Investing in property, the safest investment

Why invest in real estate?

Secure your future and that of your loved ones!

Investing in real estate should be seen as the opposite of speculation, with a long-term vision lasting at least 10 years, or even 20 or 30 years. For this reason, many clients rightly ask: How can I optimize taxation in my real estate purchase?

Our goal here is not to replace notaries or tax specialists but to inform you about some simple possibilities stemming from Belgian law.

Purchase in your own name or through a company:

a. Purchase in your own name:

In this case, residential rental income is not subject to direct taxation. It should be noted that the indexed cadastral income multiplied by a coefficient of 1.40 must be included in your income tax declaration. It is essential to consider taking on a mortgage loan and, especially, the type of loan requested (e.g., conventional mortgage, bullet loan, loan with decreasing interest, etc.), as fiscal provisions allow for deducting the full amount of interest from the increased cadastral income (as explained above).

Additionally, it should be noted that the rental income subject to tax deduction in the tenant’s name (office, commercial, liberal profession, etc.) results in increased taxation for the owner. Specifically, 60% of such rental income will be added to the taxable income of the taxpayer.

b. Establishment of a property company:

2 main advantages:

Integration of actual expenses related to the property (e.g., renovations, insurance, real estate tax).
Transfer of your assets to your loved ones through a simple transfer of shares or donation.

2 main disadvantages:

Taxation of rental income (with deduction of incurred expenses, i.e., renovations, insurance, real estate tax, as well as purchase expenses, registration, VAT, notary fees, etc.).
Taxation at a rate of 29% (ISOC) on the capital gain realized during the resale.

While the 1980s and 1990s were often an opportunity to build real estate assets through property companies, it is evident that this trend has reversed since the early 2000s. The reduction of ISOC could once again make this option attractive. Of course, it will still be possible to transfer the shares of the company owning the properties to avoid capital gains tax, but we leave it to the specialists to inform you about the resulting tax implications, which you should carefully consider.

Purchase of bare ownership and usufruct:

This formula is becoming increasingly popular among investors for two main reasons:

a. In terms of inheritance:

Acquiring the usufruct of an apartment by a parent and the bare ownership by the children allows them to become full owners of the property in the event of the parent’s death without having to pay any inheritance tax.
b. In terms of taxation:

Some of you can acquire the bare ownership in your own name and have the usufruct purchased by a company (e.g., a management company).

Thanks to clear fiscal rules, this type of arrangement is perfectly manageable for everyone and allows you to transfer your assets from the company to your personal ownership at the end of the usufruct period (generally 20 years).

We draw the investor’s attention to a crucial point: seek guidance from a knowledgeable tax expert or your notary in this matter to stay fully compliant with tax regulations. If you wish, we can recommend specialists to assist you.

If necessary, consider organizing a donation of usufruct to the bare owner before the sales agreement is finalized. It is therefore essential to seek advice before completing the signing of a sales agreement.

What should I pay attention to before investing?

4 fundamental elements:

01. Rental potential of the property

In other words, am I sure to find a tenant for this type of apartment in this location?

The suitability of the acquired property with the market’s potential is undoubtedly a key element in the success of a real estate investment. Also, the importance of targeting your property based on the type of clients you are aiming for: experts, traditional clientele, students, multinational company executives.

Avoid excessive rental competition: Do not buy in a building fully occupied by tenants.
02. Rental yield

Establish your financial plan based on a reasonable estimate of rental income, taking into account essential expenses such as real estate tax, maintenance work, property insurance, rental refurbishment (approximately 10% of rental income to allocate to this expense), as well as real estate agent fees and/or property manager fees.
03. Capital gain
Rental yield is generally inversely proportional to the quality of the property’s location.

Depending on your aspirations, you can consider three types of locations:
- “Good family father” location: You buy a property in a socially and urbanistically stable environment. You immediately know its parameters while counting on a similar situation for the future years. Your capital gain will be progressive and in line with average market increases. Expected yields range from 2.5% to 3.5%.
- “Precursor” location: You invest in an area where you anticipate growing interest and increased real estate demand. All cities have experienced and will continue to experience urban developments in areas that received less attention a few years earlier. In this case, you can expect to boost your capital gain by doubling this growth potential… or fall short if your forecasts are not proven. Typically achieved yields vary from 3.2% to 4%.
- “Prestige” location: You buy a property in a “top location” for which you do not expect a very attractive yield (ranging from 2% to 2.5%) but for which you rely on the long-term capital gain due to its excellent location and rarity. Rarity always triggers high demand and, therefore, stronger prospects for capital gain above the average but with a certain risk concerning the more limited potential of the targeted market.
04. Updating your property
From the outset, you must consider a crucial aspect of successful rental:
- You must offer a good-quality property. Your prospective tenant will choose your apartment provided that you offer an appealing property at a fair price. Never forget that the choice of a place largely relies on emotional rather than rational criteria.
- Your property should, therefore, evoke an emotional added value, a particular charm, freshness – in short, it should be a place where the prospective tenant and their potential family will feel comfortable.
- Remember that your interest as an owner relies on the longevity of a stable tenant-owner relationship.

TREVI can assist you in acquiring a property, providing a tailor-made fiscal and inheritance solution, renting and managing it, and why not, one day, selling it. The significance of this investment should motivate you to turn to long-established professionals in the Belgian market, recognized for their expertise by notaries, lawyers, and banking institutions.

That’s why TREVI has become the No. 1 residential real estate market. We hope that you will come to see us and acquire one of our properties like more than 30,000 clients have done.

Investing in Real Estate

At TREVI, we have been assisting clients in the real estate investment field since 1980.