Among all the asset classes available in the investment universe, real estate has a special place. It is often an important act, considered directly, carried out on credit, with a view to preparing for retirement and / or benefiting from a tax advantage. However, before embarking on the acquisition of an apartment for rental use, it is important to ask the question of alternative choices and in particular of indirect real estate.
Paper real estate has become an essential investment in building up the financial heritage of savers. It has many advantages: access to business real estate, geographic diversification, pooling of rental risk, professional management of real estate, ease of investment, absence of management constraints and lower and progressive minimum investment than an investment live. These characteristics are undeniable assets, it is still necessary to choose the support adapted to your needs. A brief overview of the products available on the market.
SCPI, OPCI: two essential pillars of stone-paper
The SCPI is the ideal vehicle for those seeking additional income. This type of fund, fully invested in real estate assets, pays income quarterly. The shares can be acquired by resorting to bank financing. However, the very nature of SCPIs makes their income subject to the progressive scale of income tax and social security contributions. Thus, for a household with a marginal tax rate of 30%, the tax cost will be 47.2% because the flat tax does not apply to this income. SCPIs now offer good liquidity, but if there is no fundraising, the deadlines for repayment of units may lengthen. Finally, remember that the price of SCPI shares is not very volatile and generally reviewed once a year by management companies.
Alternative to SCPI: Collective Real Estate Investment Organizations (OPCI). Although often offered as part of life insurance contracts, some of them can be purchased directly. These vehicles have a subscription / redemption price that varies with each net asset value and generate a lower dividend than SCPIs due to the composition of their assets, which includes a pocket of securities and cash representing between 35% to 45% of their net assets. OPCIs have 2 important assets: income and capital gains subject to flat tax, i.e. 30% social security contributions included, and intrinsic liquidity within 15 days, except in exceptional circumstances.
For people who do not need immediate income, but who wish to invest part of their wealth in real estate assets, investing through life insurance is an effective means. SCPIs and OPCIs are well represented there.
Civil companies: active management in the form of “funds of funds”
Life insurance contracts also make it possible to invest in Civil Companies. Civil companies are almost exclusively invested in real estate, whether directly (in buildings) or indirectly (in other real estate funds). The universe of Civil Societies is wide. In particular, you can find real estate funds of funds set up in this form. Advantage of these structures: the management company selects the best performing funds on the market and changes the asset allocation according to its market convictions. With these products, you no longer worry about the property allocation in your life insurance, while benefiting from the attractive taxation of this support. Finally, Civil Societies generally have little or no entry fees.
The advantage of life insurance is that liquidity is guaranteed by the insurer. Be careful, however, the Sapin 2 law has provided for provisions to restrict the liquidity of these units of account, if necessary. Finally, it is important to take into account the cost of the life insurance contract in the analysis of its investment.
FPS: a top-of-the-range solution for sophisticated investors
For those who wish to benefit from a capitalization real estate investment without entering into the framework of life insurance, real estate FPS type vehicles have made their appearance. These vehicles, reserved for informed customers, accessible from € 100,000, have more investment flexibility than SCPIs and OPCIs, thus allowing exposure to more sophisticated strategies in order to seek superior performance. These can be dynamic strategies aimed at carrying out important work on buildings, whether at the rental level or as part of a work program. Generally fully invested in real estate, these vehicles can, depending on the case, adapt their liquidity to the composition of their assets. This generally depends on the collection and the rate of transfer of investments. Finally, these vehicles benefit from the attractive taxation of income from movable capital (flat tax of 30%, social security contributions included).
SCPI, OPCI, SC or FPS, these vehicles all have their advantages and disadvantages. Unlike a direct investment in a real estate asset, indirect investment in a fund leaves more possibilities in terms of the taxation applicable to the investment or in terms of investment strategies. One important element remains common to direct and indirect investment: in all cases, real estate investment must be considered over the long term.