Benefits and Profitability of a Real Estate Investment
Why invest in Alpine real estate? Investing in mountain real estate is both a pleasure purchase, a source of rental yield, and a good way to build up your assets. Many buyers turn to this type of investment to acquire an apartment or chalet high in the mountains and rent it out during their periods of absence.
Cimalpes will decipher all the advantages of mountain real estate for you and help you invest in the most beautiful resorts of the Alps, Hautes Alpes, and Isère.
Profitable rentals in all seasons
From winter sports to summer adventures, the most beautiful ski resorts have reinvented themselves to offer colourful holidays all year round.
The phenomenon of cold beds (accommodation only occupied during the winter holidays) is on its way out, replaced by a much more diversified mountain experience. Courchevel, Megève, Saint Martin de Belleville, and many other mountain villages are reinventing the alpine experience by offering a wide choice of activities: visiting a spa resort, paragliding lessons, themed hikes, gastronomic stays, festivals.
At medium and high altitudes, it is now possible to rent out your chalet in all seasons, provided you choose a welcoming and versatile property. The mountain character, so dear to the Savoyards, is an undeniable asset for holiday rentals and weekends with family or romantic partners.
Even at the height of the financial crisis, high-altitude ski areas and renowned villages continue to increase in value over time. Whatever the difficulties encountered both by the French and the international community, holidaymakers will always need a safe place and clean air to recharge their batteries. A calm living environment, outdoor activities, and exceptional comfort are among the most sought-after assets offered by chalets and apartments for rent in the mountains.
Property, a safe haven par excellence, is therefore a good choice for an investment.
Tax measures also make it possible to improve the profitability of this investment by opting for one of two schemes: the non-professional furnished rental (LMNP) or the para-hotel scheme.
Benefit from VAT recovery thanks to the para-hotel scheme
The para-hotel scheme makes it possible to offer many services to its tenants while recovering the VAT on them. The provision of beds made on arrival, a daily breakfast service, and cleaning during the stay are all services that increase the rental potential of the property. The flexibility of rents (in and out of season) is thus reduced by the implementation of additional services.
This scheme is also particularly advantageous for the purchase of a new property (20% VAT). 20% VAT is refunded provided that the new owner agrees to continue renting out the property for a minimum period of 20 years. As under the LMNP scheme, if this condition is breached, VAT is only to be returned in proportion to the remaining time.
If the Pyrenean real estate market suffers from high levels of debt and a certain lack of profitability in the majority of its resorts, the Alpine market on the contrary offers net profitability of 3 to 5%.
At high altitudes, the turnover per skier is around €1,000/week. Chalets and apartments for rent, therefore, rely on quality to attract exceptional customers looking for an exceptional experience. By carefully choosing the location of their properties for rent, mountain investors ensure that they obtain regular income.
The LMNP scheme allows many charges to be deducted from rental income. Loan interest, property tax, any renovation work and management costs generated by the rental of your second home can quickly put you in a property deficit. You will then be non-taxable.
If the rent, excluding charges received during year N-1, does not exceed €140/m², you are even exempt from taxes.
According to LMNP precedent, even notary fees can be depreciable under this tax system. In addition, the depreciation of furniture acquired for rental often covers the rental income generated during the first years. Some shrewd buyers even take advantage of this scheme to buy ideally located but poorly arranged adjoining cabin studios to create new, more spacious and much more comfortable rental apartments at the foot of the slopes.
Note: investing in a service residence of a new home or off-plan under LMNP status allows you to benefit from the reimbursement of the VAT advanced on the purchase of the property. The only constraint is that in the event of early resale (less than 20 years after the purchase) without taking over the lease, the VAT will be returned in proportion to the remaining time.
Invest in mountain LMNP
The status of the non-professional furnished rental owner is reserved for owners of furnished rental accommodation who meet the following criteria:
Annual rental income is less than €23,000
Rental income is lower than the total income of the tax household
To be considered furnished, the accommodation must be equipped with everything necessary so that holidaymakers only have to put down their suitcase. According to the Alur law, it is particularly important to ensure the mandatory presence of duvets and pillows, cutlery, a kitchen and household maintenance equipment.
At medium altitude, chalets and apartments for sale are more affordable. Out of season, they make it possible to target a clientele of retirees looking for calm environments and unspoiled nature. The initial purchase price is generally more favourable for those on a budget, but the resale value increases much less quickly than that of the most prestigious resorts.