Real estate

Self-financing, the basis of real estate rental investment

You should know that self-financing is really very important, and is even the basis of profitable rental investment, because you have to understand that self-financing is the main way banks work. In other words, the bank will analyze your investment to see if it is self-financing. There are three main reasons why you should look for self-financing investments or turnkey rental investments.

Self-financing and turnkey rental investment: the winning combination!

Self-financing and turnkey rental investment can form a winning combo for real estate investors. Firstly, becauseinvesting in turnkey rental property allows you to generate income immediately. The result? This is a solution that allows you to cover the credit amount without delay. What’s more, you can opt for a property that is already let. It’s an easy way to generate regular rental income. What’s more, you’ll be able to count on positive cash flow from the outset, which means showing your bank a clean bill of health.

What’s more, with a turnkey rental investment, you get maximum benefits in terms of rental management! In fact, by entrusting this task to a specialized company, you no longer have to worry about this kind of problem. This saves you time and stress on a day-to-day basis, as they take charge of finding tenants, managing rental contracts, collecting rent, maintaining the property… In short, a multitude of tasks that inevitably require a perfect knowledge of the market and the legal framework.

Turnkey rental investment can also help you make maximum savings at the time of purchase! In fact, by entrusting your project to a specialized company, it will undertake an in-depth analysis of the market. What’s more, she has a perfect knowledge of the local market and can even negotiate the price with buyers. That way, you’ll have every chance of finding exactly the right property for your budget. What’s more, you’re opting for a good yield potential to maximize your rental income while relying on an effective self-financing solution.

Finally, by opting for turnkey rental investment, you minimize all the risks associated with real estate investment. If you’re just starting out in this sector and are looking to build up your wealth, then this is a key tip for limiting losses. By entrusting your project to a specialized company, it will carry out an in-depth analysis of your selection criteria, your budget and your return objective. What’s more, in the event of renovation work, she’ll be able to call on trustworthy craftsmen who will meet deadlines for immediate rental!

First reason

To keep your debt to a minimum, there’s the 33% rule.For example, if someone earning 3,000 euros a month has a loan costing 1,000 euros a month and is one-third in debt, i.e. 33% in debt, they will not be able to re-borrow during the term of their loan to make an investment, unless their income increases. On the other hand, if you borrow 1,000 euros a month from the bank, but earn 2,000 euros in rent, the bank will take into account your income + the differential you earn on your property. In our example, the bank will therefore take into account the 3000 euros of income + the 1000 euros of rental income, i.e. 4000 euros. Not all banks calculate in this way, but there is what is known as the ” clean calculation “and the differential calculus “So it’s extremely important to respect this first point of self-financing, because you need to maintain a level of self-financing that’s not too high. lowest possible level of debt.

Second reason

If you make a self-financing investment, you won’t have to make any effort to save, i.e. your cash flow will remain positive and growing during your investment, for as long as it takes you to pay it back, thanks to the positive cash flow. If you make an investment in an apartment, for example, that generates 1,000 euros in rent, but you have 1,000 euros in credit, it won’t pay for itself, because you have to add property tax, condominium charges, various contingencies, and if you have a tenant who’s away for a month or more, your credit will still run. Hence the importance of respecting the 70% rule, which goes hand in hand with the above.

Read also; Make real estate investment your business

Third reason

If you’re self-financing, we can call it a blank operation for the bank. In other words, if you have a credit of 700 euros a month, and rent of 1000 euros a month, the 300 euro difference will pay for the various contingencies, property taxes, condominium charges, etc., but you’ll also generate a surplus, which will give you a a transaction that cancels itself out in the eyes of the bank, allowing you to continue investing. You’ll have shown your bank that when you pay back 500 euros every month, it means you’re capable of earning 1000. The banker will see the account statements, the various movements, that you’re a serious person and that every month you take your surplus and invest it in life insurance policies, for example who will be working at 3, 4 or 5% while you will have borrowed money at around 2%, so you’re using indirect amortization.

Also read: Everything you need to know about LMNP investment

Alix Lebrun

Alix Lebrun

Alix Lebrun est auteur pour le magazine Adises Active, spécialisé dans tous les sujets liés aux affaires, au droit et à l'emploi. Elle est titulaire d'une maîtrise en commerce international et d'une licence en communication. Alix écrit depuis l'âge de 12 ans et a toujours aimé partager ses pensées avec les autres par le biais de l'écriture.