What do you want to know?
Why rent furnished ?
The main advantage of furnished rentals lies in its very favorable taxation.
Indeed, the diet Real Simplified often allows furnished rental owners to avoid paying taxes over several years, in particular thanks to the possibility of depreciating the rental property and deducting all charges inherent in the furnished rental activity.
In return for the furniture provided to the tenant, obviously, the rent of furnished accommodation is higher than that of empty accommodation.
You can ask for a rent 10% to 30% higher for a furnished rental than for an empty accommodation equivalent in terms of surface, quality and location, which ensures you a better gross profitability.
Likewise, the maximum amount of the deposit payable by the lessor exceeds that of unfurnished accommodation.
In fact, in an unfurnished rental, the owner-lessor may require a maximum of 1 month's rent as a security deposit against 2 months for furnished accommodation.
There are two types of furnished rental:
Non-professional furnished rental (LMNP)
Professional furnished rental (LMP)
Both are governed by specific rules.
In general, furnished rentals allow :
Obtain low-tax additional income,
To diversify its assets and sources of income.
To benefit from social security coverage (LMP)
Furnished rental: Profitability & attractive taxation
How does furnished rental work?
Furnished rentals are intended for people who wish to diversify their assets and their sources of income, or quite simply to build up additional income in the long term by controlling taxation.
It consists in renting one or more dwellings furnished with sufficient furniture so that a tenant can enter the premises and live there normally with only his personal effects.
Furnished accommodation is accommodation with at least some furniture, to allow the tenant to sleep, eat and live properly. Furnished accommodation is decent accommodation equipped with a minimum of furnishings: Bedding with duvet or blanket. Shutters or curtains in the bedrooms.
If it is a civil activity from a legal point of view, but the furnished rental is considered from a tax point of view as a commercial activity, which has important advantages.
Less widespread than empty rentals, furnished rentals make it possible to meet the housing demand of students, people who move for professional reasons, expatriates and other mobile people who do not want to burden themselves with furniture.
Two statuses stand out according to certain eligibility thresholds:
The non-professional furnished rental company (LMNP)
professional furnished rental company (LMP)
To be a non-professional furnished rental (LMNP), annual income must not exceed 23,000 euros per year or 50% of the household's overall income. The statute applies as soon as one of these two conditions is met. Conversely, when annual rental income exceeds 23,000 euros and they represent more than 50% of household income, then the status of professional furnished rental company (LMP) is required.
In furnished rental, there are several types of rental contract which differ according to the duration and the reason for the stay of the occupants of the accommodation:
Lease furnished rental principal residence: If the accommodation constitutes the main residence of the tenant, it is advisable to make him sign a lease rental furnished Main Residence.
This rental contract, subject to Law No. 89-462 of July 6, 1989, is concluded for a period of 12 months, tacitly renewable.Mobility lease: It is aimed at tenants in a mobility situation (students, internship, assignment, transfer, professional training) who need accommodation for a temporary period of between 1 and 10 months.
Student lease: The student lease is an alternative to the classic furnished lease. This lease can only be offered to furnished accommodation, intended for shorter-term rentals. It is for a nine-month non-renewable period.
Seasonal furnished rental lease: The seasonal furnished rental contract is concluded for a maximum and non-renewable period of 90 consecutive days.
The tenant is therefore committed for the entire duration of the rental, unless contractual provisions allow him to give his leave before the end of the furnished seasonal rental contract that he has signed with the lessor owner.
LMNP excluding serviced residences
Non-professional furnished rental (excluding service residence) meets different objectives:
Prepare for retirement,
Diversify your heritage,
Increase your disposable income.
The rental can relate to an old or new property. You can buy an apartment or a house for furnished rental, or if you already have an empty rental property, you can furnish it.
This is not about getting a tax cut or creating a deficit on overall income.
Furnished rentals make it possible to benefit from the BIC regime, which is more advantageous than that of property income, thus making it possible to reduce the taxable income of the
taxpayer.
It is not the rent received that is taxed, but the rent less the charges incurred. As such, you can choose between 2 calculation methods:
Micro-BIC
Real BIC
Professional furnished rental company
To have the status of professional furnished rental company (LMP), the following 2 conditions must be met:
The annual revenues withdrawn from this activity by all the members of the tax household must exceed € 23,000 on the calendar year .
These receipts must be greater than the total amount of other activity income of the tax household (salaries, other BIC).
If one of these conditions is not met, the lessor is considered as a non-professional lessor.
The tax regime for professional furnished rentals (LMP) is reserved for residential premises comprising all the movable elements essential for normal occupancy by the tenant.
The status of professional furnished rental company allows you to save tax and obtain social security coverage while building up or optimizing your rental property.
