Buying a Home: The Action Plan to Follow Step By Step

 

 

How to buy a property at the right price

Buying a home is an important decision that deserves reflection. Indeed, before buying a property you must take into account several parameters to assess the relevance of the operation. Purchase price, financing, expenses of the works, as many points which will determine the result of your investment. If your project is well planned, buying a house can become a source of substantial savings. It is up to you to proceed gradually in the realization of the purchase of your property. Discover in this article 7 steps to buy a property at the right price.

Why buy a property

Pourquoi acheter un bien immobilier - Acheter une maison

Why buy a property – Buy a house

Buying a home is an investment that appeals to more and more people. This can be explained by many economic and personal reasons. Indeed, real estate investing is a great way to:

  • Making a Home : Buying a house relieves you of the obligation to pay rent to your landlord at the end of each month. You become the owner and manager of your property. It is up to you to make the decisions concerning it (sale, renovation work, rental, etc.). In addition, you have the opportunity to pass on wealth to your loved ones.
  • Build wealth : Buying a home is a worthwhile investment to build sustainable wealth. Indeed, real estate investment is less subject to the problems of the economic situation. Moreover if you place it in rent, the return on investment is much higher than that of the usual savings.
  • Reducing taxes : Buying a home is a great way to benefit from tax cuts. The Pinel law for example allows you to reduce your taxes over a period of 12 years for a real estate investment. This reduction can go up to 21% of the cost price of your property. However, pay attention to the purchase price of your property that may exceed that practiced on the market.
  • Completing your income : Investing in rental real estate allows you to collect rent. This constitutes a supplement of income perceived on a regular basis.

Buying a house to invest in rental real estate is a profitable operation that allows you to ensure a transmission to your loved ones and ensure their future.

 

 

Buying a house and investing in real estate: Tax exemption devices

Buying a house and investing in real estate: Tax exemption devices

Investing in rental real estate allows you to benefit from several tax benefits. For this purpose, there are several tax systems that allow you to reduce your taxes. However, real estate developers have the habit of increasing the selling price of goods benefiting from tax exemption (tax exemption products). This state of affairs has two major consequences for the purchaser. The additional cost of the operation exceeds the tax allowance most of the time. Worse still, the resale is done most often at a loss because the purchase took place largely above the market price. Personally, I do not recommend these tax exemption products. However, it is useful to know how they work to make an informed decision.

Investing in new rental real estate: The pinel law

The pinel law is a tax exemption scheme for rental investment. Thanks to this law, it is possible to buy a house and to rent it without contribution. This law gives you the opportunity to benefit from a tax reduction of 21% of the cost price of the property over 20 years.

Invest in furnished rentals: The Censi-Bouvard law

The Censi-Bouvard law relates to furnished rental investments. It allows you to recover VAT on your property. Depending on your LMNP or LMP status, the benefits change. In general, you can benefit from a tax reduction of 11% and the recovery of VAT at 20%

Invest in an old building: The Malraux law

The Malraux tax exemption concerns real estate investments in apartments to renovate (housing for rental). The work done must lead to the total restoration of the property. The Malraux law gives right to tax benefits calculated according to the amount engaged in the restoration. The amount is either 30% or 22% depending on the heritage site.

7 steps to buy a property at the right price

Étapes pour acheter un bien immobilier au bon prix

Steps to buy a property at the right price – Buy a house

To buy a house and make a good investment, you must consider a set of criteria. These criteria or steps will allow you to acquire your property at a fair and equitable price. The price of each home depends on its own value. To determine the value of the property you wish to acquire, you must look at the general and particular presentation of the property in question.

Step 1: The geographical location

Step 1: The geographical location

This is the most important criterion for estimating the price of a home. It takes into account the geographical location of the property. Indeed, the prices are not the same from one city to another, from one district to another. They will tend to be two to three times higher in large metropolises than in remote areas. It must also consider the amenities related to the neighborhood. That is to say, calm, green spaces, proximity to the city center, schools, shops, etc. Similarly, an apartment served by different means of transport will cost more than another more distant.

Step 2: The nature of the property

Step 2: The nature of the property

To buy a house, you must consider the size of the property. In general, the larger the area of ​​housing, the lower the price per square meter. As a result, the price per square meter of a studio proves to be greater than that of a 3 to 4-room apartment. Beyond 4 rooms, the property includes a reduction of 5% to 10%. In addition, for the same area, a home with 2 bedrooms, will cost more than one with only one room.

Step 3: The potential of the property

Step 3: The potential of the property

Evaluating the potential of a property is to define the main targets, study the competition and evaluate the nuisances. Before buying a house, you must set your target for housing. Depending on this, you can opt for either a studio (for students), an apartment or a house (if the target is a couple or a family with children).

Subsequently, a competition study is needed to find out if there is a high demand on the market for this type of housing. For this, you must make a comparative study between the price offers for similar properties and located in the same sector. The goal is to invest in real estate where demand is strong. This guarantees you to easily find tenants and thus ensure a good profitability.

