Real estate is attractive because it remains a reassuring investment: less risky than the stock market, more tangible than crypto-currencies and more profitable than savings! In fact, building up a real estate portfolio is a way to protect oneself from need, to protect one's family, to prepare for retirement or as part of the 150 0 B TER. Ever Invest explains how this asset is built and how it develops.
Definition of real estate assets
The real estate assets refer to all the real estate owned by a natural or legal person. They include various types of property: buildings, building land, business premises, etc.
A real estate asset is a non-financial asset and is legally characterized by the fact that it consists of property that cannot be moved. It is referred to as fixed real estate, as opposed to movable property such as vehicles or works of art, or intangible property such as company shares.
The real estate assets of individuals also include the rights that can be attached to their various properties, such as a mortgage or a usufruct, as well as "paper stone", securities held in companies whose main activity is real estate. These companies include SCPI (société civile de placement) and OPCI (organisme de placement collectif d'immobilier).
The different types of real estate assets
A real estate heritage is often started with the purchase of a primary residenceThis is complemented by other real estate: second homes and rental properties. Residential real estate is thus distinguished frominvestment property.
Another possibility to build a real estate portfolio: commercial real estate, by investing in professional real estate: walls of warehouses, stores, companies... This type of investment is made by investing via a SCPI or a listed real estate company.
There are also building plots, to build both a primary or secondary home, as well as a property reserved for rental (which in this case should never be furnished).
Finally, forests and agricultural land, even if not built on, are part of the real estate assets, because they are also a source of profitability.
Increase your real estate assets
An investor's goal is always to manage and grow his or her assets over the years. Let's take a look at how ambitious investors do it.
Taking advantage of the banks' money
A real estate asset is not only a set of assets, it also comes with debts. This is inherent to the way the investment is financed, which is based on a unique mechanism: the use of bank loans, or the use of money from banks, called leverage. It can be summed up schematically as follows: the banks lend the capital, the rents pay back every month, and the investor gets richer... Given the current low interest rates, it is easy to see that the use of leverage will still allow the development of a real estate portfolio in 2021. For this year, the following average rates have been recorded:
- 1.45% for 20-year loans;
- 1.15% for 20 years;
- and 0.95% over 15 years.
Consider that in the 1980s, these rates were almost 20%! This confirms that real estate remains a way to build wealth without necessarily being rich to begin with.
A small downside: in 2022, 110% loans, or loans with no down payment, where all additional costs are financed by the bank (notary, agency, guarantees), will be much more difficult to obtain. The personal contribution of 15% of the purchase price will become the rule.
Start small
All experts agree that you should start small to build your real estate assets.
The goal is to limit the risks by starting with the purchase of a small area, such as a studio or F2. You should aim for at least self-financingThe first step is to make sure that all the costs are covered by the rental income, so that you never have to take out cash.
The ideal, of course, is to have a positive cash flow, with an investment with a high profitability, i.e. above 5%, which generates a surplus every month. You will then make 2 big profits:
- you don't have to worry about your debt ratio with the banks, and you can take advantage of the leverage effect, allowing you to make several investments and cash flows .
- You also pay back your loan faster, which allows you to take full advantage of your rents to create additional income.
Please note: a rental investment takes approximately one year to complete. It involves a number of steps, such as finding the property, renovating it, or getting a bank to agree to the financing. Some steps naturally take longer than others. To create a beautiful real estate heritage, experts recommend not to wait, but to set up several projects at the same time, so as not to miss a good opportunity. The important thing is to succeed in chaining properties together, in order to benefit fully from the leverage effect.
Diversify your real estate assets
It is advisable to diversify one's real estate holdings in order to limit risks such as vacancy or the possibility of a drop in prices per square meter. Several strategies exist today, such as :
Crowdfunding
Either the online participative investment, via a platform. It consists in lending money to a promoter, without going through institutional channels. Just like SCPI, crowdfunding allows to invest modest amounts, while offering very honest rates of return.
The SCPI
The shares of these companies that investment mainly in commercial real estate (warehouses, offices), or more rarely residential, constitute par excellence assets with which to diversify a real estate portfolio. A well-made set-up, by diversifying its shares between several companies, allows easily to reach 5% of profitability.
Parking lots
A parking lot is a real estate investment that is inexpensive to purchase and has the advantage of requiring little maintenance. The returns are excellent, but the low rents force you to hold a lot of them.
Are you looking to build your wealth and are you attracted to real estate? To progress more quickly and minimize risks, get help.
Ever Invest, a specialist in turnkey investments, looks for tailor-made properties with high profitability for you. Renovation, rental: we take care of everything. Put your projects in our hands and start investing with confidence.
