Borrowing is always advantageous to finance a rental investment. You increase your real estate purchasing power, you lower your taxes. And you protect your family.
Finance a rental investment
Credit remains the best way to finance a rental investment. First because it is leveraged: it allows you to become the owner of a property that is more difficult to pay cash. Note that rental real estate is virtually the only investment that can be financed by a loan. Banks will not lend you money to buy stocks…Second; the credit interest rate is usually lower than the gross return of your real estate investment. If you add the rental yield to the return on capital, the overall profitability is greater than the cost of your loan. In short: you are a beneficiary. A particularly sensitive trend since the movement of falling interest rates started since 2011.
Finally, loan interest is deductible from rent, which optimizes your tax. This very interesting possibility is open to investors in empty rental as well as in furnished rental. In addition, the mortgage is almost always associated with death and disability insurance, which secures the transaction. Most often, the rent you collect does not cover the entire monthly loan. Each month, you must spend a certain amount of money on your investment. Consider this savings effort or cash effort in your financial calculations.
Credit reduces your taxes
Deduct loan interest on empty lease
In empty rental, you deduct the interest of borrowing from your property income (rents in tax language). As they go down, you optimize your tax system. Borrowing interest can contribute to creating a land deficit. The latter is imputable to your overall income. The latter are reduced, which necessarily reduces your taxes. The deductible interest amount is not capped. It is not limited in time. The deduction includes ancillary expenses related to the credit such as the administration fees.
Deduct borrowing interest in furnished rentals
You are rented in unprofessional furnished. You deduct loan interest from your rental income if you choose the actual plan. With decreasing revenues, you pay less taxes. If you opt for the flat-rate scheme, you cannot deduct the interest: you do not benefit from any deduction but a flat-rate deduction of 50% on your receipts. Are you a professional furnished rental? You deduct all expenses from your overall revenues. Loan interest is included in the calculation of expenses. They are therefore deductible. Again, you lower your tax burden.
Loans dedicated to rental investment, like most mortgages, come with death and disability insurance. In case of death, total loss of autonomy or permanent disability, she takes the repayments of the loan in charge. Your family is protected: it keeps rented housing, it collects rents. What guarantee its future!