How can we at least break even?

This post is the continuation of yesterday’s post.

By modulating the figures in my tool, I find that:

• In most cases, the micro-BIC plan is not a good option. You’ll have to actually make very good profits for it to be an interesting option. It will be even less interesting from now on as they modified the percentage that is supposed to account for expenses. Up until last year, they considered that 71% of your rental income had been spent in expenses. As of next year, they will apparently lower that percentage to 51%, which doesn’t reflect our reality at all. And according to what I’ve been reading on the Internet, it doesn’t reflect the situations of lots of other “small owners” either. So the best system (or the lesser of two evils actually!) is the simplified actual profit system.

• If we managed to actually break even (0€ in our actual profits), we would still have profits as defined by tax laws because the amount of capital that you pay back is not deductible, only interests and loan insurance. Therefore we would still have to pay taxes. We would also need the services of an accountant, at least the first time, because the paperwork looks pretty repulsive and complicated, and you certainly don’t want to mess with the Treasury!

• If we managed to actually profit let’s say 500€ anually, our declarable income would be much higher since only part of the loan payments are deductible, as explained previously. Therefore we would have to pay in taxes much more than we actually profited, leaving us again with negative figures. Man, how are successful real estate investors doing it?!

• In order to break even after paying taxes, we would have to make a profit of about 1000€. How can we profit that much with two little studios? Let’s find out tomorrow.