SCPI: a property investment for a broad public
Property investment is a savings solution that provides a way to invest simply and indirectly in leased properties.
Buying SCPI shares is suitable for every budget, which means that young professionals or pensioners alike can access regular additional potential revenues and thus respond to their different investment objectives (preparing for the future, adding to pension income, etc.).
SCPI: a popular investment option suitable for every budget
SCPI propose a way to invest in property with a relatively small capital outlay, much less than that necessary for a direct investment. According to the French Association of property investment companies (Aspim), average SCPI shares prices fall between 200 and 1,000 euro.
Generally one needs to subscribe to a minimum of five or ten SCPI shares. But the price to be paid remains unbeatable when compared to the personal contribution required to buy real estate property directly. When you invest in a SCPI, you can calibrate your investment in terms of your financial capacities. Your investment could be progressive, by purchasing SCPI shares over time depending on your treasury, savings budget and your personal situation in general.
As a young professional: subscribing for SCPI shares is a way for you to prepare for your future.
Subscribing for SCPI shares is an excellent way to prepare for your future thanks to the potential revenue pay-outs (dividends) and the final value increase of your invested capital over time*.
This type of investment can also be done on credit if you do not have the available liquidity or do not wish to move a part of your capital around. In all cases, investing in SCPI shares should be seen as a long term undertaking. The current low interest rate situation means that you could increase your assets with a relatively limited savings effort that you can adjust to suit your situation, the rent received could even cover a part of your monthly loan repayments**.
You could also benefit from the financial leverage effect of loans, since the interest paid will be deducted from your rental income when you calculate your taxes. Once you have repaid the loan, you will own capital which will have already increased in value and be receiving regular potential revenues paid out in the form of quarterly dividends.
Primonial REIM, the leading SCPI asset management company, has also set up a system allowing investors to make scheduled payments. The service proposed by Primonial REIM allows investors to choose the amount that they wish to invest periodically in SCPI, the investment rhythm (monthly, quarterly, half-yearly, yearly), whilst also allowing them to modulate their payment amounts, switch them from one SCPI to another, or to stop them without paying any extra charges. The potential dividends generated by Primonial REIM SCPI are paid out quarterly.
If you are retired: subscribing to SCPI shares is a good way to access additional potential revenues in addition to your pension income
Subscribing to SCPI shares is an excellent way to invest any available reserves. By paying directly your investment will immediately provide you with a regular (quarterly in general) additional potential revenue. The revenue will be far higher than if you place your funds in a classical savings scheme (Livret A). And less volatile than stock exchange investments.
The rent income paid out by the SCPI is taxable. However your income tax rate could well be comparatively low since your pension income will be lower than your most recent salaried income. And in addition, if you own a property that is leased out directly as well as the SCPI shares and you receive no more than 15,000 euro in annual rent income, you could benefit from the advantages of the micro-property owner taxation scheme. The advantage of this is a 30% rebate on your taxable rent income.
Investing in SCPI shares when you are retired is also an interesting way to hand down your assets. When you die, the division of your share portfolio amongst your heirs will be a lot simpler than for a physical property. They could even sell some of the shares to cover the inheritance tax.
Good performance in spite of the crisis
Over the last 30 years, SCPI have never generated average returns below 4%*. In 2019, the average market value distribution rate (TDVM) was 4.40%.
In spite of the public health crisis and the difficulties faced by tenants unable to make their payments, the perspectives remain positive for 2020. For example, the effects of the crisis on dividend pay-outs should be quite limited for Primonial REIM Group SCPIs. For 2020 as a whole, the company plans to distribute additional regular revenues to each associate, without any negative impact on the values of the shares of its SCPIs.
Since they are not listed on the financial market, they are less volatile than other types of investment whilst still generating interesting returns.
Just as with any other property investment, investments in SCPI shares are not secured. The potential income, the values of the shares and their liquidity may rise or fall depending on the property market. However in the long-term, they are a very interesting compromise between risk and returns for private investors.
(1) Sources: Aspim and IEIF figures
(2) Sources: ACPR estimation
IMPORTANT FIGURE: 65 billion euro
This was the total value of the SCPI market at the end of 2019. SCPI capitalisation doubled over the last five years (2014 - 2019), which clearly demonstrates a general sense of private investor enthusiasm for property investment (Sources: Aspim and IEIF).
*As with any property investment, there is a risk of capital loss that may be caused by fluctuations in property markets and/or currency exchange rates. Revenues are not guaranteed, they may rise or fall depending on how the trust performs. An SCPI is a long-term investment with a recommended investment period of 10 years. Liquidity is limited, the management company cannot guarantee the resale of shares. As with any investment, past performances are not an indication of future performance.
**Investing on credit involves risks: a loan commits the subscriber and must be repaid. Check your repayment capacity before you commit. The subscriber must not take into account exclusively the income from the SCPI, given their random nature, to meet his repayment obligations.