Secure Better Rental Yields on Your Property in France

• How do you calculate rental yield?
• Where to invest in France: Top 10 profitable cities in France
  • Criteria for choosing a French city for rental investment
    • Marseille
    • Paris
    • Lyon
    • Saint Etienne
    • Toulouse
• How do you maximize rental yields?
  • Property Upgrades
  • Common Mistakes
• Rental Yields in France compared to Europe
• Rental Yields in French Cities for Apartments

The real estate market in France has remained steady thanks to continuous interest from both international and local buyers. Where in France is the best place to invest, though? What are the best places that can generate exceptional income? 

How do you calculate rental yield?

Understanding rental yield is needed to assess the return on your property investment (ROI). This metric, expressed as a percentage of the property’s value, comes in gross and net. Gross rental yield does not factor in maintenance or taxes, while net rental yield considers these expenses when calculating income:

Rental Yield = (Annual Rental Income / Property Value) x 100%

Example:

Let’s think about a scenario where you own a property that produces an income of 30,000 euros with a property value of 500,000 euros. To calculate the Rental Yield, you can use the formula: €30,000 / €500,000 x 100% = 6%. This means you would get a 6% return on your investment each year.

Where to invest in France: Top 10 profitable cities in France

France spends about 504 billion euros on rentals, which is 21.9% of the country’s GDP. Actually, there are numerous “the” best cities because it is one of the most touristy-friendly countries in the world.

1. Marseille
2. Lyon
3. Paris
4. Nice
5. Bordeaux
6. Toulouse
7. Saint Etienne
8. Lille
9. Nantes
10.  Saint Etienne

Criteria for choosing a French city for rental investment

Strong rental demand, a growing population or steady influx of newcomers, thriving businesses and industries, a sizable student population ensuring ongoing housing demand, attractive real estate prices, a high standard of living, plus attractive rental profitability are all important considerations when choosing a city for rental investment.

A few French cities combine several of these advantages in 2024.

The rental market in France is anticipated to experience steady growth in 2024. Paris, Lyon, and Marseille will likely lead this development due to their economies and attractiveness to global tenants.

Marseille

Marseille‘s property market has experienced a remarkable recovery in the last several years. It is dynamic and draws a lot of investors because of its strong rental demand and growing, but still extremely attractive, sale prices. In Marseille, the most profitable districts are typically those that are being revitalized or that are previously established but still in demand.

Paris

Paris‘s long-term rental yields cannot compete with several other French regions. Moreover, given its status as capital, Paris is vulnerable to property inflation. On the other hand, short-term rentals have a lot of potential. The demand for vacation rentals is also outpacing the availability.

Even with current rent control laws and extremely high real estate costs, Paris nevertheless continues to offer attractive opportunities. The capital is still a safe choice because of its rich legacy and unrivaled reputation in France.

Not every Parisian area, meanwhile, is an excellent place to invest in rentals. Due to their high demand, the most lucrative regions for a rental project in 2024 will be Paris’s 18th, 19th, and 20th arrondissements. When combined with far cheaper prices than in other districts, these benefits typically result in strong rental returns.

Even though the real estate market in Paris is expensive and regulated, investing there is still a feasible alternative. The capital of France provides outstanding stability in terms of property value and continuous demand for rentals.

Similar to Paris, Bordeaux doesn’t offer much opportunity for long-term rentals. Nonetheless, Bordeaux real estate is a wise investment because short-term rental rates aren’t too far behind those in the capital.

Lyon

Lyon is one of the safest towns in France to invest in real estate. It is also one of the most dynamic employment markets. As an investment security, the Capital of the Gauls offers numerous benefits, including an average gross rental yield of around 3.79%. Lyon’s strong economy, vibrant academic scene, and consistent population growth make it a popular choice for real estate investing. The city continues to draw tenants, which keeps the demand for rental accommodation strong.

Saint Etienne

Saint Etienne prides itself on having one of the highest rental returns in France. Real estate prices in Saint Etienne are pretty budget-friendly, significantly lower than those in cities like Paris. This allows you to kick-start your property portfolio with a much smaller investment. Investing in properties in Saint Etienne offers promising potential for both good rental yields and capital gains upon reselling.

Saint-Etienne has a relatively low price per square meter; the rental profitability is between 7% and 8% gross. Thus, Saint-Etienne offers some of France’s highest rental yields. As a result, every indicator—including the capital gain on the sale and the rental yield—is in the green.

Saint-Etienne is a great location to invest in short-term rentals, especially considering the 1.1 million overnight stays in the Loire department.

Toulouse

Toulouse offers an average gross annual rental income of 5% to 6%. For this reason, investing in Toulouse is similar to ROI from rentals in Lyon and Marseille. But when it comes to the cost per square meter, Toulouse wins out.
With 5.5 million visitors a year coming to enjoy its extraordinary city, short-term rental vacancies are almost non-existent.

How do you maximize rental yields?

To pinpoint the cities for property investment, you must first determine the type of rental you intend to pursue (long-term, mid-term, short-term). Focusing on mid-term and short-term rentals is the way to go for those aiming to maximize their ROI in specific places in France. In this scenario, prioritizing tourist destinations in France is vital. Why? One risk in short-term rentals is vacancy, a concern that’s minimal in major French cities.

Indeed, the occupancy rate of a short-term rental property in Roubaix would greatly differ from that of a short-term rental property in Paris. You should choose a short-term rental in a tourist area to optimize your revenue, as it will be less vulnerable to the fluctuations of the local industrial economy.

Then again, in a place like Clermont-Ferrand, where the Michelin factory is the biggest employer in the Auvergne area, you cannot invest in short-term rental without being concerned about the company’s financial situation.

Property Upgrades

1. Upgrading properties plays a big role for property owners who want to boost their income. For example, modernizing kitchen appliances, landscaping, security, interior design, and energy efficiency or upgrading high-priority rooms like bathrooms and kitchens can attract higher-paying tenants and justify higher rental rates.

 2. Simplifying property management tasks like collecting rent, handling maintenance, and screening tenants can significantly save time and resources. Using technology tools such as property management software or outsourcing some responsibilities can streamline operations and enhance overall profitability.

At the end of the day,

3. Know your audience—whether it’s students, young professionals, families, or tourists. Tailor your property features and marketing to suit their needs.

4. Adjust rental rates based on high and low seasons in tourist destinations.

5. Rent yields on a well-furnished home can rise dramatically in cities with a high demand for furnished apartments.

6. Properties with better energy efficiency ratings can command higher rents and are more attractive to eco-conscious tenants.

7. To reduce risks and maximize income streams, consider expanding into several property types, such as residential, commercial, or mixed-use properties.

8. Diversify your investments across different locations to capitalize on various market situations and minimize dependence on a single market.

Common Mistakes

To improve ROI analysis, you should steer off typical errors. One common misstep is underestimating expenses, resulting in inaccurate yield projections. Another error is failing to consider how vacancies can affect income estimations. Leveraging technology, in particular, can help you prevent these pitfalls by offering data for analysis.

Rental Yields in France compared to Europe

(Last updated June 2024)

Rental Yields for Apartments in French Cities