LMNP
Non-Professional Furnished Rental. A favorable French tax regime allowing deduction of expenses and property depreciation.
Example: A furnished one-bedroom rented at 800/month with 3% depreciation on the purchase price.
43 terms explained simply
Real Estate Investment Glossary
Taxation
11Micro-BIC
Simplified regime with a 50% flat-rate deduction on furnished rental income.
Example: For 10,000 in rental income, only 5,000 is taxed.
Micro-Foncier
Simplified regime for unfurnished rental with a 30% deduction on rent.
Example: For 10,000 in rental income, only 7,000 is taxed.
Real Regime
Allows deduction of all actual expenses (works, interest, management fees, depreciation).
Example: Ideal if your expenses exceed 50% of your rental income.
Marginal Tax Rate
The tax rate applied to your highest income bracket.
Example: With a 30% marginal rate, each additional euro of rental income is taxed at 30%.
Depreciation
Accounting deduction for the loss of value of the property and furniture over their useful life.
Example: A property worth 200,000 depreciated over 30 years = 6,666/year in deductions.
CSG-CRDS
Social contributions levied on rental income at a combined rate of 17.2% (French social security contributions).
Example: On €10,000 net rental income: €1,720 in social contributions.
Property Deficit
When deductible expenses exceed rental income, the deficit can be offset against general income (up to €10,700/year).
Example: €8,000 rent - €20,000 renovation = -€12,000 → €10,700 deducted from taxable income.
Capital Gain
Profit made when selling a property. Taxed at 19% + 17.2% social contributions, with progressive allowances based on holding period.
Example: Property bought at €150,000 sold at €200,000 after 10 years: partial exemption thanks to allowances.
Flat Tax (PFU)
Single Flat-rate Withholding of 30% (12.8% income tax + 17.2% social contributions) on capital income.
Example: SCI dividends: €5,000 × 30% = €1,500 flat tax.
SCI
French Civil Real Estate Company. Legal structure for jointly owning property, with the choice between income tax (IR) and corporate tax (IS).
Example: Two partners at 50/50: each declares their share of income and expenses.
Financing
10Cash flow
Difference between rental income and all expenses (mortgage, taxes, charges). Positive = you earn money each month.
Example: Rent 800 - Mortgage 600 - Charges 100 = +100 cash flow.
Gross Yield
Ratio between annual rent and purchase price. Does not account for expenses.
Example: (800 x 12) / 150,000 = 6.4% gross
Net Yield
Yield after deducting all expenses and taxes. Reflects your real gain.
Example: A 5% net yield on 200,000 = 10,000/year in real gain.
Leverage Effect
Using the bank's money to invest. Multiplies the return on your down payment.
Example: With a 20,000 down payment, you buy a 200,000 property = leverage of 10.
ROI
Return On Investment. Measures profitability relative to the money invested (down payment + fees).
Example: Annual gain 5,000 / Down payment 30,000 = 16.7% ROI.
Debt-to-Income Ratio
Portion of income allocated to loan repayments. French banks cap this at 35%.
Example: Income €3,000/month, loan payments €1,000/month → 33% debt ratio.
Down Payment
Amount invested without borrowing. Typically 10-20% of purchase price + notary fees.
Example: For a €200,000 property: €30,000 down payment (15%) + €15,000 notary fees.
APR (TAEG)
Annual Percentage Rate. Includes interest, insurance and processing fees. Allows comparing loan offers.
Example: Nominal rate 3.5% + insurance 0.3% + fees = APR 4.1%.
Borrowing Capacity
Maximum borrowable amount based on your income, existing debts and the 35% debt ratio limit.
Example: Income €4,000/month with no debt → borrowing capacity of ~€200,000 over 25 years.
Loan Insurance
Mandatory insurance covering death, disability and incapacity on the mortgage.
Example: Average rate 0.25-0.40% of borrowed capital, tax-deductible under LMNP real regime.
Property
9Vacancy Rate
Period without a tenant. On average 1 month per year = 8% vacancy.
Example: 8% on a rent of 800 = 768 average actual rent.
Rent Excl. Charges
Rent excluding charges. Rental amount without recoverable charges.
Example: The rent excl. charges is the basis for calculating yield.
Rent Incl. Charges
Rent including charges. What the tenant actually pays each month.
Example: Rent excl. 700 + Charges 100 = Rent incl. 800
Furnished Rental
The property is equipped with furniture necessary for daily living. Favorable tax regime (LMNP).
Example: Bed, table, chairs, appliances... defined by law.
Unfurnished Rental
Property rented empty. Different tax regime (property income).
Example: Simpler but often less tax-advantageous.
EPC (DPE)
Energy Performance Certificate. Rates housing from A (efficient) to G (energy sieve). Mandatory for renting.
Example: An F or G rating has prohibited rental since 2025 (French Climate Act).
Carrez Surface Area
Private living area measured under the Carrez law. Excludes surfaces below 1.80m ceiling height and annexes.
Example: A 2-bed flat with 65 m² Carrez may have 72 m² total floor space (low attic excluded).
Rental Market Tension
Ratio between housing demand and supply in an area. Higher tension means lower vacancy risk.
Example: Paris, Lyon, Bordeaux = high-tension zones → almost zero vacancy.
Condominium
Legal regime for a building divided into units. Each co-owner pays shared maintenance charges.
Example: Condo charges: elevator, concierge, gardens → €150-300/month.
Expenses
5PNO Insurance
Non-Occupant Owner Insurance. Protects the owner against damages when the property is rented.
Example: Around 100-200/year depending on the area.
GLI Insurance
Unpaid Rent Guarantee. Covers unpaid rent and tenant damages.
Example: Generally 2.5-3.5% of annual rent.
Property Tax
Annual tax owed by the owner. Varies by municipality and cadastral value.
Example: Can represent 1 to 2 months of rent depending on the city.
Management Fees
Real estate agency commission for managing the rental (tenant search, receipts, etc.).
Example: Generally 6-8% of rent for full management.
CFE
Business Property Tax. Tax for furnished rental operators if revenue exceeds 5,000.
Example: Varies by municipality, often 200-500/year.
Acquisition
2Notary Fees
Acquisition fees including taxes and notary remuneration. Around 7-8% for existing properties.
Example: For a 200,000 property: about 15,000 in fees.
Agency Fees
Real estate agency commission for the sale. Paid by the buyer or the seller.
Example: Generally 3-5% of the sale price.
Market
4IRL (Rent Reference Index)
Rent Reference Index published quarterly by INSEE. Caps annual rent increases for tenants.
Example: IRL Q3 2025 = 145.47 → max rent increase: +3.2% vs last year.
ICC (Construction Cost Index)
Construction Cost Index reflecting new building cost trends. Used for some commercial leases.
Example: ICC Q2 2025 = 2,227 → used as baseline for commercial rent reviews.
DVF (Property Sales Data)
Public database of all property transactions in France, published by the tax authorities.
Example: Check actual sale prices in your neighbourhood over the last 5 years.
Price per m²
Average price per square metre in an area. Key indicator for evaluating a property against the local market.
Example: Paris 16th: ~€11,000/m² vs Mulhouse: ~€1,200/m² - comparable gross yield possible.
Strategy
2Self-financing
When rents cover 100% of charges, loan repayments and taxes. Cash flow ≥ €0.
Example: Rent €900 - Loan €650 - Charges €150 - Tax €50 = +€50 → self-financed.
Wealth-building Strategy
Investment approach focused on long-term asset accumulation rather than immediate cash flow.
Example: Buying in Paris at 3% yield but expecting 20% capital appreciation over 10 years.
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