Many investors are on the lookout for all tax exemption solutions in order to avoid tax pressure that they consider too high. One of the most popular measures remains the Pinel device, which is aimed at those who wish to invest in real estate. If at first glance, this solution seems attractive, what is it really?
The main purpose of real estate tax exemption is to offer a tax reduction to investors who have decided to make investments in real estate. It should not be forgotten that this sector is one of the most popular investment products in France, in particular because of its security aspect. Its greatest asset is that it has given rise to several laws and tax exemption schemes that have been put in place by the State to boost the real estate market. Depending on the property purchased and the device selected, tax bonuses will be offered. These tax exemption solutions are numerous:Censi-Bouvard Law, Girardin Law, Malraux Law, LMNP, LMP, Historic Monuments Law. One of the most popular is the Pinel law.
Replacing the Duflot law, the Pinel law was extended until 2021 following the 2018 finance law and remains valid for zones A, A bis and B1. Its purpose is to allow individuals to invest in new rental real estate and in return to enjoy a tax reduction of 12% over 6 years, 18% over 9 years and 21% over 12 years. To be able to benefit from this allowance, the investor must nevertheless comply with a few rules. The tax benefit is only granted if the accommodation is located in already predefined areas where the supply of accommodation is less than the demand, and only if the tenants have fairly specific income conditions or if the rent respects a certain ceiling.
The Pinel law seems advantageous in many ways, but if analyzed, it can also present some risks for investors. Already, in relation to ceiling rents, they can be lower than local market rents. It happens that investors rent at very decreasing prices, which has a negative impact on their return. Ditto for the purchase price of Pinel housing which can be very high. A situation calling into question the real interest of the tax benefit granted. Added to this are any capital losses. Even if the property purchased is new, it is not immune to rapid obsolescence due to the use of low-end materials. To preserve its value, repair work will be necessary and will increase the expenses allocated to the property. The profits generated by the owner are likely to drop dramatically under these circumstances.
In conclusion, is it worth investing in Pinel accommodation or not? It all depends on the level of risk each investor is willing to take. It is especially advisable to opt for quality constructions made with good materials and especially very well located. Because many people have bought property in places where selling prices and rents are attractive, but where tenants are often impecunious.