The professional furnished rental company can deduct any deficits from his overall income without limitation of amount (while the non-professional can only use the deficit on his income of the same nature).
If you sell your property as a professional furnished rental company, the capital gain is totally exempt when the rental income is less than € 90,000 excluding taxes (HT) during the 2 calendar years preceding the transfer. The furnished rental activity must also have started at least 5 years ago.
The exemption is partial in the event that these revenues are between € 90,000 and € 126,000 excluding tax.
Beyond these amounts, however, all capital gains are considered long-term and taxed at 30%. Since the finance law of 2018, the gain is taxed at a flat rate of 30% including social contributions (income tax at the rate of 12.8% and social contributions at the rate of 17.2%) and no longer enters in the progressive scale. It is important to note that the LMP under the micro regime cannot benefit from the exemption
Finally, as a professional furnished rental company, you can be exempt from IFI (Tax on real estate wealth) under certain conditions.
The exemption is applicable for real estate since it is used within the framework of a commercial profession. The furnished professional rental corresponds to the exercise of a real profession, because it is exercised on a usual basis and allows to meet the needs.
LMNP Service residence
LMNP Service residence
Buying a rental property in a service residence allows you to build up a wealth, to obtain additional income, avoiding the constraints of rental management since a professional takes care of it for you.
These accommodations are all within a residence offering services adapted to the needs of the target clientele, gym, swimming pool, concierge, etc.
There are different types of service residences and sectors on the furnished rental market, for example:
Student residences,
Tourist residences,
Senior residences or even EPHADs.
The service residence is managed by an operator (manager) with whom you conclude a commercial lease for a minimum period of 9 years.
It is the operator who takes care of the rental management of the accommodation.
As such, he must :
find tenants,
collect rents,
maintain common areas,
carry out any repairs,
manage services for residents, etc.
The operator also undertakes to pay you rent each quarter (amount provided for in the lease), regardless of whether the accommodation is occupied or not. In return, you cannot dispose of your property, you must let it rent from the operator (except for a specific contract granting you enjoyment at certain time of the year).
Seasonal rental
The first advantage of seasonal rentals is the flexibility provided by this type of investment. Depending on needs and desires, the property can be rented or occupied by the owner at his convenience. Housing turns into a second home and then a profitable investment.
Seasonal rentals allow you to generate a comfortable income under the guise of a good location. The more sought-after and more touristy the area, the more expensive accommodation can be and the more remote the rental vacancy. To get an idea, count a weekly rent 2 to 3 times higher compared to a traditional rental. The seasonal rental can therefore cover all or part of a mortgage.
A rental investment is always the risk of encountering unpaid rent problems. However, this can put you in a very difficult financial situation, especially if you have taken out a loan to invest in real estate. This risk is eliminated with seasonal rentals, especially if you use platforms to rent. Payments are made online and you are sure to be credited. Also, you do not need to take out a guarantee of unpaid rents, it is a real saving.
Finally, the seasonal rental allows to benefit from an interesting tax system. It is indeed possible to deduct many charges and to depreciate the property with a great tax saving as a result.
Family SARL
Family SARL
He is not possible to have a furnished rental activity in an SCI (Société Civile Immobilière) subject to income tax, which is why the family SARL can be used for furnished rental properties.
The constitution of a limited liability company (SARL) is recommended to facilitate the management and transmission of several rented furnished properties. The SARL gives you the possibility of optimizing the transmission of your assets to your children while retaining control.
You can purchase furnished rental property through the LLC or transfer ownership of property you already own by either bringing the property to the LLC or selling it.
The exercise of the furnished rental in a company is compulsorily subject to the actual regime. The micro-BIC regime is not applicable.
The advantages of going through an LLC will be twofold:
The liabilities of the company (debt for the acquisition of goods) will reduce the value of the shares
It is possible to dismember the shares (donation of bare ownership)
Taxation of furnished rental companies
Taxation of furnished rental companies
As a furnished rental company, you can declare your income:
Micro BIC diet
At the Real Simplified diet
In principle, furnished rentals are automatically exempt from VAT without the possibility of an option.
To benefit from the micro BIC scheme, your annual income (turnover) must not exceed a ceiling of € 72,600 (ceiling to be adjusted in proportion to operating time during the calendar year if necessary).
The taxable benefit of your furnished rental income, under the micro BIC regime, is equal to the annual income (including rental charges and ancillary income) less a standard allowance of 50%.
Note: In the case of a furnished rental for classified tourism and a guest room, the allowance
applicable is 71%.
The actual simplified regime applies as of right to the taxpayer whose annual revenue is between € 72,600 and € 818,000 excluding taxes.
It can be applied, at the option of the taxpayer, when revenues are less than € 72,600.
