How to make a success of your first real estate investment?

When it comes to taking the plunge into real estate investment, many people wonder where to start. It's a big decision, and one that can be both exciting and a little daunting. Today, we have the privilege of working with Marc, a 32-year-old software engineer with a passion for technology and the adventure of real estate investment. 

 

Marc, like many of you, wants to get into real estate investing to diversify his portfolio and generate passive income. In this article, we'll explore together the key steps to success on this path, taking into account Marc's specific objectives and expectations. Follow us on this instructive journey! 

 

Understanding the basics of real estate investment

Before taking the plunge into real estate investment, it's essential to get to grips with the basics. Marc shares his questions with us, and we're going to answer them, covering the advantages of this type of investment and the precautions to be taken. 

 

The benefits of real estate investment

Marc, with an annual income of €45,000 and savings of €30,000, is in an ideal position to start investing. Real estate offers considerable advantages, such as the creation of passive income, long-term capital gains and tax benefits, which are particularly attractive in schemes like the Pinel law. such as the Pinel law.

Please note: The Pinel scheme applies if the investment has been made since September 2014 and until December 31, 2024: So it's almost the end of this scheme!

 

Risks and precautions

Like Marc, it's normal to be concerned about the risks associated with any investment. The key is to do thorough research, understand the market and be prepared for possible fluctuations. It's also a good idea to surround yourself with experts, such as real estate investment advisors, to guide your decisions. 

By taking these factors into account, you'll be better equipped to start your real estate investment journey. Marc is ready for the next step, aren't you?

 

Defining your investment project

Once you've understood the basics of property investment, it's time to look at your specific project. This step is crucial to aligning your financial and personal goals with real estate market opportunities.

 

Identify your goals and needs

Before taking the plunge into real estate investment, it's essential to clearly define your objectives and needs. This involves understanding your motivations, assessing your financial situation and determining the type of property that will best meet your expectations. To illustrate this process, let's take a look at a table that puts different investment scenarios into perspective, with their advantages, risks and a few figures.

 

Purpose / Type of good	Benefits	Risks	Numerical example
Passive income - Apartment	Regular rents, increased property value	Risk of vacancy, non-payment of rent	Purchase at €200,000, monthly rent €800, gross annual yield 4.8%.
Added value - House	High value-added potential	Fluctuations in the real estate market	Purchase at €250,000, resale at €300,000 after 5 years, gross capital gain of 20%.
Mixed investment	Balancing income and value creation	More complex management	Purchase at €220,000, monthly rent €750, medium-term potential increase in value of 10 to 15%.

Explanations:

• Passive Income - Apartment: Ideal for those looking to generate a stable income. The key is to choose a location with strong rental demand to minimize vacancy risk. Apartments in urban areas or close to universities are often a good choice.
• Added value - House: Suitable for investors looking for a significant gain over the medium to long term. This type of investment requires a good understanding of the market and the ability to anticipate developing areas.
• Mixed investment: Combines passive income and capital appreciation strategies. This may involve buying a property in a developing neighborhood with potential for value growth while generating rental income.

Benefits and risks :

• Benefits: Real estate investments offer the opportunity to diversify your assets, benefit from regular income and realize long-term capital gains. What's more, they can offer tax advantages.
• Risks: The main risks include vacancy, non-payment, market fluctuations, and unforeseen maintenance and repair costs. A sound investment strategy should take these risks into account and mitigate them.

By accurately identifying your objectives and needs, and understanding the benefits and risks associated with each type of investment, you'll be better equipped to make an informed choice and succeed in real estate investing.

 

Choosing the right type of property

The choice of property type depends on your objectives and budget. An apartment in a developing area may offer good value potential, while a new or recently renovated property may require less management and maintenance. Take the time to compare the advantages and disadvantages of each option with your investment strategy.

 

The importance of location

Location is a key factor in the success of your investment. Look for areas with strong rental demand, good growth potential and quality infrastructure (transport, shops, schools). A strategic location can not only ensure a good occupancy rate, but also promote added value on resale.

 

Financial preparation for investment

Good financial preparation is essential to secure your investment and maximize its potential.

 

Evaluate your budget and borrowing capacity

Determine your total budget, taking into account your available savings and your borrowing capacity. Don't forget to take into account ancillary costs such as notary fees, any renovations and taxes. If you're considering a mortgage, find out about the different options and conditions offered by banks.

 

Understanding tax incentives and grants

Find out about available tax incentives and assistance available, such as the Pinel law, that can optimize your investment. These schemes can offer tax reductions, under certain conditions, and make your investment more attractive.

 

Importance of savings and managing your downpayment

Your savings play a crucial role in your project. It can be used as a down payment for your mortgage, to reduce your monthly payments, and to cover unforeseen expenses. Good management of your down payment is therefore essential to the financial health of your investment.

 

By following these steps and preparing carefully, you'll increase your chances of success in real estate investment. 

