It’s not a surprise that Italian investment opportunities are many. This is a rich country included in the G7, a place that even before its unification (1861) has always been open to foreign money, energies, and ideas. Despite this positive approach, you must consider from the beginning that investing in Italy without the proper Italian support can be difficult.
Should I consider Italy for my property portfolio?
Real estate investment is often a passion for investors and you have surely heard the saying, “there is nothing safer than investing in brick and mortar.” Italy has always been an attractive place for investing in property based on its lower prices and consistent level of tourism. However, investing in real estate is a complex business and as you can imagine, more challenging to navigate if you are not Italian or Italian, but no longer based in Italy. In this article we will try to shed some light, trying to offer some insights into the reasoning of the ordinary real estate investor, or who perhaps has the goal of buying a home or who owns family real estate and is considering whether to sell or keep it.
A house, when it becomes an investment property, is an asset. This means that it must be evaluated with financial parameters: trying not to fall victim to some very common biases.
For those who do not have time to go through this entire article, we can summarise that real estate investments in Italy are investments that can be very profitable when the right opportunity is found. When speaking about buying your own home or a holiday home, some great deals can be found all around the country and properties used for hospitality in the right place can be a veritable gold mine. However, when talking about property investment and returns, the value of real estate in Italy has depreciated on average, and it is not easy to predict real estate market trends and find a real estate investment that yields more than the alternatives that are easily accessible to investors, such as the financial markets. Real estate investments are also very illiquid. Buying the wrong property could be a mistake from which it is very complex to come back.
This is why a foreign investor needs to appoint the right professionals to assist them to evaluate the investment in all its aspects.
Investing in real estate abroad can be a lucrative opportunity for foreign investors seeking to diversify their portfolios and capitalize on the potential of foreign markets. Italy, with its rich cultural heritage, vibrant cities, and picturesque landscapes, has long been a popular destination for international real estate investments. However, navigating the complexities of the Italian real estate market requires expert guidance, making the appointment of Italian Real Estate ILF attorneys essential.
Residency by investment in Italy: the golden visa
It is called golden visa or residency by investment and the entry investment has recently been changed from 500,000 euros to 250,000 euros. So you just have to invest in joint stock companies (500,000 euros) and startups (250,000 euros). You are not obliged to reside physically in Italy for the entire duration of the visa.
Italy’s Golden Visa, also known as the Investment Visa, provides residency to applicants who make investments in specific areas.
- Investing €2,000,000 in government bonds.
- Making a philanthropic donation of €1,000,000 in the fields of culture, education, immigration management, scientific research, or preservation of cultural and landscape heritage.
- Investing €500,000 in an Italian limited company (SPA).
- Investing €250,000 in a certified innovative start-up, as defined by law decree 179/2012.
The procedure for obtaining the visa is as follows:
- Completely online: Visa applications and all subsequent communications are done through the Italian government website.
- Expedited: The approval for the visa is issued within 30 days of submitting the application.
- Bilingual: The website, application forms, guidelines, and customer care services are available in both Italian and English.
- Centralized: The Secretariat (at the Directorate-General for Industrial Policy) serves as the sole point of contact for visa applicants and coordinates the inter-institutional committee responsible for issuing the approval for visa issuance.
It’s important to note that currently, Italy does not have a program for investors purchasing real estate. However, the Italian government plans to vote on a bill later in 2023 that could introduce real estate investments as a pathway to obtaining a Golden Visa in Italy.
Regardless of the circumstances, we strongly encourage you to get in touch with us! The costs of our consultations are certainly minimal when compared to the potential risks you may encounter along the way.
In-depth Understanding of the Italian Legal Framework
Did you know that even one town from the next, can have a different set of regulations? Make sure you hire a lawyer who understands this and has a lengthy experience in this field, because it is all too common that a foreign buyer has received a penalty for a regulation that was not followed by a previous owner.
The Italian real estate market operates under a unique set of laws, regulations, and bureaucratic procedures. Our specialized Italian Real Estate attorneys possess an in-depth understanding of the legal framework governing property transactions, including property rights, zoning regulations, land use restrictions, and building permits. This knowledge ensures that foreign investors can navigate the complex legal landscape and comply with all relevant regulations, minimizing the risk of legal complications and protecting their investments.
