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Life insurance and real estate: still a winning combination?

Real estate soothes in turbulent times. Stone, a tangible investment, offers a long investment horizon free from stock market fluctuations. It also acts as a bulwark against inflation. This is why real estate investment trusts (SCPI) continue their unabashed growth. These products provide access to rental properties, often professionally, without having to suffer the hassle of property selection or rental administration.

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Available at low cost, they allow savers to invest in a diversified portfolio of real estate and in return receive the share of rent corresponding to their investment. A format that seduces!

According to the French Association of Real Estate Investment Companies (Aspim), SCPIs registered record inflows of 5.2 billion euros in the first half of 2022. The enthusiasm of the French was reinforced by the good performance of SCPI returns in recent years, despite the pandemic. In 2021, the latter yielded an average of 4.45%, according to the Institute for Property and Land Savings (IEIF).

The main disadvantage of SCPIs lies in their taxation. Rental income is actually taxed at the marginal tax rate for the investor’s household and is also subject to social contributions of 17.2%.

Therefore, for a household taxed at 30%, almost half of the dividend received is taken. And much more for households placed in the highest brackets of the scale. Life insurance represents a haven for these highly taxed savers. As long as the winnings remain in the contract, they are not taxed. At the time of exit, they benefit from the advantageous taxation of the envelope, which provides significant reductions after eight years of retention.

No grace period

Life insurance has two other benefits that are sometimes overlooked by savers.

First, subscription fees are often reduced. For a share worth 100 euros directly, you can e.g. get it for 97 euros with the insurance envelope (the cost is integrated into the share price).

So by housing your SCPI in a life insurance contract, you are not supporting the enjoyment period. “The latter corresponds to the period between the date of subscription to an SCPI and the time when the saver is entitled to receive his first dividend”defines Paul Bourdois, the founder of the broker France SCPI, in his book SCPI for Dummies (First, 240 pages, 12.50 euros). This gives the management company time to invest the money in the real estate market. This is usually between four and six months. In life insurance, it is therefore just as much time – and money – saved for the saver.

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