Should I buy my main residence or stay as a renter? For Louis, the answer to this question is found in full. As a young employee, he just bought his main residence on debt so as not to pay the rent and “throws money out the window.” His twin brother Auguste took the opposite path. For him, the property “was” And he doesn’t even know where he’ll be in one year, so he’s committed to a 25-year loan…He chose to remain a renter, while investing on credit in SCPI.After 10 years, we show you which of the two brothers made the right decision…
Two life choices: buy your main residence or rent it and invest it
Twin brothers, Auguste and Louis, continued their major studies, which they each completed in Paris within a year of each other. August graduated from engineering school in 2019 while Louis graduated from business school in 2020. They’ve been sharing a one-bedroom apartment since 2019 in the 20th arrondissement (August sleeps in the bedroom, Louis sleeps on a sofa bed in the living room).
2022 will be a turning point in the boys’ lives, for two reasons: First and foremost, August and Marie, his girlfriend of about a year, decide to take the plunge and move in together in a few weeks. For the first time in their lives (and even before they are born…), the boys will be separated.
The other event is Mali: This year the parents of the two children decided to help them and take them to them 50,000 euros “to carry out an acquisition of real estate”.
Lewis’ Choice: Buying His Principal Residence
Louis He doesn’t ask many questions about what he should do with the €50,000 that his parents inherited. Should Buy the main residence and stop, as his father often says, “throw the rent out the window.”
Being an owner, for Louis, is a sign of success. It turns out that Louis has been thinking about it for several months and knows from a reliable source that the owner of the property he is currently living in is ready to sell it for €400,000, a price that also seems to him very reasonable given the quality of the property.
Because Louis loves this property, very well located, close to the metro in a direct line with his business, in a pleasant area with many good restaurants and bars to go out, a nice swimming pool a few steps away and a large park for picnics. The apartment is great, especially since they have been living there for 3 years and they have decorated it to their liking.
Attachment to the main residence is not negotiable. Lewis knows that by purchasing his main residence, he will benefit from savings on rent and also from forced savings that he will convert into assets.
He understands that to make this acquisition profitable, he will have to live in this property for many years, but this fully corresponds to his plans …
Auguste’s Choice: Rent and Invest
Despite the insistence of Louis and his parents, Auguste is in no hurry to buy his main residence. He found the perfect tiny apartment to rent with Marie for €890 per month (each), and would prefer to continue to rent.
Buying your home means taking Lots of commitmentTo Mary, but also to himself. Today, he is happy to live in Paris but he He still dreams of getting professional experience abroad. Working for a few years in London, New York or Singapore makes him dream more than owning a two-bedroom apartment in Paris.
However, August is Realizing that at his age, under current credit conditions, it is very exciting to borrow to make a real estate investment.
But August wants to invest in rental property within a simple framework and without worrying about management. He does not want to have to manage the tenants of a Parisian studio, especially since he does not intend to live his life in Paris. So his choice is on SCPI (Civil Real Estate Investment Corporation). These are investment vehicles that collect money from savers to build a portfolio consisting only of real estate assets such as dwellings, shop walls, offices or warehouses, in short there are many types of sustainable intensification of crop production. The stake is usually a few hundred euros. The partner regularly receives income corresponding to the property rentals of the CPI.
SCPIs already offer many advantages, and scale, to savers looking for higher quality assets, less exposure to stock market volatility. Above all, they are among the rare investment vectors that still offer great returns. For example, they paid an average payout rate of 4.45%* last year, according to Aspim numbers!
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Two investments: account details
- Property price: 400,000 euros.
- Agency fee: 20,000 euros.
- Notary Fee: 30,000 Euros.
- Contribution: 50,000 euros.
- Credit: €400,000 over 25 years.
- Monthly payments: €1,831.62***.
- Property price (SCPI shares): €200,000.
- SCPI Income*: €940 per month.
- Net income (TMI 30%): 496 euros per month.
- A contribution of €50,000.
- A credit of 150,000 euros for 10 years.
- Monthly payments: 1440 EUR ***.
- Monthly savings effort: 944 euros.
The two brothers therefore have the same property budget: Louis pays 1,831 euros in monthly payments to his main residence (and thus does not pay rent). Auguste pays €890 in rent and must also pay €944 in loan repayment (a total of €1,834).
10 years later
After 10 years, everything is going well Louis. For 3 years, he has been making perfect love with Evelyn, who dreams of settling in the north of Paris. And his wish will come true since Lewis has just accepted a new position, a very good one within a large technology group based in La Défense. If Lewis was so attached to the 20th region, he wouldn’t want to waste more than an hour and a half a day on transportation. On the other hand, there is no question of renting out your own property (very restrictive), nor of renting an apartment with Evelyn (and “getting the rents out the window”…). Louis decides to sell his apartment (with a capital gain since he found a buyer against a net seller of €440,000) and to buy with Evelyn.
- Sale of the property: 440 thousand euros (10% revaluation * in 10 years).
- Payable capital: 263,350 euros.
- Early refund fee***: 2,780 euros.
- Final capital after redemption: 173,870 euros.
On the contrary, life was not easy August. He separated from Marie 5 years ago and suffered from an illness the classroom economic. He used his period of unemployment to try to launch his own chip design company, but without much success. tired of paris, He came back to live in Dobbs, With his parents and reunited with his childhood friends, including Angélique … He is now a preparatory class teacher and rents a beautiful apartment on the outskirts of Besançon. Angelique is pregnant, the couple A very stable situation, Auguste is now planning to buy a house on the banks of the Dobbs for cash…
- SCPI shares: €220,000 (10% revaluation * in 10 years).
- Selling costs (10%): 22,000 euros.
- Final capital after sale of shares: 198,000 euros.
finallyAugust’s investment proved more profitable than Louis’s investment, because after 10 years he found himself with a capital of 198,000 euros against 173,870 euros for his brother, he even “thrown the rent out the window” …. if Auguste could keep his SCPIs that would bring him a regular income (and avoid selling costs ), this capital will instead be used to buy a house for cash with Angélique. But the couple will also borrow again to buy rental property (SCPI or student housing) while still taking advantage of the credit leverage.
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* Past performance is not a guarantee of future performance. Unit-linked products present the risk of capital loss.
Like any investment, real estate presents risks:
Decreased investment value. The invested capital is not guaranteed. Its value develops over time, in close relationship with the state of the real estate situation. This position is followed by successive cycles, with ascending and descending phases.
Decreased rental income. In a less favorable economic context, a decrease in the rental income paid to partners is due to a decrease in the financial occupancy rate and/or a decrease in the total amount of rent paid by the tenants. However, this decline can be mitigated by the effect of pooling risks thanks to the real estate and rental diversification of the portfolio.
Liquidity. Since real estate is not a listed product, it has less liquidity compared to financial assets. Thus the terms of sale (delay, price) can vary according to the development of the real estate market.
** TDVM: Market Value Distribution Ratio measures the level of historical distribution. It is the division of the total pre-tax earnings paid for year N (including the extraordinary interim payments and capital gains dividend) by the average purchaser share price for year N.
*** Non-contractual information cannot be used as a credit quote. No request can, of course, prejudge the decision of the lending institution to grant the requested credit or not. The credit is obligated to you and must be repaid. Check your ability to pay before committing.
No individual may be required to make any payment of any kind prior to obtaining one or more financial loans.