Real estate remains a safe haven for investors
Amid political uncertainty and high real estate prices, real estate remains a safe haven for investors. But is it worth it to invest in an energy-inefficient property just to renovate it?
SeLoger's research team presents the first study on the payback period for a rental investment based on energy efficiency ratings, revealing new opportunities for buyers seeking profitability.
Amid a uncertain political climate and high real estate prices, real estate remains a safe haven for investors. However, interest rates—which have quadrupled over the past four years—do not appear to support attractive rental returns.
However, regulations based on the Energy Performance Diagnosis (DPE) may well offer new opportunities for buyers seeking a good return on investment. But is it really a good idea to invest in a home with poor energy efficiency and renovate it in 2024?
Surprisingly high profitability in major cities
Contrary to expectations, investing in a property in need of renovation as part of a rental investment strategy has proven to be the most profitable move in more than a quarter (27%) of France’s major cities. This strategy proves to be more advantageous than investing in a comparable property with a higher energy efficiency rating that does not require any renovations before being rented out.
A Significant Discount on Purchase
The significant discount when purchasing an energy-inefficient home largely explains the appeal of renovating these properties as a rental investment. For example, in Lille, a typical 45-square-meter apartment can be purchased for €122,227 with an F or G energy efficiency rating, compared to €158,490 for one with a D rating—a difference of €36,263 due solely to the energy efficiency rating.
Based on renovation costs of €500 per square meter, this discount covers almost the entire cost of the renovation (€22,500) as well as real estate agent and notary fees (€15,890 in this case). Thus, purchasing an F- or G-rated property to renovate as a rental investment in Lille proves profitable from the very first year, compared to three years for an investment in a similar D-rated property that requires no work.
A national trend
This trend is not limited to major cities. In 17% of departments, it pays off faster to invest in an energy-inefficient property and renovate it than to invest in a property with a better energy performance rating, assuming renovation costs of €500 per square meter. This holds true in 70% of departments if the cost of the work does not exceed €250 per square meter.
