Overview
Unfurnished rental is the most "classic" form of buy-to-let investment. For tax purposes, the rents fall under property income with two main regimes: micro-foncier and the actual-expense regime.
A property deficit (when expenses exceed rents) can reduce your overall income tax, particularly thanks to deductible works. The residential lease strictly governs the duration, security deposit, charges and indexation.
If you have few expenses, micro-foncier may be enough. If you carry out works, pay loan interest or have a lot of expenses, the actual-expense regime often becomes more advantageous.
Unfurnished rental: definition & framework
An unfurnished rental is the rental of a non-furnished home used as the tenant's primary residence. The rules largely come from the law governing rental relationships (the "classic" residential lease).
The home must be decent, meet information obligations (surveys/diagnostics), and the essential terms (duration, deposit, charges, indexation) are strictly regulated.
Lease duration (general rule)
3 years if the landlord is an individual (or a family SCI), 6 years if a legal entity (apart from exceptions).
Security deposit
For unfurnished rentals, it is in principle limited to 1 month's rent excluding charges.
Taxation: micro-foncier vs actual-expense regime
| Regime | For whom? | Mechanism | Strengths | Limitations |
|---|---|---|---|---|
| Micro-foncier | Small property income | Flat-rate allowance on rents | Simple, little accounting | No actual deduction of expenses |
| Actual-expense regime | Significant expenses/works/interest | Deduction of actual expenses | Optimization, property deficit possible | More paperwork (returns, supporting documents) |
Income tax + social levies
Property income is taxed according to your income tax bracket and bears social levies. The choice between micro and actual is often made by comparing the amount of deductible expenses with the micro flat-rate allowance.
Rule of thumb
If expenses + interest + works exceed the micro flat rate, the actual-expense regime often becomes more advantageous (to be confirmed with a simulation).
Deductible expenses & works (actual-expense regime)
Under the actual-expense regime, you deduct from the rents received certain expenses related to operating the property. Always keep invoices and supporting documents.
Running expenses
- Co-ownership charges (deductible share)
- Insurance (landlord's insurance, rent guarantee insurance…)
- Management / agency fees
- Taxes (some, depending on their nature)
Financing
- Loan interest
- Application / guarantee fees (depending on the case)
- Borrower's insurance (often)
Works
- Maintenance / repairs
- Improvement (without extending)
- Caution: extension = different treatment
Good reflex: distinguish repair/maintenance (often deductible) from construction/extension (different treatment). If in doubt, have it validated by a chartered accountant or tax specialist.
Property deficit: rules & strategy
When your deductible expenses (notably works) exceed your rents, you create a property deficit. Subject to conditions, it can reduce your tax bill.
Principle
Part of the deficit can be offset against your overall income (annual cap); the surplus is offset against future property income.
Rental condition
To keep the benefit, you generally need to keep the property rented for a minimum period after the offset (to be checked against the rule applicable in the filing year).
Classic strategy: schedule major works in a year when your marginal tax rate is high, while keeping the "works ↔ continued rental" logic consistent.
Lease, deposit, charges, indexation, notice
| Topic | Rule (summary) | Good practices |
|---|---|---|
| Security deposit | For unfurnished rentals: generally 1 month's rent excluding charges | Detailed inventory + dated photos |
| Charges | Provision with annual reconciliation (often) | Co-ownership statements + supporting documents |
| Indexation | Based on the IRL index if a clause is in the lease | Automate the calculation + notify in writing |
| Notice | Regulated grounds, strict deadlines | Plan the timetable ahead (sale/repossession) |
Landlord obligations: decency, surveys, energy rules
Decency
The home must meet safety, health and minimum equipment criteria.
Surveys
Energy performance certificate (DPE), electricity/gas (depending on age), natural and technological risk reports… as applicable.
Energy rating
The rules are changing: some DPE classes may be restricted from renting. Check before you buy.
Profitability: calculation method (simple and useful)
Gross yield
(Annual rent / Purchase price) × 100
Net yield
(Annual rent - non-recoverable charges - taxes - insurance…) / Purchase price
Cash flow
Rents - (loan + charges + taxes): this is the "reality" indicator.
Tip: run a 10–15 year simulation with "rental vacancy", "works" and "rising co-ownership charges" scenarios and compare micro-foncier vs the actual-expense regime.
Common pitfalls & good practices
Common pitfalls
- Forgetting rental vacancy and unpaid rent in the forecast
- Not anticipating major co-ownership works
- Confusing deductible works with extensions
- Choosing micro when actual would have been more advantageous (or vice versa)
- Ignoring DPE constraints in the short/medium term
Good practices
- Ask for the general meeting minutes, budget and co-ownership maintenance log
- Draw up an old-school detailed inventory + photos
- Keep a "tax" binder: invoices, interest, service charge calls
- Compare several scenarios (micro/actual) over several years
- Landlord's insurance + possibly rent guarantee insurance depending on the tenant profile
Landlord checklist (before renting out)
Before buying
- Neighborhood analysis + rental demand
- Condition of the property + DPE + works to plan
- Co-ownership: charges, approved works, unpaid amounts
Before move-in
- Compliant lease + appendices
- Up-to-date surveys
- Landlord's insurance + (optional) rent guarantee insurance
During the tenancy
- Charge reconciliation
- IRL indexation if a clause exists
- Maintenance follow-up + reserves
Other investment solutions
As a complement or an alternative to unfurnished rental, other schemes can help you invest in real estate.
LMNP (non-professional furnished rental)
Furnished rental: tax advantages, tax regimes, conditions and obligations. Complete guide with official sources.
Bare ownership
Split-ownership real estate investment: definition, tax advantages, reduced purchase price, simplified management, and estate planning optimization.
Serviced furnished rentals
Professional furnished rental: definition, conditions, tax advantages, differences with LMNP, and obligations.
LLI (intermediate-rent housing)
Intermediate-rent housing: a buy-to-let scheme with 10% reduced VAT and a tax credit. Conditions and tax advantages.
Girardin
Girardin scheme: investing in the French overseas territories with a tax reduction. Conditions and tax advantages.
Denormandie
Denormandie scheme: a tax reduction for buying and renovating properties in certain areas.
Historic Monument
Investing in a Historic Monument: exceptional tax advantages for heritage restoration.
Disclaimer
The information in this article comes from the official sources referenced in the "Official sources" section at the bottom of the page. Handee cannot be held liable for any errors, omissions or interpretations of the information presented.
If in doubt or for any question specific to your situation, we invite you to consult the official sources mentioned directly (Service-Public.fr, impots.gouv.fr, etc.) or to contact a qualified professional (chartered accountant, tax advisor, notary).
The rules on unfurnished rental, micro-foncier/actual-expense regimes, property deficit and obligations may depend on your situation, the type of property, the co-ownership and the tax year. Eligibility conditions, scales and rules may change. Only the official sources are authoritative.