Should you invest in a serviced residence on the secondary market?
In an unstable economic and real estate climate, the rental investment market for properties managed under commercial leases (LMNP for seniors, students, business, or tourism), whether new or existing, meets the expectations of investors seeking performance, transparency, tax optimization, and responsible investment practices.
The secondary market for managed real estate, in addition to offering high and sustainable returns combined with controlled risks, differs from the new-construction market in that the properties have already been in operation for years, thereby allowing investors to immediately generate rental income that is subject to little or no taxation. This market—which remains relatively unknown—has proven to be resilient and is proving particularly dynamic, offering genuine opportunities to those who take the time to seriously explore it.
With transaction volumes that are constantly changing and offering high average returns (over 5%), investing in the secondary market in
A managed residence (for seniors, students, business travelers, or tourists) is now an essential component of any wealth management strategy.
The Benefits of a Dynamic Market
Purchasing a managed residence on the secondary market offers several advantages. First, it ensures immediate and high returns, since the property immediately generates rental income because the residences are already in operation. In addition, the net return after expenses and taxes ranges from 3.5% to 8%.
Second, the average investment amount is more affordable and easier to finance, with acquisition budgets averaging around €100,000. The average transaction value reported by Consultim, the French market leader, was €95,000 in 2023, ranging from €35,000 to €500,000.
Another advantage of the secondary market for managed real estate lies in the existence of a management track record for these properties, which allows investors to manage risks based on the asset’s lifespan, as well as the reliability and financial stability of the property manager. Furthermore, this type of investment aligns with new investment trends by offering properties such as student housing or senior living facilities, for example, which address investors’ social and sustainability concerns.
The variety of managed vacation home types available on the secondary market also allows investors to select the product best suited to their budget, financial goals, risk tolerance, and risk appetite. Finally, vacation residences, with their attractive locations (seaside, mountains, etc.), offer the opportunity to combine enjoyment with profitability—whether by using the investment for personal vacations or by obtaining discounts on public rates from partner brands.
The LMNP in Managed Real Estate: Favorable and Stable Tax Treatment
In addition to profitability, transparency regarding the property’s history, and a low initial investment, a managed residence in an older building qualifies for the favorable tax treatment available to “non-professional furnished rental property owners” (LMNP). Under the “réel” tax regime, this arrangement allows owners to depreciate the property and furnishings for accounting purposes, in addition to deducting standard property-related expenses (loan interest, property tax, etc.), thereby avoiding tax on this rental income—either partially or entirely—for a period that may exceed 20 years.
Used or New: Different Strategies
New or existing homes—which should you choose? Both have characteristics and advantages that will appeal differently to investors depending on their savings profile. For example, some will prefer new construction to take advantage of the legal framework for off-plan sales (VEFA) and the associated warranties (two-year and ten-year), while others will opt for the secondary market to benefit from immediate income, since it involves a cash payment.
In reality, investment decisions are often based on two criteria: location and budget. Depending on these factors, investors will find opportunities in one or the other market—or even both. However, for investors with a modest budget, as we enter the second quarter of 2024—with interest rates continuing to fall and high yields available in the secondary market for managed residential properties—now seems like the ideal time to make an investment there. Yields are at their highest level in 10 years because they have adjusted to changes in the interest rate market (bank, financial, and real estate savings, as well as borrowing conditions), and rent indexation allows for sustained growth over time and effective protection against inflation.