Beyond € 818,000, you must declare your income in the real normal regime (not simplified).
The real simplified regime allows in particular to deduct the following charges from your furnished rental:
maintenance and repair invoices
property tax (if the property is recorded as an asset)
insurance costs (if the property is capitalized)
management fees etc ...
The real simplified system allows in particular to deduct the following depreciation:
depreciation of premises (if these are capitalized)
depreciation of equipment and furniture (if these are capitalized)
depreciation of construction, reconstruction, expansion and improvement works (if the property is capitalized)
Namely: Accounting depreciation is the annual recognition of the loss in value of the components of a property (windows, roof, facade, etc.) due to wear or time.
Accounting depreciation makes it possible to deduct a "fictitious" charge (corresponding to the deterioration of the building) from the rents collected without cash outlays.
The statutes of LMP and LMNP are aimed at individuals who wish to rent their property furnished.
Indeed, the latter have the choice between two statuses to declare their income from furnished rentals, namely:
the status of professional furnished rental company (LMP),
the status of non-professional furnished rental (LMNP).
The investor who wishes to benefit from the status of professional furnished rental company must cumulatively fulfill the following two conditions:
The annual income withdrawn from the furnished rental by all the members of the tax household is greater than € 23,000;
These receipts are higher than the professional income of the tax household (salaries and wages, retirement pensions, life annuities free of charge and against payment, industrial and commercial profits excluding furnished rentals, agricultural profits, non-commercial profits and the income of managers and associates mentioned in article 62 of the CGI).
Failure to comply with one of these conditions automatically confers the status of non-professional furnished rental.
Unlike the LMNP, which can only deduct its deficit for the furnished rental activity from the income from its furnished rentals, the professional furnished rental company can transfer it to overall tax income.
In the event of a capital gain during the sale of a leased property, it will not be taxed under the private capital gains regime as is the case for the LMNP but according to the professional capital gains regime.
This will be the case if the activity has been carried out for more than 5 years and the gross rental income does not exceed € 90,000.
The LMP will therefore benefit from the advantageous taxation of this capital gains tax regime.
Regarding the IFI, the goods necessary for a professional activity are exempt from tax, if they have a direct link with the exploitation and if they are used effectively and exclusively for the needs of an industrial, commercial or artisanal activity. , agricultural or liberal.
Within the framework of the LMP statute, the rented goods are considered as professional goods if the lessor fulfills specific conditions, different from those applicable in terms of income tax.
Finally, the LMP is subject to professional social charges which allows it to benefit from health cover and old-age insurance.
If the annual tax-free revenue does not exceed € 72,600 (income 2020) *, the micro-BIC scheme (micro-enterprise) applies as of right **.
* revenue less than 72,600 € for furnished accommodation in the general case, less than 176,200 € for guest rooms or classified tourist accommodation.
** excluding option for the actual speed (see below)
The taxpayer is taxed on the basis of rental income, less a flat rate allowance for costs:
50% in the general case
71% in the case of bed and breakfast or furnished tourist accommodation classified
The net amount after deduction of this allowance is added to the taxpayer's other income and taxed at the progressive income tax scale.
Note: the minimum deductible allowance is 305 €. So, if the revenues are less than or equal to 305 €, this rental activity does not generate any tax. Please note when applying for the package, charges cannot be deducted.
Above this threshold, the actual regime will apply automatically.
Under the actual tax regime, a large number of charges can be charged against rental income provided that the corresponding invoices are obtained:
property tax, housing tax and CFE;
co-ownership charges;
insurance of your property;
various purchases of supplies and equipment up to a limit of € 500;
maintenance and repairs in the house or in the rented apartment;
agency or property manager fees;
the costs of notaries following the purchase of housing;
the fees of the accountant;
interest and administrative costs resulting from the mortgage;
procedural costs following a dispute with a tenant;
provisions for default risk;
the costs of electricity, water, gas, fuel and other energies;
current costs such as internet subscription, telephone, etc.
Advantages & Disadvantages of the non-professional furnished rental company
Advantages & Disadvantages of the professional furnished rental company
LMNP acquisition
Example of investment in LMNP
1
Initial situation
Aurélie owns an empty (bare) rental property for which the loan has been fully repaid. She would like to rent it, but finds the taxation too high.
2
If she rents the furnished property
By renting furnished accommodation, Aurelie can expect a higher rent than a bare rental, estimated at € 5,800 (+ 20%).
If it opts for the micro-BIC scheme, it will be able to claim a reduction of 50% on the amount of rents received, ie € 2,900.
Like her at a marginal tax rate of 41% (+ the PS), Aurelie will have a NET income of (5,800 - 1,000 - 1,689) 3,111 € per year.
