Rental real estate faces new challenges

Rental real estate investment is becoming more complex as of the end of 2026, with rising costs and changing market dynamics influencing its profitability. According to Pierre-Emmanuel Jus, director of Maslow, a specialist in rental investment, the real estate market operates on mathematical principles, and rising interest rates are affecting both buyers and sellers.

Higher interest rates impact borrowing

Credit rates have increased to around 3.4% for 20-year terms and could rise further, making borrowing more expensive than in previous years. However, this situation may offer advantages for investors with financing, as sellers may be more willing to negotiate prices to facilitate sales.

Property tax increases strain landlords

Property tax has also become a significant expense for landlords. A study by Maslow found that property tax increased by 18.6% on average between 2021 and 2025 across 200 municipalities. In some areas, property tax can now represent up to two months of rent annually, significantly reducing net rental income.

Rental yields remain modest

Rental yields, which are the returns on investment from rental income, generally range between 3% and 5%, with a slight edge for furnished properties. However, this figure must be adjusted for expenses such as management fees, insurance, co-ownership charges, and maintenance. Additionally, rent control measures in some municipalities can limit the ability to increase rental income.

Location and property type matter

Location remains a critical factor in rental profitability. Cities such as Caen, Rennes, and Besançon have shown resilience in their real estate markets between 2021 and 2025. However, rental profitability is not directly measured by these rankings. The choice of property type also influences investment outcomes. Studios and two-room apartments are in high demand, particularly in Paris, where they accounted for 46.8% of furnished rentals in the third quarter of 2026.

Energy efficiency regulations add costs

Energy efficiency regulations have introduced further considerations for investors. Properties classified as G in the energy performance diagnosis (DPE) cannot be rented under a new lease in metropolitan France. Properties classified as F will follow in 2028, and E in 2034. Investors are advised to consider properties with a DPE rating of at least D. Additionally, common areas in co-ownership may require significant investment for renovations, which can add up to several months of rent over a 10 or 20-year holding period.

Investors must consider more factors

Despite these challenges, rental real estate investment still presents opportunities, particularly with increased negotiation possibilities and sustained rental demand. However, the previous simplicity of assessing profitability by comparing apartment prices and rental income is no longer sufficient. Investors must consider a broader range of factors to make informed decisions.