SCPI: Investing in Real Estate without Buying Properties
Real Estate Investment Trusts (REITs) are investment vehicles that allow access to real estate without having to directly purchase properties. Created in 1970 under the impetus of Law No. 70-1300 of December 31, 1970, they offer investors a way to benefit from regular income while spreading risks across a wide portfolio of real estate properties. This guide explores in detail how REITs work, their advantages, and precautions to take before getting started.
What is a REIT?
A REIT is a company that collects funds from investors to acquire and manage a portfolio of rental real estate properties. In return for their investment, investors become co-owners of the properties and receive income proportional to the rents collected by the REIT. For example, if a REIT acquires an office complex in Paris worth 10 million euros and you own 1% of the shares, you will receive 1% of the rents generated by these properties.
Example of Operation
Suppose you invest €20,000 in a REIT in January 2024. With an average annual return of 4.5%, you could receive around €900 per year, or €225 per quarter. Unlike direct real estate purchases, you won't have to worry about rental management, repairs, or unpaid rent, as these aspects are handled by the REIT itself.
The Advantages of REITs
REITs offer several advantages:
- Accessibility: Unlike directly purchasing real estate, which requires a significant capital, it is possible to invest in a REIT with much smaller amounts, often starting from a few thousand euros.
- Risk Diversification: By investing in a diversified portfolio of properties, rental risk is spread among multiple tenants and types of properties. For example, a REIT may own offices in Paris, shops in Lyon, and residences in Île-de-France, thus reducing overall risk.
- Professional Management: Property management is entrusted to professionals, allowing investors to benefit from optimized management without having to handle it themselves.
The Disadvantages of REITs
Despite their advantages, REITs also have disadvantages:
- Capital Loss Risk: Like any real estate investment, the value of REIT shares can fluctuate depending on the real estate market and the performance of the REIT.
- Limited Liquidity: REIT shares are not as liquid as publicly traded stocks. Selling shares can take time and depends on demand in the secondary market.
- Management Fees: REITs charge management fees, which can reduce the net return for the investor.
Legal Texts and Taxation
Income from REITs is subject to income tax and social security contributions (17.2% in 2024). Under Article 15 of the General Tax Code, capital gains realized when selling shares are also taxed, with deductions based on holding period. For example, after 22 years of ownership, the deduction on taxable capital gains is 100%.
Conclusion
REITs are an interesting solution to diversify real estate assets without the constraints of direct management. They provide access to real estate for moderate amounts, with risk diversification and delegated management. However, it is essential to understand the mechanisms of this type of investment and ensure that the risk is in line with financial objectives. A financial advisor can help determine if REITs are suitable for your financial situation.