 

Property search and selection

Now that you've defined your project and prepared your financial plan, it's time to move on to property search and selection. This phase is crucial to finding a property that meets your criteria and objectives. Like Marc, who is looking for an apartment in a dynamic area of Lyon, you'll need to consider several key factors.

 

Criteria for choosing a low-risk property

To minimize risk, concentrate on properties located in areas of high rental demand. Look for properties with good potential for appreciation, just like Marc, who favors a developing neighborhood or one close to the city center. Also check the condition of the property and evaluate any work required. A property requiring little or no work, as Marc prefers, can be easier to manage, especially for investors with limited time.

 

The importance of the property's condition and the work required

When buying a property, the assessment of its condition and the need for any work required are decisive factors. They can greatly influence the return on investment, the total budget and the project schedule. This is where a feasibility study becomes crucial.

Why a Feasibility Study?

A feasibility study validates various aspects of the project before purchase:

• Regulatory aspects : Checks that the project complies with local urban planning regulations, such as Plans Locaux d'Urbanisme (PLU).
• Technical aspects: Identify structural, environmental and soil constraints.
• Usage aspects: Examines the current configuration of the property and assesses the possibilities for development.
• Economic aspects : Estimate the cost of the work and the necessary schedule.

A concrete example for Marc:

Let's imagine that Marc is considering buying an apartment in Lyon, with the idea of renovating it to increase its value. Here's how a feasibility study could help:

• Expansion potential : Marc wants to know if he can extend the apartment by adding a veranda. The feasibility study will help him understand the regulatory limits and estimate the cost of this extension.
• Work assessment: The study will be able to determine whether the wall he wishes to knock down to open up the space is load-bearing or not, and what the structural impact of this modification would be.
• Cost and Planning: Based on the expansion and renovation project, the study will provide Marc with a cost estimate and a realistic schedule, enabling him to plan the financing and management of the project.

Feasibility study rates and options 

Through the Archibien platform for his feasibility studyMarc has a choice:

• Regulatory feasibility Starting at €600 incl. VAT, this study focuses on the regulatory aspects of the project.
• Architectural feasibility Starting at €1400 incl. VAT, this validates the project in terms of volumes and plans, providing a more concrete vision of the property's potential.

 

By opting for a feasibility study, Marc will be able to make informed decisions about his investment, based on concrete data and professional advice. This will enable him to minimize risk and maximize the potential of his real estate project.

 

Key steps to finding the right investment

Start by clearly defining your search criteria, as Marc did. Use real estate portals and agencies, and consider using a property hunter to find offers that match your expectations. Take the time to visit several properties, compare them, and don't hesitate to seek expert advice to assess the potential of each property.

 

Finalize the purchase and manage the investment

Once you've found the ideal property, it's time to finalize the purchase and plan the management of your investment.

 

Purchasing process and negotiation

The buying process involves several stages, including price negotiation. Like Marc, don't hesitate to negotiate the sale price to obtain the best possible terms. Don't forget to check all the legal documents, and be accompanied by a notary or real estate expert.

 

Investment financing and credit facilities

The financing phase is crucial to your real estate investment project. In 2024, with the prospect of falling mortgage rates, it becomes even more pertinent to carefully consider your financing options. According to forecasts, rates could fall to around 3% by the end of the year, offering an attractive opportunity for borrowers.

Credit market trends in 2024:

• Rates expected to fall: Lending rates, which have recently risen to over 4%, are expected to fall. This could restore some of the purchasing power of home loans.
• Rising wages: With wages expected to rise by 10% between 2022 and 2024, the average borrowing capacity could rise from 185,000 to 235,000 euros.
• Falling property prices: At the same time, property prices could fall by up to 10%. A property valued at 260,000 euros today could see its value fall to 234,000 euros by the end of 2024, in line with the new borrowing capacity.

Data source : Capital.fr

Decision-making tips:

• Evaluate your borrowing capacity: Taking into account the evolution of interest rates and your salary, determine how much you can borrow. Use online simulators or consult a broker for an accurate estimate.
• Choose the right time to borrow: With rates on the decline, 2024 seems an opportune year to take out a loan. However, keep an eye on market developments to find the best time.
• Compare Loan Offers: Don't settle for the first loan offer. Compare the different options available from several banks to find the best conditions.
• Consider the Loan Term: Think about how long you want to repay the loan. A longer term can reduce monthly payments, but increase the total cost of credit.
• Take ancillary costs into account: Don't forget to include all ancillary costs, such as notary fees, insurance and any work required.

In summary, with credit rates set to fall and wages set to rise, 2024 offers an opportune window to finance your real estate investment. However, it is essential to plan ahead and keep abreast of market trends to optimize your financing.

 

Tips for efficient rental management

Once you're an owner, you'll need to manage your property and your tenants. If, like Marc, you prefer not to spend too much time on management, consider hiring a rental management agency. This can help you manage the day-to-day aspects, such as finding tenants, collecting rent and maintaining the property.

 

By following these tips and preparing thoroughly for each step, you'll be well on your way to making your first real estate investment a success, just like Marc. Good luck in this exciting new adventure!