Real estate investment companies or SCPIs have the role of collect money from investors then use it to purchase a property and take care of asset management. The investor receives rental income in the form of dividends every three months. This type of investment is increasingly popular today, but be careful, it is not without risk. Discover in this article the 5 traps to avoid when selecting SCPIs.
Focusing on a single share of SCPI
Basically, SCPIs are dedicated to spreading risks. But you can go even further to limit breakage. To do this, make sure to diversify your portfolio by acquiring several SCPI shares. This allows you to benefit from higher rate returns. However, this option is interesting beyond the threshold of 10,000 euros.
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Not knowing enough about fees
When you buy SCPI shares, you are required to pay the associated fees. This includes the transfer fee, the subscription fee, the acquisition fee, the management fee and the works management fee. Generally, entry fees vary between 5% to 12% of share value. Management fees, for their part, fluctuate between 8% to 10% of dividends.
Neglecting the choice of management company
The management company is, in a way, the common thread of your investment. When making your choice, you must find out about the yield by adopting the following formula: distribution rate on market value divided by the average price of the units. Afterwards, check the diversification system put forward to limit risks. You can move towards SCPIs invested in different real estate structures, in several different locations, etc. Also examine the liquidity of the units, management fees and ratios.
Not understanding the waiting period
The waiting period is the period between the date of investment and that of payment of the first rent. It can last between 3 and 9 months depending on the management company. This delay is a significant detail, particularly for SCPIs with variable capital, because it has an impact on the shareholders’ cash flow.
Not taking into account the tax aspect
It is important to emphasize that income from SCPI shares is subject to the progressive scale of income tax, but also to social security contributions. This taxation is not necessarily interesting, particularly in terms of the investor’s return. Find out about this aspect before embarking on this type of investment since it is not always favorable for large taxpayers.