Before buying a house, also consider the parameters that can be a nuisance for future tenants. It can be humidity, pollution, noise, security, etc. Each of these parameters may affect the purchase price of the property.

Step 4: Compare with market prices

Step 4: Compare with market prices

There is a simple method to evaluate the price before buying a house. To do this, you can inquire about the prices of similar properties sold in the same neighborhood. You can have this information from real estate agencies or real estate listings. Find out about price per square meter details published in specialized journals. A comparison between these different prices will give you a rough idea of ​​the price of the property you plan to acquire.

Step 5: Consult a real estate agent

Step 5: Consult a real estate agent

Consulting a real estate agent will allow you to benefit from his expertise and his experience of the market. You will be able to verify in a concrete way if the property is sold at its fair value. Indeed, since it has actual price information for similar goods sold in the same area, it can provide you with the correct information. There is even a possibility that it has a price history of the good in question if it has already been sold in the past.

A notary is also able to provide you with reliable information. He could give you the price of m² that applies in the sector. Since it is involved in this type of transaction, it is ideal for knowing market prices. However, you will probably have to pay notary fees.

Step 6: Well negotiate the price of your property

Step 6: Well negotiate the price of your property

It is important to know how to negotiate the price before buying a house. This is the negotiation that will allow you to get a good price that meets your expectations. For this there are several techniques:

  • Offer a price well below what you are willing to pay in reality: It reassures you to finally conclude at the price you have planned. And maybe even less than the original price you estimated.
  • Pay close attention to the seller: A seller who is in a hurry to sell for one reason or another will be more inclined to yield easily.
  • Push the seller to make an offer: Ask him the question of whether the price of his property is fixed. If this is not the case, ask him at what margin. You bring him to take the lead to begin the process. He will have already taken a step to get out of his position.
  • Use force majeure: By mentioning an external constraint that controls the price you can offer. This may be for example a maximum rate beyond which your bank will not grant you the loan. The goal is to make him understand that you are interested in the good, but you are not able to respond to his offer. You will then push him to make a conciliation so as to offer you a better price.
  • Mention the work to do: This point will allow you to obtain a variable discount between 5% and 10%. It is usually rare to get more. For this you need to make a good estimate of the renovation costs.

Step 7: Take the time to visit

Step 7: Take the time to visit

Before buying a house, it is important to visit the property. So, you must take the time to visit each piece in detail. For that it is necessary :

  • Ensure the proper operation of the installations: Boiler, electrical installation, plumbing, sanitary facilities.
  • Ask questions, take pictures, and once at home, you can study everything in the details.
  • Listen to the seller: In the conversation, you will learn a lot of details about your seller. Pay attention to information such as the duration of the good on the market, the reasons for the sale, etc.

Calculate the yield of a property

Calculating the yield of a property – Buy a house

Once the property is visited, you must estimate the yield of the property. This will allow you to determine whether or not you can consider buying a home. To calculate this yield, you need to consider several parameters:

Cost of renovations

Cost of renovations

There are two methods of estimating renovation costs. The first is to make an estimate yourself by applying a simple method of estimating the price per square meter. Thus, you can estimate the square meter to 200 euros if it is small jobs such as painting again. For works such as changing the floor, locks, lights, etc., count 400 euros per square meter. In case of total renovation, count 800 euros per square meter. The second method is simply to solicit the expertise of a professional.

The rents

The rents

To estimate your rents, it will be necessary to make a comparative study, to know at which price the other owners fix their price. Concentrate on the goods that have the same value as the one you plan to buy.

Bank loan

Bank loan

To avoid the unexpected, it is advisable to set aside a security background of at least one year. This security background is actually a year’s rent. Make as little personal contribution as possible. The bank estimates your monthly payments at 70% of the rent collected. It considers that a margin of 30% of your rent is sufficient to cover the expenses related to the property.

loads

loads

Your expenses include co-ownership taxes, property taxes, property maintenance, rental management and insurance. You can reduce co-ownership taxes by including it in the lease agreement. Thus, it is the tenant who will take care of it. Property taxes generally correspond to 1 year’s rent. You will also have to pay the property assessment fee (CFE) if you are renting furnished.

 

The tax rate

 

The bare rentals are classified in the category of the property revenues, while the furnished rentals are part of the Industrial and Commercial Benefits (BIC). You have the option to opt for a micro plan, and thus benefit from a flat rate or opt for the actual plan and pay your taxes according to your expenses.

It is important that you can generate cash flow right away, in order to make a good deal. The Corporate Tax (IS) will allow you to benefit from a slaughter based on your income.

 

In the end, buying a home is an investment that requires excellent preparation. It is therefore up to you to take into account each of the steps detailed above in order to acquire your property at the best price.

To go further, I suggest you follow this video: How to become an annuitant through real estate

 

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