What is the best strategy for investing in an SCPI?

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The SCPI (civil company for real estate investment) designates a form of company, which holds the ownership of various real estate assets operated for profit. With the acquisition and management of real estate as its core activity, this company opens its capital to other investors. SCPIs allow various investor profiles to own shares in a real estate portfolio, without committing time and resources to its creation or management.

With such operation, the SCPI is particularly practical and attracts many savers. Statistics published by ASPIM (French association of real estate investment companies) reveal that in 2021, net inflows of 7.37 billion euros were recorded for SCPIs [1]. These 7.4 billion represent an increase of 21.22% compared to 2020. The average return of SCPIs over the year 2021 was also 4.45%, a rate of return significantly higher than that of the life insurance or booklet A.

The SCPI certainly has the characteristics required to attract an investor. But it is still necessary that the latter adopts the right strategy!

SCPIs also obey one of the main investment rules: you must define your objectives beforehand.

A young thirty-something who has worked for 6 or 7 years and has just welcomed his first baby will not have the same investment objectives as a fifty-something who is less than 10 years from retirement. What is your wealth objective? Defiscalize or obtain annuities? Your situation and your vision should guide your choices.

While it is true that each type of SCPI can be more or less perfect depending on your situation, one of the most relevant strategies for investing will be to diversify your SCPI shares. By building an SCPI portfolio comprising a variety of assets, you protect your investment from the declines that a segment may experience.

For illustration, in 2020, SCPIs holding commercial buildings had obtained catastrophic results, due to the pandemic. On the other hand, SCPIs whose real estate portfolio included specialized goods (logistics, health, etc.) had recorded good performances.

The diversification of your SCPI units allows you to amortize losses over time. Based on this logic, most SCPIs select properties spread over several geographical areas.

If you have an annuity objective, it would be preferable to bet on a performance SCPI. A SCPI of this type is able to pay you income on a regular basis. It generally positions itself in a niche rental real estate market. If you rather want to reduce your taxes, choose a tax SCPI. The latter makes you own shares of very specific assets (corporate assets, monuments, etc.), giving the right to a tax reduction, a tax deduction on work costs, etc.

Finally, there are capital gain SCPIs, for investors who are part of long-term savings. A capital gain SCPI specializes in the purchase and resale of buildings, apartments, etc.

Your strategy must cover all the points likely to influence the safety and the profitability of your investment in SCPI. To do this, also direct your thoughts towards the budget to be provided for the investment, and towards the number of SCPI shares to buy.

One of the main advantages of SCPIs is the low minimum amount required. While for a direct investment in real estate, you will need several tens or hundreds of thousands of euros, a few thousand euros are enough to acquire shares in an SCPI.

It is then up to you to freely define the amount you wish to invest in the paper stone: part of your savings, all of your savings, etc.

There is of course no standard number of shares to acquire. The main thing is that you invest in types of SCPI allowing you to have a diversified portfolio, or in a single SCPI corresponding to your profile. For reasons of practicality and for the fluidity of management, most SCPIs nevertheless require each investor to buy a minimum of shares.

Considering these parameters, the minimum amount to invest in an SCPI is on average between 3,000 and 5,000 euros.

To establish your investment strategy in SCPIs, the question of financing is also essential. For investors with substantial savings, cash investing is the most popular option. The investor injects his money into a reliable asset, and can expect regular profits, while protecting himself from the costs of the inactivity of his assets.

A second financing solution exists, however: mortgage. If an investor chooses to invest in an SCPI with a mortgage, a priori because he does not have substantial savings, he should ideally turn to a performance SCPI. The income he receives from the rents of the SCPI’s rental properties will then be used to repay the monthly installments of the loan.

Sources

[1] https://www.aspim.fr/chiffres-du-marche-des-FIA-en-immobilier/scpi.html