Our rental investment in Nice. We did it again!

A few years ago, we became owners of a two-bedroom apartment in La Rochelle, we told you about it here.

Six years later, we’ve just picked up the keys to another apartment in Nice. We bought it two years earlier while we were on the other side of the world. Once again, this article is a feedback post, not advice.

This time, we went through the same financial advisor, who offered us three off-plan apartments: one in Saint-Étienne, one in Reims, and one in Nice. The purchase prices and estimated rents were different. For various reasons, we chose Nice because it seemed like the most dynamic city and the rent-to-buy ratio seemed the most attractive.

Plus, this apartment is:

• near the train station
• a 10-minute public transport ride from the beach
• near the universities
• lots of public transport nearby
• lots of restaurants and shops around
• in a sought-after neighborhood

So it’s the ideal location, both for long-term rentals and for short-term rentals. We were told Nice is known for its festivals and it was entirely possible to rent the apartment to musicians for a summer month, for example, and not just on Airbnb.

We don’t know Nice very well, but our notary is from Nice and our financial advisor sold apartments in the building next door, so everyone was able to confirm that the location was ideal. I showed the address to a friend who had also been looking to buy in Nice for several years, and she also confirmed it.

Having very little cash, we bought it with no down payment; we only paid the notary fees out of pocket. Our bank supported us because they already knew us and we have an active mortgage with them. In 2022, we took advantage of the last window of opportunity to take on maximum debt at an attractive rate over a long period (20 years). Note, however, that the debt-to-income ratio for rental investment will always be a bit higher than for a primary residence.

Unlike our first rental project in La Rochelle, this one is a Pinel (with tax reduction over 12 years). And the monthly loan repayment is twice the rent. That means we need to make a savings effort over the next 20 years. However, the amount is modest enough that we can afford it.

I remind you that this investment is for our old age, not to become 100% rentiers. We have other sources of income and accept a savings effort for this apartment to leverage the loan. We could have also opted out of the Pinel scheme for a higher rent, but after calculations, the tax reductions from Pinel are more advantageous and managing a long-term rental seems easier for us. But that’s just our point of view. Other investors might have made different choices.

Everything was done remotely:

• Selection and presentation of apartments by the financial advisor
• Contacting our bank for the loan application
• Meeting with the notary via video call to sign the power of attorney
• Mandating a real estate agency to represent us in Nice
• Apartment handover received by our agency in Nice
• Minor carpentry work
• Purchase and installation of appliances
• Tenant search

I went to Nice to visit the apartment twice while it was under construction, to make sure it was roughly done according to the plans. One time it was raining so hard in Nice that daycare centers were closed, the tram was cut off, the floods caused a lot of damage, and I went to see the apartment, very happy to see that no water had leaked into the building.
But the real handover was done by our agency, and luckily, because I wouldn’t have noticed the small details and defects that were flagged in the document.

Unfortunately, between Covid, the war in Ukraine, inflation, floods, …it wasn’t all smooth sailing. The apartment was delivered with a year and a half delay. During that time, we had to pay the loans without receiving any rental income. There were connection issues with ENEDIS, water damage, a change of architect, contractors who defaulted, and at delivery, a few square meters were missing. Anyway.

The apartment listing was online for 3 days on the most well-known rental sites. The agency had to deactivate it after receiving 100 inquiries. 20 applications were sent, from which they selected 5 people for a viewing. And out of the 5, 3 wanted to rent it.

Since it’s a Pinel law apartment, it’s reserved for people with modest incomes. Of the 3 applications, there was one that didn’t earn more than the others, but we really liked the profile. Unfortunately, the application was incomplete. And since we have rent default insurance, any incomplete application is not eligible, so we had to give the apartment to another, more complete application. So, if you’re looking to rent an apartment, know that income isn’t everything. But you need to state your income fairly quickly when contacting the agency (via SMS or contact form). Then, have a super complete application from the start; it will make your apartment search easier.

This is the last time we buy off-plan; there are too many unforeseen issues and too many unpleasant surprises. But our retirement plan is slowly falling into place.

P.S.: We are neither brokers nor financial advisors; this article merely recounts our experience. Every experience is personal, and since this is a significant investment, we won’t be able to recommend a specific bank or share our advisors’ contact details. Thank you for your understanding.