Investing in Paris real estate: how much can you earn on rent
According to a study by Cushman & Wakefield for 2014, Paris ranks sixth in the world in attractiveness among investors. Every year they invest in property in the French capital more than $ 20 billion.
In Paris to invest in real estate of any type, however, the greatest efficiency among residential properties bring the Studio in downtown, and commercial areas — offices and shopping malls on the periphery.
“The average return for all property types is around 5-6 %, in rare cases — 8 %. The minimum capital for market entry income amount to 400-500 thousand Euro”,— says Marina Nonprofi, head of Department on work with Russian-speaking clients of the company “Cabinet T2I”.
20 % of buyers of luxury real estate in Paris — the citizens of the CIS countries
Housing: it is cheaper to invest in the Studio
Often, investors buy in Paris, Studio or one-bedroom apartment, then to take them to tourists or students. The proportion of such buyers is about 11 %, which is twice more than the national average.
“Buy real estate for short term rental is very profitable. Restrictions on short term rentals not more than long-term, and profitability is much higher. In addition, the French and foreigners alike, by organizing your vacation, are increasingly make a choice in favor of renting studios and apartments and not live in hotels. This is especially attractive for families with children: so it saves the budget and better meals will be provided,” says Marina Nonprofi.
Champs Elysees — the most expensive street in Europe, the most beneficial lease, says Marina Nonprofi. Indeed, in Central Paris, housing the greatest demand and is the most expensive. However, it is recommended to pay attention on promising areas — those in which the construction of new infrastructure and upgrades.
For example, small apartments in demand in the 2nd arrondissement near Les Halles, which is a large-scale reconstruction, erected new buildings and shops open. The most prestigious in the 2nd arrondissement is Rue Montorgueil. The apartments here are on average 9.3 thousand Euro/m2.
Most students live in one-bedroom apartments or studios
The main source of income of the investor that decided to invest in the Studio, are students. Focusing on this category of tenants, you should pay attention on districts 5, 6 and 13, in which many universities (Jussie, University of Paris VI Pierre et Marie Curie, University Paris I panthéon – Sorbonne and others). About 70 % of the total housing stock here consists of small apartments. Prices vary from 7.5 to 8.5 thousand Euro/m2. Students also prefer to rent a house in the area of metro station “Abbesses”, in Montmartre (arrondissement 18). But less than 10 thousand euros/m2 for the investors it is hard to find something.
The cost of the studios depends on the County. For example, in the East of Paris objects of this type are at least 140-160 thousand euros, in districts 14, 15 and 16 — from 150-170 thousand euros. In the most prestigious areas of the centre it is almost impossible to find cheaper housing 250 thousand euros.
According to the information Lavieimmo.com rental in Paris is an average of 21 Euro/m2 per month. Most expensive homes for rent in the 5th and 7th districts. Residents give an average of 29.7 Euro/m2 per month. Cheapest rent apartments in nothing remarkable 19th district (20,8 € /m2).
| County | Rent, EUR/m2 per month |
Gross yield % |
|---|---|---|
| 1 (Louvre) | 29,00 | 3,50 |
| 2 (Exchange) | 27,50 | 3,68 |
| 3 (temple) | 28,00 | 3,39 |
| 4 (Hotel de Ville) | 29,30 | 3,41 |
| 5 (Pantheon) | 29,70 | 3,43 |
| 6 (Monaco) | 28,30 | 2,90 |
| 7 (Palais-Bourbon) | 29,70 | 3,33 |
| 8 (Champs Elysees) | 27,50 | 3,33 |
| 9 (Opera) | 26,20 | 3,55 |
| 10 (Uncle-Saint-Laurent) | 23,60 | 3,78 |
| 11 (Popenker) | 25,40 | 3,74 |
| 12 (Reuilly) | 23,60 | 3,78 |
| 13 (Tapestry) | 24,30 | 3,81 |
| 14 (Observatory) | 24,80 | 3,56 |
| 15 (Vaugirard) | 24,30 | 3,43 |
| 16 (Passy) | 26,50 | 3,49 |
| 17 (Batignolles-Monceau) | 25,40 | 3,74 |
| 18 (Montmartre) | 22,40 | 3,81 |
| 19 (Buttes-Chaumont) | Of 20.80 | 3,77 |
| 20 (Belleville) | 21,20 | 3,69 |
| Paris | 21,20 | 3,69 |
According Location-étudiant.fr in Paris, students renting Studio in an average 744 euros per month, one — bedroom apartment-1 249 euros.
