in an unfurnished rental.
Indeed, while the lease term is at least of three years for unfurnished rental, that for a furnished rental for use as a main residence is of one year renewable (article L.632-1 of the Construction Code).
- Rental charges: the furnished allows you to recover fixed-price charges while this provision is only possible in the context of an empty rental shared apartment.
- Deposit: the guarantee for unpaid bills and damages of the tenant is covered by a deposit of 2 months for furnished rentals against one month for unfurnished property.
This guarantee constitutes a seat belt for the owner in the event of damage of the furniture and equipment of the renter.
- An attractive tax regime: renting as furnished allow you to enjoy the lucrative status of LMNP.
- Up to the threshold of 72 600 euros of annual income, this status enables you to be under the “régime micro-BIC”, which enables you to benefit from a flat-rate reduction of 50% on rental income against 30% for unfurnished property.
The surplus is subject to progressive scale (according to the French tax bracket) and social security contributions (of 17.2%, or 7.5% for the EU citizens + UK).
- If the rents are greater than 72 600€/year, the owner has to opt for the “regime réel” tax scheme. The lessor can deduct his expenses (loan interest, works) as well as the depreciation of his property. If the income is below this threshold, it is possible to choose for this régime as well.
If the sum of the charges and depreciations are higher than the received rents, a deficit will be recorded and carried forward to income of the same nature for the following ten years. The deficit will not be taxable.
If the choice of renting furnished offers a safe environment to make a successful rental investment, the legal and tax aspects must however be taken into consideration.
Indeed, the Alur law of March 24,2014 introduced provisions for the lessor such as the standard rental contract, the compulsory furniture items or even the limitation of the security deposit of two months.
In conclusion, despite the framework defined by the legal and tax system, furnished rentals activity has a number of attractions that have made it an advantageous formula.
Indeed, the benefits are ensured by the strong rental demand and tax advantages.
As the furnished rental niche has become more democratic, it is up to you to make a difference in terms of comfort, decorations and equipment to stand out and benefit from exponential profitability.