If you are looking for an investment that pays off without taking risks, don’t miss out on the non-professional furnished rental! It doesn’t require expert knowledge to set up, it is easy to manage and it can provide you with additional income over the long term. Spotlight on the Non-professional Furnished Rental and the essential things you need to know before you start.
The principle of the Non-professional Furnished Rental (Location Meublée Non Professionnelle (LMNP)
The non-professional furnished rental is open to all French taxpayers. As the name suggests, it involves renting out furnished accommodation without making it your professional or main activity. The status has existed since 1949 and allows for interesting tax optimisation, which explains its success.
The income earned must be declared in the appropriate box on your tax return, but it will be net of tax! In addition, if you buy a new property (or if you take over an existing contract), the VAT is recoverable.
Why become a non-professional furnished landlord?
Of all the types of property investment, you will quickly see the advantages of the LMNP in terms of ease of access and management.
Depending on the objective, there are many reasons to adopt this status:
- Become a property owner,
- Make an annual profit of up to 7%,
- Build up savings,
- Increase your capital thanks to the capital gain on the resale of the property in LMNP,
- Guarantee additional income on retirement,
- Benefit from tax advantages.
Conditions for accessing LMNP status
Prior to your rental, register with the relevant Centre de Formalités des Entreprises (CFE). Fill in a form and you will obtain a Siret number: you are officially in business!
The first condition is that you must have furnished accommodation. To retain your status as a non-professional furnished landlord, you must earn less than €23,000 in rental income during a fiscal year AND this income must not exceed half the income of your tax household.
As for the furniture that must be present in order to qualify for the status, the list is provided by Decree No. 2015-981 of 31 July 2015.
Lastly, you are not allowed to be registered in the trade and companies register as a professional furnished landlord.
LMNP management constraints
These are minimal. As far as taxation is concerned, when you make your initial declaration, you choose between:
The micro-BIC regime, which does not require any particular accounting except for the calculation of a 50% deduction (71% for gîtes and bed and breakfast businesses) prior to your declaration. The simple mention of your rental income on your annual tax form is sufficient.
The simplified real regime, which enables you to deduct your real expenses but requires you to draw up a balance sheet and income statement. It is strongly recommended that you consult a chartered accountant, particularly for calculating depreciation. If you create a deficit, it can be carried forward in its entirety over several years.
The service residence for complete peace of mind
Although its management is accessible to most people, the choice of property remains important, for the durability of the investment or its resale. In this context, we would strongly advise you to opt for an acquisition within a so-called service residence. There are several types: dedicated to students, the elderly, business trips or tourism. They provide highly sought-after services and ensure that they are always full.
You should be aware that if you sign a rental contract with the professional operating such a residence, you are protected from the risk of non-payment (you will receive your rent even if the accommodation is not occupied). In addition:
- you won’t have to find a tenant by yourself,
- you won’t have to furnish the property either,
- you won’t have to deal with neighbourhood quarrels,
- you won’t have to manage or pay for any damage.
The existence and age of the residence ensures that the location is favourable and that you will be able to resell easily if you so choose.
Entrust your project to a professional!
Armed with all our advice, don’t hesitate to call on a LMNP professional to find the acquisition that suits your profile. Selecting one residence rather than another is not an easy task, just like negotiating the contract with the operator.
The same goes for the resale of the property: finding a buyer in this niche market can be complex. A professional already has contacts of investors looking for good deals.
LMNP is certainly the only sustainable investment that allows for a profitability of over 5% without any risk of loss. Better still: it is a real estate investment and therefore a safe investment in the long term. The sooner you get into it, the more you will gain, so go for it!