Real Estate: the 20 best cities to invest in rent

Choosing the right city to make a rental investment can quickly seem like a headache, as the criteria to consider are numerous and often volatile. So, to help you find the ideal city, the company Masteos carried out a quantitative study (based only on statistics) and examined no less than 500 French cities. The start-up specializing in rental investment thus applied particularly selective criteria to obtain the Top 20 of the best cities to make your investment.

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To make the selection, Masteos started by applying a demographic criterion to rule out the least dynamic cities. All the municipalities that appear in the ranking have a population of over 40,000 inhabitants. To avoid the so-called “at risk” cities, where prices that are too low often hide problems of attractiveness, the Top 20 municipalities also have the particularity of presenting prices per square meter above 2,000 euros. Abnormally low prices are often synonymous with low demand and therefore a high risk of vacancy.

2 weeks maximum to rent the property

While it is important not to neglect demographic criteria, the indicator most scrutinized by investors is, of course, gross rental income. This is a ratio that measures the gross income that renting the accommodation brings in relation to the purchase price and cost of the property. The gross rental yield (in %) is calculated as follows: (rent amount x 12 months) x 100 / at the purchase price (including acquisition costs). The 20 municipalities selected by Masteos all have gross rental income above 5%, that is, the threshold above which investments become attractive according to real estate professionals. Several municipalities present in the Top 20, such as Thionville, Draguignan, Colmar or Melun, have rental yields above 6%.

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Once the property has been purchased, you still need to find tenants quickly to make the investment profitable. To assess the level of rental demand in each city, Masteos created a rental tension indicator. Each city receives a score ranging from 1 to 9, depending on the average time it takes to rent a property. All cities in the Top 20 scored between 8 and 9, which means the average time to find a tenant is less than 2 weeks. In other words, the risk of vacancy is almost nil in the cities selected by Masteos.

A limited risk of non-payment

Limiting unpaid rents as much as possible is also an important issue for investors. If zero risk does not exist, it is still possible to reduce this risk taking into account the standard of living of the inhabitants of the municipality. Thus, all the cities in the Top 20 have an average income per inhabitant higher than the French average (more than 21,000 euros net per year). The inhabitants of Annemasse (average annual income of 28,870 euros), Draguignan (27,394 euros) and Thionville (26,812 euros) are particularly distinguished by a particularly high level of income.

To avoid a loss of capital during a possible resale, it is obviously preferable to invest in a municipality where property prices are on the rise. It is for this reason that all cities included in the Masteos selection have seen their prices increase in the last 5 years and since January 2022 (price evolution to date). Real estate professionals then speak of “positive dynamics”. At Quimper and Laval, since 2017, prices have increased by 30.7% and 23.7%, respectively.

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The table also indicates the average local purchasing power of each municipality. This is the average area in square meters that can be acquired by a family residing in the municipality where they are investing. The higher the average purchasing power, the more the current rates are undervalued. Finally, the transactional tension index (ITT) evaluates the excess of the number of buyers in relation to the number of sellers. For example, an ITT of 10% indicates that there are 10% more buyers than sellers in the municipality and, therefore, that demand is greater than supply.

Do not neglect qualitative criteria

Although the Masteos study refers only to statistical elements, it is important not to neglect the “qualitative” aspect of the municipality. does not appear in the statistics, explains Thierry Vignal, co-founder of Masteos. Betting on tourist cities such as Arles or Quimper can also be a good strategy.”

The geographic location of the municipality chosen for an investment can also be crucial. For example, the city of Annemasse,

located close to the Swiss border, it may be undervalued, and therefore see its rates rise soon, due in particular to the high purchasing power of its residents working in Switzerland. By taking into account quantitative, but also qualitative and aesthetic criteria, you will put all the odds on your side to succeed in your rental investment.

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