Extended for one year in its current form, i.e. until December 31, 2022, Pinel’s rental investment scheme in new buildings will continue to exist in 2023 and 2024, but with a progressively reduced tax advantage.
During these two years, investors will have access to “Pinel+” that offers tax cut rates similar to the original Pinel standards, but with stricter eligibility criteria. If you want to invest, should you then choose another path by preferring the old by placing a non-professional furnished rental company (LMNP)? Or should we hurry up to invest in Pinel in 2022? response elements.
“Pinel +”: strict eligibility requirements
Shortage of raw materials exacerbated by the war in Ukraine, which led to additional costs in construction and renovation sites, high credit rates since the beginning of the year … Rental yields are declining.
Added to this tense context, as of next year, is the prospect of a reduction in the tax benefits of Pennell’s Act. The current tax reduction rates of 12%, 18% and 21%, depending on the term of the rental commitment chosen, will be gradually reduced from the beginning of 2023 to 10.5%, 15% and 17%. Then in 2024 at 9%, 12% and 14%.
To continue to benefit from a tax break similar to the original Pinel, investors will have to turn to Pinel+. But the eligibility criteria for the latter will be more restrictive than they are today: dwellings must have a minimum surface area that meets the ordinance of March 17, 2022. “In addition, dwellings must comply with energy performance higher than that required by RE2020 environmental regulations,” notes Martin Menez, president of Bevouac, who specializes in rental investing in the old. This will result in property at an overall higher price per square metre, according to this company.
LMNP: a more convenient system in large cities
Investors have another possible option: investing in older properties and renting their furnished properties under the status of a non-professional furnished rental company (LMNP). This system is flexible because it allows the investor to prefer either the depreciation of business and furniture when costs are high (thanks to the real system), or he prefers simplicity thanks to a fixed rate allowance. 50% rental income deduction (at Micro-BIC).
So Pinel, Pinel+, or LMNP?
“In most large cities, the LMNP scheme is often more financially convenient than the Pinel scheme, notes Bevouac. In addition, it does not fall within the maximum tax loopholes of €10,000 per year in general.”
If we take the example of a property of 35 sq.m. purchased new under Pinel or Pinel + at a price of about 193,000 euros and 40 sq. sq.m. € 3,769 after works (for these two acquisitions with a loan over 20 years of 1.5%, with a contribution of about € 25,000): “It is clear from this comparison that using the real LMNP, the debt is only 32.23%, and if the costs of Renewal and additional costs (transportation fees, administrative costs…) are greater, the profitability is much better than in the case of Pinel (implemented before January 1, 2023) or Pinel + (implemented before January 1, 2025) where the debt reaches 34.31% Bivok analysis.
For this same example of buying, between Pinel and Pinel+, Pinel+ is the one that wins in terms of tax credit gains. Because “For Pinel, it will go up from €40,425, for an investment made in 2022 with a 12-year lease commitment, to €33,688 if made in 2023 and to €26,950 if made in 2024. Loss of €13,475 in tax credit For the same investment,” Martin Menez de Bevoac comments. Thus, Pinel + will be more beneficial because the tax profit will be 40425 euros, provided that the property meets the famous criteria of use.
“Whether you want an optimal return in the short term or net profitability in the long term, you should not rush into Pinel in the current context. For Pinel+, it will become more selective, which will affect the return, he warns. Under the circumstances, LMNP proves to be a wise alternative.”