Good for the long term - March 2011
From Riviera Times
The pros and cons of an SCPI when investing in propertyAn SCPI (société civile de placement immobilier) is a French entity holding real estate, similar to an SCI but open to the public. The difference with an SCI is similar to the one between a listed and privately held company. An SCPI can be compared to a listed company, as in fact the subscriber becomes a co-owner of a real estate portfolio that can consist of offices, warehouses, shops or even houses or flats.
What are the costs and return?
Subscription fees are usually high as they are comparable to notary fees and registration tax. In the event of a sale, capital gains tax is similar to a buy-to-let. However, the investor receives a rental income based on long term leases (4 to 6 per cent return) and can also expect capital gains similar to any real estate investment. It therefore gives an investor a solid long term return and security.
Why can it be interesting?
Depending on the client’s tax profile, it can be interesting to buy the shares through an insurance policy, because it minimises the tax when sold. In this case, instead of a tax on rental income and capital gains, the taxation rules of the life insurance, which are often more beneficial, apply. Moreover, the insurance company insures the liquidity of the secondary market. Financially, it is also an interesting alternative to bonds that are currently generating a low income and could suffer if inflation rises, and to equities which many investors are avoiding due to their volatility. Because of the financial and tax advantages, we think this type of investment should be considered by long term investors.
How does one subscribe?
The most important thing is to choose the right SCPI and the right way to buy it. For instance it could be done directly or through a life insurance policy. As a financial advisor to North European individuals, RFP can advise clients and help them to integrate this type of investment into their global investment
strategy, in the best financial and tax conditions.
Riviera Financial Planning
Independent Financial Advisor
and Mortgage Broker
Tel: +33 (0)4 93 00 11 26