Two Approaches to Property Investment
Property remains the favourite asset class of French investors, but the ways to invest have diversified considerably. Two main options are available: direct property (buying a physical asset to rent out) and SCPIs (Societes Civiles de Placement Immobilier), also known as "paper real estate" (pierre-papier). Each has advantages and drawbacks that deserve careful consideration.
Entry Cost and Accessibility
This is one of the starkest differences. Direct property requires substantial capital: between 100,000 and 300,000 euros in most major French cities, plus notary fees (7 to 8% for existing properties) and any renovation works. Even with a mortgage, banks typically ask for a 10 to 20% deposit.
SCPIs are accessible from 200 to 1,000 euros per share, with a minimum investment often set at 5,000 euros. This accessibility lets you gradually build a property portfolio or diversify with limited capital.
Comparing Returns
The return on direct property varies considerably depending on location and property type. On average, gross rental yield ranges from 3 to 5% in major cities and from 6 to 9% in mid-sized towns. But the net-of-all-costs return, after expenses and tax, often falls to between 1.5 and 3.5%.
SCPIs posted an average distribution rate of 4.52% in 2025 (source: ASPIM). The best SCPIs exceeded 6%. After management fees (already factored into the distribution rate) and tax, the net return typically sits between 2.5 and 4%, depending on your tax bracket and the proportion of European-sourced income.
Let us take a capital of 150,000 euros:
- Direct property (net-net yield of 2.5%): 3,750 euros/year net income
- Diversified SCPIs (net yield of 3.5%): 5,250 euros/year net income
SCPIs come out ahead on net yield, but direct property offers the potential for capital appreciation on resale and the leverage effect of a mortgage.
Management and Time Commitment
Direct property involves active management: finding tenants, drafting leases, conducting inventories, overseeing works, managing unpaid rent, dealing with building management. Even when delegated to an agency (at a cost of 6 to 8% of rents), you remain the decision-maker on important matters. Count on 5 to 15 hours per month for a directly managed property.
SCPIs offer 100% delegated management. The management company handles everything: acquisitions, lettings, maintenance, works, and disposals. The investor simply collects dividends and files an annual tax return. The time investment is virtually nil outside of the annual tax declaration.
Diversification and Risk
Direct property concentrates risk on a single asset in a single city. A 3-month vacancy, major water damage, or a defaulting tenant directly and significantly impacts your return.
A typical SCPI holds 50 to 200 buildings and several hundred tenants. Pooling substantially reduces risk. If one tenant defaults or a building experiences a vacancy, the impact on your income is marginal. Furthermore, European SCPIs offer geographic diversification that is impossible to replicate with direct ownership.
Taxation: Advantage to Direct Ownership?
In terms of taxation, direct property offers more optimisation levers:
- LMNP status (Loueur Meuble Non Professionnel) under the real-expenses regime lets you virtually eliminate tax through depreciation
- Property losses (deficit foncier) let you deduct renovation costs from your overall income (up to 10,700 euros/year)
- Tax incentive schemes (Pinel, Denormandie, Malraux) offer income tax reductions
SCPIs are more rigid from a tax perspective: income is taxed as standard property income (revenus fonciers) at your marginal rate plus 17.2% social contributions. However, subscribing through life insurance or in bare ownership (nue-propriete) can significantly optimise the tax treatment.
Liquidity and Investment Horizon
Liquidity is a weak point for both vehicles, though to different degrees. Selling a property takes on average 3 to 6 months and generates significant costs (agency fees of 4 to 6%, diagnostics, capital gains tax).
SCPI shares can be resold on a secondary market within a few weeks to a few months under normal conditions. During a crisis, delays can lengthen substantially. Variable-capital SCPIs generally offer better liquidity than fixed-capital SCPIs.
In both cases, the recommended horizon is 8 to 15 years minimum.
Which Choice for Your Profile?
Choose direct property if you have sufficient capital, want to use the leverage of a mortgage, are willing to dedicate time to management, and are looking for tax optimisation levers (LMNP, deficit foncier).
Choose SCPIs if you favour simplicity and delegated management, want to diversify your property exposure without the hassle, have limited capital, or are looking to complement an existing direct property investment.
Combining both is often the wisest strategy: one direct property for leverage and tax optimisation, complemented by SCPIs for diversification and simplicity.