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French Property Investment: Increased Rent Reduces Income

French real estate investors need to be aware of the results of a new study by Edhec business school published in Explorimmo.

The study completed in February 2014 reveals that renting a property above the market price reduces the profitability of the French property over time.

The higher the rent is above the correct market price for the French property the lower the return on investment, according to the study. For example, if the rent is 20 percent more than the market renting rate the profitability is 4.23 percent compared to 4.47 percent if it was at the correct market rate.

The researchers found the reason for this reduced profitability is due to the increased risk of vacancy as tenants who are paying too much rent will leave the property when they find a better renting opportunity at market pricing. While the French property is empty the owner loses income. In addition, if the rent is too high there is a great risk the tenant may not be able to make a payment.

The researchers say the information requires more research to see if this is always  the case.

Learn more about the right rental pricing for your French real estate investment by working with a local English speaking French real estate professional. Contact today.

Read the original article in French here