To put down a deposit or not for a property investment?

To put down a deposit or not for a property investment?

To contribute or not to contribute, that’s the question we’re trying to answer today!

To take an example, Stéphane wants to invest in an apartment in south-west France costing around 100,000 euros. At least that’s the price negotiated, including notary fees. Stéphane has this money from an inheritance, so he can invest in his apartment directly from his own funds, without taking out a loan. But Stéphane also enjoys a stable situation with a rather comfortable salary of 4,000 euros net per month.

It’s still advisable to borrow the money, because if Stéphane is debt-free, has capital and substantial income, banks are bound to lend him money. But when you have a sum of money at your disposal, investing it in life insurance policies over the long term can work out a return of 4, 5, 6 or even 7%.

Also read: life insurance, interesting or not


A loan is less than 2%, it is therefore advisable to always try to borrow as much as possible.even if it means reaching the maximum debt ratiothe more debt you have, the more banks ask you to put down as a downpaymentand that’s when we’ll have to tap into these savings to add to them little by little for other goods.

But bank leverage is crucial to your success, so if you put 20% down to invest in a property and you have 20,000 down, you’ll have a budget of 100,000 euros! And this leverage effect becomes infinite when you find financing for which you are not required to make a downpayment or pay an application fee etc. i.e. you don’t put anything of your own in and the bank lends you 100,000 euros because you have Crédit Logement behind you to guarantee the loan, for example. So you really need to use the magic of leverage to the maximum, and only make a contribution when you have to.

Bank loans

Today, you can borrow for 20 to 25 years at low rates of 5% to 2%. In the late 90s, you were borrowing at rates of 10 to 15%! When you borrowed 100,000 francs, you repaid 200 to 230,000 francs! Today, when you borrow 100,000 euros, you pay back 120 or 130,000. The cost of the loan has fallen enormously over time, and even if the central banks are raising interest rates, they remain low. Money costs nothing to borrow, and you have to take it as a real blessing, as a real opportunity. We’re living in a time of extremely low interest rates, and you have to borrow as much as you can and, above all, touch your capital as little as possible. If the bank asks you to make a downpayment, it may be because you’re already in debt or that your financial situation isn’t ideal in the eyes of the banks, so they want you to get wet too.

But to take the example of Stéphane, who has a net monthly income of 4,000 euros, 100,000 euros in cash and no debt, and who also owns his own apartment as his main residence. We’re dealing with a person who’s going to pay off his loan in full, and the bank won’t ask for a downpayment or will agree not to make one.

So when the situation allows it, make one investment first, then a second, then a third, and after a while you’ll have to dip into your cash flow to be able to continue borrowing and not increase your debt ratio too much by lowering the cost of the loan.

So for all you smart investors who have a little cash to spare and are wondering whether or not you should have a capital contributionIt’s best to borrow as much as you can until you reach the point where the banks say stop.and only then should you use your cash. But banks will go along with you more easily if you respect a basic rule for real estate investors: the 70/30 rule.

Also worth reading: the 70/30 rule