Rental Property Investment: The Most Important Part Happens After the Appointment with the Notary
The turnkey investment market is structured around the transaction: finding the property, securing financing, completing renovations, renting it out, and closing the deal. However, the decisions that determine an investment’s profitability over a 15-year period come afterward. Tax treatment, choosing between unfurnished and furnished rentals, cash flow, and resale: a look at the areas where individuals lose the most money.
The tax choice, often made by default
The first decision—and a fundamental one—is the tax regime for rental income. For unfurnished rentals, the “micro-foncier” regime applies automatically for property income under 15,000 euros, with a flat-rate deduction of 30%. Above that threshold, or if you opt for it, the “réel” regime applies, allowing you to deduct actual expenses, loan interest, and maintenance costs.
The calculation is quick, but almost no one does it. As soon as deductible expenses exceed 30% of the rent—which is the case for virtually all properties financed with a loan—the net result becomes more favorable. The resulting property loss is deducted from total income up to a limit of 10,700 euros per year, with any excess carried forward for ten years. For a property purchased that requires renovations, the tax savings amount to thousands of euros. One caveat: opting for the actual method commits you for three years.
For furnished rentals, the rules are different. The micro-BIC system offers a 50% tax deduction on income up to 77,700 euros for long-term rentals. For short-term rentals, the reform that took effect in 2025 tightened the rules, with a 30% deduction on income up to 15,000 euros for unclassified tourist rentals. The actual-cost tax regime under the LMNP, on the other hand, allows for depreciation of the property, which often offsets the tax on rental income for ten or fifteen years.
Depreciation is no longer tax-free
This is the point that many investors who entered the LMNP program before 2025 failed to take into account. The 2025 Finance Act put an end to a major benefit of the program: depreciation claimed during the holding period is now included in the calculation of capital gains at the time of resale. In practical terms, the acquisition price is reduced by the amount that has been depreciated, and the taxable capital gain increases accordingly.
This does not rule out the LMNP, which remains highly effective during the holding period. It changes the exit calculations—and thus the optimal time horizon. An investor who planned to sell after ten years will need to recalculate. Those aiming for a long-term holding—until capital gains tax is waived after twenty-two years and social security contributions are waived after thirty years—are much less affected.
Cash Flow: The Blind Spot in the Investment Structure
A second source of unpleasant surprises is the discrepancy between reported profitability and the cash actually available. A gross return of 6% advertised at the time of sale can easily drop to 3% after taxes once property taxes, non-recoverable expenses, rent default insurance, management fees, vacancy costs, and the provision for repairs are deducted.
The calculation to make before buying—and then to repeat every year—is that of after-tax cash flow. A property that costs its owner 150 euros per month isn’t necessarily a bad investment, as long as the owner can cover the savings requirement and the tenant pays off the mortgage. On the other hand, an investor who realizes this requirement only after the fact sells at the wrong time.
Because the fundamental question isn’t who ends up on the phone after the sale. It’s about what you expect from a real estate portfolio fifteen years down the line: supplemental income, passing it on to the next generation, or capital appreciation. These objectives require different tax regimes, different ownership structures, and different resale timelines. An SCI subject to corporate income tax makes sense only for certain profiles. A property split makes even less sense.
Three appointments to mark on your calendar
The first takes place in the first year, to choose a tax plan based on full information rather than by default. The second is around the fifth or sixth year, when the mortgage has begun to be paid off and the question of a second property arises. The third is five years before the planned resale, to decide whether to keep, sell, or pass on the property. None of this is settled at the notary’s office on the day of signing.