Studio bring you a higher income than medium and large apartments. For example, in the 19th arrondissement Studio 22 m2 $ 165 thousand euros for rent for 700 euros a month (gross yield of 5.09 %). In the same area two bedroom apartment of 62 m2 offers 1 600 euros per month (gross yield was 3.31 %). Big impact studios to compensate for the disadvantages of this type of real estate: a shorter time of the lease, less reliable tenants, the need for more frequent repairs compared with the spacious apartments.
Usually net income (including maintenance expenses) is approximately two times lower than gross income.
| Area | 50 m2 |
|---|---|
| The cost when buying | 9 000 Euro/m2 |
| Rent | 24 Euro/m2 / month |
| 0288 € /m2 per year | |
| Gross income | 3,2 % |
| Downtime, failure to pay, management costs |
28.8 euros/m2 per year (10 % of annual income) |
| The cost of maintenance and repair | 135 Euro/m2 per year (1,5% from apartment cost) |
| Net income | 124 Euro/m2 per year |
| 06 210 euros per year | |
| 01,38 % | |
Commercial facilities: offices and shops
“Commercial real estate is also in demand, but it is expensive, and besides, such proposals are less. Sold as “walls” (with the signed lease agreement or without) and “commercial Fund” — the right to rent and the opportunity to engage in activities in this room,” says Marina Nonprofi.
According to her, the offices and shops should acquire in the 8th arrondissement, especially around the Champs elysées, as well as districts 2 and 9.
The cost of renting the most expensive shops on the Champs Elysees more than 14 000 Euro/m2 per year
According to Cushman & Wakefield’s 2014 Paris occupies the 10th place in the world most expensive offices. In the city center rent is 860 EUR/m2 per year. In Defence main business district of the capital, the offices are rented on average about 550 euros/m2. Slightly different data, CBRE:
| Regions | New or refurbished |
Secondary |
|---|---|---|
| The center and West | 542 | 404 |
| South | 431 | 342 |
| Northeast | 327 | 257 |
| Defense | 415 | 340 |
| 1st ring | 227 | 147 |
| 2nd ring | 159 | 108 |
| Ile-de-France | 296 | 218 |
According to CBRE, the yield of offices in the centre and West of Paris are 4,25–5,75 %. The less popular the area the higher the yield and Vice versa.
| The center and West | 4,25 – 5,75 |
|---|---|
| Defense | 6,25 – 7,50 |
| 1st ring | From 6.25 to 9.00 |
| 2nd ring | A 6.75 – 12,00 |
According to Cushman & Wakefield for 2014, the French capital ranks third in the world at cost of rent of commercial real estate. At the most expensive shopping street of Paris and all of Europe — the Elysian Fields — the objects are sold in an average 13 255 Euro/m2 per year.
| Neighborhoods | Street | Rent |
|---|---|---|
| Golden triangle | Champs Elysées, street Francis I, Avenue Montaigne and George V |
2 500 – 14 000 |
| Opera – Vendome the area of Saint-honoré |
Rue Saint-Honoré, de La Paix, Royal, Faubourg-Saint-Honoré, Avenue de l’opéra |
1 500 – 8 000 |
| Large stores | Street Tronchet, boulevards Haussmann, Madeleine, Capuchin |
1 800 – 6 000 |
| Mare | Street Rozier, The Francs-Bourgeois, Vieille-du-temple |
1 500 – 4 500 |
| Rivoli – place de La Bastille | The Rue De Rivoli | 1 500 – 3 500 |
| Latin quarter – Saint-Germain – Odéon |
The Boulevards Saint-Germain Saint-Michel street Rennes, sèvres |
800 – 3 500 |
| Le-Al | The Boulevard Of Sevastopol, street Etienne Marcel |
500 – 2 000 |
| Large boulevards | The Streets Of Richelieu Druot, Poissonnière, Boulevard Bonn-Nouvelle |
500 – 1 500 |
According to Colliers International, the average yield of retail facilities in the Paris amounts to 4.75 %. According to CBRE, the shops on the main streets of Paris bring 4-6% per annum.
| The shops on the main streets | 4,00 – 6,00 |
|---|---|
| Shops on secondary streets | 5,90 – 8,00 |
| Shopping malls on the outskirts (Ile-de-France) |
5,65 – 8,00 |
* * *
Among residential facilities are the best of the Studio: they bring a higher income in comparison with the spacious apartments, and budget for their purchase does not have to be large. Liquid offices and shops are expensive, but bring a good income, especially those located in the centre of Paris. Such facilities are beneficial because they guarantee stable investment: contracts for several years, during which it is possible not to worry about finding tenants.
Yulia Kozhevnikova, Tranio.Ru
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