Local Market Knowledge and Insights
ILF Italian Real Estate attorneys bring valuable local market knowledge and insights to foreign investors. They possess a deep understanding of the regional dynamics, market trends, and pricing structures in different areas of Italy. This knowledge helps investors identify lucrative investment opportunities, assess risks, and make informed decisions. Additionally, an ILF attorney can provide advice on emerging market trends, such as changes in property taxation, incentives, or new legislation that may impact investment strategies.
Due Diligence and Contractual Expertise
Conducting thorough due diligence is crucial when investing in real estate. ILF Italian Real Estate ILF attorneys can assist foreign investors in conducting comprehensive property assessments, including verifying ownership, title history, and potential encumbrances or liens on the property. Furthermore, they possess expertise in drafting and reviewing contracts, ensuring that all terms and conditions are fair, accurate, and in compliance with Italian law. This level of scrutiny helps safeguard investors’ interests and mitigates the risk of fraudulent transactions or legal disputes.
Negotiation and Mediation Skills
We have many foreign clients who say to us: “but I can’t negotiate, because it would be offensive or I could lose the deal”. However, we at ILF understand how and when to negotiate in Italy and it is very different from the culture that many of our clients are used to.
Negotiating a real estate transaction in a foreign country can be challenging, particularly when language and cultural barriers exist. ILF attorneys act as a skilled negotiator on behalf of foreign investors, ensuring their interests are protected during price negotiations, contract terms, and other critical aspects of the deal. In case of conflict, an ILF attorney can also provide mediation services to find mutually acceptable solutions, preserving the investor’s relationship with local parties involved.
Tax Planning and Compliance
Understanding the tax implications of real estate investments is vital for foreign investors. ILF Italian Real Estate attorneys possess up-to-date knowledge of the Italian tax system, including property taxes, capital gains taxes, and inheritance taxes. They can provide strategic tax planning advice to optimize the investor’s financial position, minimize tax liabilities, and ensure compliance with relevant tax laws. Such guidance helps investors make informed decisions regarding investment structures, ownership arrangements, and potential tax benefits or incentives.
Investing in Italian real estate offers foreign investors tremendous potential, but navigating the intricate legal and regulatory landscape requires expert guidance. Engaging ILF Italian Real Estate ILF attorneys provide foreign investors with a competitive advantage, ensuring they have access to specialized legal expertise, local market knowledge, and valuable insights. From due diligence and contract drafting to negotiation and tax planning, an ILF attorney plays a pivotal role in safeguarding the investor’s interests and maximizing the success of their real estate investment in Italy.
Why does investing in Italian brick still appeal?
In Italy, housing has a special value. Partly for cultural reasons, partly because of the large supply of available real estate (according to a recently published study there would be about 1.2 per citizen).
Seventy-three percent of the population owns at least one home, a figure that is among the highest in the world. This is certainly a positive statistic in terms of its impact on the social fabric of the country. It goes without saying that owning a home is an element of security and stability. But the great propensity of Italians to make real estate investments often did not stop at the first home.
There is a widespread belief among a large part of the population that bricks are a safe investment, a safe haven asset on which to invest even most of one’s savings. There is also a huge unused housing stock. Many people own one or more houses, perhaps as a result of inheritances received. Keeping these properties can be complex in many cases. For example, a second home by a Lake or by the sea, may no longer be used by the next generation of a family, however they are still required to pay taxes and maintenance, which may have to be split between siblings. This can mean that often ILF has found that once we start speaking to the owner or real estate agent and understand the reason for selling we can negotiate bearing in mind your needs as our clients whilst showing respect to the seller. Having this knowledge and skillset can be a vital part of the purchase.
Is it worth investing in Italian real estate in 2023 and what about investing in Italian property in 2024 and 2025?
Another very important financial concept that is often poorly considered is that of opportunity cost. When considering whether investing in real estate is worthwhile, one should not only consider the potential absolute return, but should reason about the possible alternative use of capital. A house purchase could give rise to a small income, through rent, or one could use the capital to invest in financial markets. So, in this situation, how to decide?
