RENT FURNISHED OR UNFURNISHED?

N.B.:

• The shortage of furnished accommodation that may have existed over 10 years ago no longer exists. Rentals that are 30/40/50% more expensive than unfurnished rentals belong to a bygone era.
• The market has become more mature and supply is almost on a par with demand, allowing more sensible prices and higher expectations from tenants in particular in terms of interior decoration.
• As part of the rent regulation in force in Paris since August 2015, the difference in rent between furnished and unfurnished rentals is 11% (same in all areas, chosen by the Prefecture)

TAXATION

Rental income from furnished or unfurnished property is taxed at the marginal tax rate + CSG-CRDS contributions (15.5%). The difference between the two tax systems comes from the ability to minimize the taxable amount in a furnished rental, using a more complete range of deductible expenses than in an unfurnished rental.

If you are looking for simplicity, furnished rental is better. This provides entitlement to a higher allowance than unfurnished rentals while being open to higher rents than when rented unfurnished.

In a furnished rental in the “micro BIC” regime is open to owners who have annual revenues of less than €32,900 and provides entitlement to an allowance of 50%.

For example, annual rental income of €20,000 is taxed on a base of €10,000 under the micro-BIC regime.

In a furnished rental in the “micro property” regime is open to owners who have annual revenues of less than €15,000 and provides entitlement to an allowance of 30%.

For example, annual rental income of €10,000 is taxed on a base of €7,000 under the micro property regime.

N.B.: for owners living abroad, the tax rate used is 20% (in the absence of a country-specific agreement). The CSG-CRDS contribution (15.5%) applies to owners residing in France and outside the European Union. Taxpayers who are domiciled for tax purposes in a European Union country other than France are not subject to it.

If you want to optimise your taxation, furnished rental is currently much more advantageous.

In a furnished rental in the status of a Non-Professional Lessor of Furnished Property (LMNP) under the “régime réel“ arrangements allows deduction of all expenses, including interest on loans (no difference with declaration of actual costs (régime réel) in an unfurnished rental), but most importantly it allows the property to be depreciated. This depreciation (to be calculated by an accountant) is 3% per year of the value of the property, which absorbs a large portion of the rental income (and is cumulative with the deductibility of interest payments).

Moreover, as an individual with the status of a Non-Professional Lessor of Furnished Property at the time of resale, the depreciation is not taken into account when calculating capital gains (however as the Finance Act is constantly changing on this subject, this cannot be guaranteed).

YOUR PERSONAL SITUATION AND YOUR LOGISTICAL CONSTRAINTS

Depending on the circumstances, either furnished or unfurnished rental could be more advantageous.

If the apartment is empty, completely furnishing it can require a significant budget and quite a lot of work to finish everything. So unfurnished rental is simpler. The economic calculation must include all variables (furnishing costs, target rent, tax, occupancy rate).

If the furniture is of good quality and a furnished rental is possible, it is certainly easier to rent furnished. The typical example is that of a family being posted abroad and leaving their main residence behind and then wanting to rent it out with the furniture.

If the furniture is of average quality, badly matched or not neutral enough, it is better to rent unfurnished. For the most difficult cases, it is possible to carry out targeted improvements, but this takes time, money and energy.

FURNISHED RENTAL: HOW TO DECIDE BETWEEN SHORT TERM AND LONGTERM?

In theory, the choice does not really exist, except for rather limited exceptions.

For short term rentals in Paris, the ALUR law specifies that furnished accommodation must be rented for periods of at least 12 months (9 months for rental to students):

• Unless it is the owner’s primary residence and it is rented for less than 4 months per year. An owner can therefore rent their apartment on a holiday rental website perfectly legally.
• Unless the owner obtains a change of use authorization and offsets the apartment (which can no longer be rented by a long term tenant) by buying commercial status. This operation is complicated and expensive (several thousand Euros per m² with prices varying widely depending on the area).

In short term rentals, landlords who frequently and repeatedly rent for short periods know they do so at their own risk and are subject to increasingly numerous and heavy fines.

Especially given that:

• The economic calculation is not as advantageous: the headline rent is obviously much higher for short term rental, but the net rental income is actually much lower due to costs (internet / electricity / housing tax / housekeeping / linen change / entrances / exits of buildings / assistance with tenant issues, etc.).
• A lot of time is needed to minimize vacancies and ensure the profitability of the property. The alternative is to take on a short term rental manager, which is expensive.

Conversely, long term furnished rental provides a predictable and stable income, as the relevant regulations are steady and not subject to frequent amendment.

You can contact the City Hall of Paris, the Chambre des Propriétaires (Landlord Association), and the main real estate federations for their most recent views on short-term rental if this interests you. Also talk to other short term landlords to find out how they feel about both types of rental periods.