You won’t approach investing the same way at 30 years of age as at 40 or 50 years of age. But however old you are, it is worth investing in a buy-to-rent provided you know how to make the most of the opportunities that are out there.
Investing in a rental apartment before the age of 40
If you are under 40, investing in real estate can be a scary prospect… Taking on a mortgage for the next 20 or 30 years can be perceived as an obstacle to personal and professional mobility. On the other hand, before hitting 40 is when you are more likely to be in good health and climb the ladder in your chosen career. It is when we have a higher margin of manoeuvre for investing, and more specifically for investing in a buy-to-let apartment.
Buying a main residence, which is usually what comes to mind as the obligatory first step on the property ladder, is not right for everybody. One example would be someone living in a neighbourhood where prices are sky-high. Taking out a mortgage means becoming a property-owner without having to put down a huge deposit, and a buy-to-rent investment has the added advantage of generating income for the investor. With the benefit of leverage, it is possible for young investors to 100% self-finance their project.
Be careful, however, to ensure that the property acquired is in a good state of repair. When we are 25 or 30 years old, we will generally have fewer savings at our disposal to pay for any works required… Taxation on rental investments is more favourable because if you sell your property to buy a main residence, the capital gains generated are not subject to tax.
Young investors will be able to benefit from a regular source of income very early in their lives or be in a position to make further investments.
Investing in rental apartments for the over-forties
At forty years of age, investing in a buy-to-rent may interest people who do not own their main residence because they aspire to a certain size of property in a certain location that may be beyond what they can afford. At that age, it is judicious to use your maximum debt capacity, and rental apartments are good investments.
That is also true for people who do not see the point in buying their main residence because either their company provides accommodation, or they relocate on a regular basis or they are expats. At that age, you only have twenty years left to pay back a mortgage with monthly repayments that fit in with your budget.
For those over 50 years of age, investing throws up slightly different issues, but there is still enough time left to go for it. It is the stage of their lives when certain investors pay off the mortgage on their main residence, giving them a whole new capacity for saving. Parents whose children have flown the nest may be feeling the pinch even more in terms of tax.
Investing in a buy-to-let furnished apartment (under an “LMNP” status – non-professional lessor of furnished real estate) will enable them to redress their situation because all expenses can be deducted from their rental income (interest on the mortgage, co-ownership related charges, works, etc.). It is also a particularly efficient way of using your last 10 to 15 years of working life in preparation for your retirement.
Investing in a buy-to-rent apartment: does it matter how old you are?
According to a study conducted by Crédit Foncier in 2017, the average age of private buy-to-rent investors is 45 years old.
We have seen, however, because of the feeble impact it has on the budget (thanks to the rental income earned) you can take the plunge with this type of investment at a very young age in order to build up useful capital for future investments. Later on in life, it is a low-risk way of putting your freed-up savings to good use, and one that presents advantages in terms of tax.