According to Bankitalia’s annual analysis, real estate prices have remained stable on average in Italy over the past 10 years for 67.2 percent of Italians. Instead, 16.6 percent showed an increase and 16.2 percent a decrease. The real estate market is one where good deals can be made, especially when one has a lot of capital at one’s disposal and a specialized ability to operate.
Recent trends in 2023 have shown more Americans buying property in Italy as their interest rates have priced them out of the US market, more British looking to move to Italy, as their cost of living becomes harder to bear and the search for hotels for sale in Italy on the increase, after the pandemic put many plans temporarily on hold. Now could be a really good time for many to consider where and how to buy real estate in Italy.
Investing in your primary home in Italy: investing in real estate with a mortgage as a non resident
Obviously, when it comes to your primary residence, your home, the discussion is different. One has to distinguish real estate investment from the purchase of a home, which more than an investment is a financial goal. When you decide to invest in real estate you have to think about whether to do it with your own capital or take out a mortgage.
Obviously, a mortgage on one’s home is a loan and has costs, but it should be emphasized that buying a home is one of the few opportunities for most people to take advantage of leverage, which helps to significantly increase one’s ability to accumulate wealth in the long term. For these reasons, one should avoid buying the house in cash and where it is convenient try to maximize the portion one borrows and invest the remaining capital in solutions with greater return potential and more liquid.
Is property for hospitality a good investment in Italy?
What are the costs of real estate investment in Italy?
Another aspect that needs to be considered when thinking about real estate investment is that of costs. When investing in real estate, the first cost to consider is that related to the transaction. The notary’s fee, taxes, and costs associated with the purchase of the house can result in expenses of up to several thousand euros that must be added to the purchase price when considering the affordability of the investment. Another cost to take into account are the tax charges, which can also be very high if you are investing in your second home. In our in-depth look at taxes associated with buying a second home you will find all the information you need to anticipate this cost item. Finally, you need to take into account any renovation costs.
Renting out an Italian house as an investment: putting an investment property to produce income
Using an investment property to produce income could definitely be a strategy. According to Idealista, among Italian capitals, Taranto and Syracuse are the most profitable, with a return index of 11.6 percent. They are followed by Biella (10.6 percent), Ragusa (9.7 percent) and Trapani (9 percent). On the other hand, Italy’s lowest returns accrue to rental homeowners in Siena (3.1 percent), Salerno (3.2 percent) and Venice (4.1 percent). In Rome, gross returns rise to 4.6 percent, while Milan stands at 5.6 percent.
As can be seen, the highest yields are found in cities where the housing market is fairly small; as the yield increases, therefore, the possibility of having one’s home vacant for a period or seeing it depreciate increases. One must then consider taxes and the risks associated with tenant delinquency, but all in all, rental yields are one of the factors to consider when evaluating real estate investment.
Italian Real estate crowdfunding: what is it?
Real estate crowdfunding is an investment in which an investor finances a private real estate project through a loan, indistinctly and without intermediation (or with minimal intermediation). Crowdfunding is usually offered by platforms that aim to match supply and demand (as is the case in the vast majority of cases).
Real estate crowdfunding consists, in most cases, of the purchase of a home. The buyer, instead of turning to a bank to obtain a mortgage, activates a fundraising campaign. The investor receives the amount loaned with interest.
Is Real estate a solid asset in Italy?
If you are considering investing in real estate during 2023 or in 2024 and 2025, it is good for you to begin to enter into the view that bricks and mortar is just one of many ways to invest your savings. This is a fairly intuitive concept, although not widely understood, because we tend to attribute special status to housing. In reality, the real estate asset, except for the first home, should be treated like any other financial asset and be valued from a wealth management perspective.
Once you assume this way of thinking here are what factors you should consider if you are thinking of buying a home:
If we look at the real value (which takes into account the effect of inflation) of real estate over the past 25 years, we can see that it has fallen by an average of 15 percent. This means that those who had invested in real estate would not have been able to protect the value of their capital from inflation, which has not even increased particularly fast in the past 25 years. Consider that the geographic location of your investment is crucial. While real estate values have indeed remained steady in large cities such as Rome and Milan, they have plummeted in other areas of the country, where you have likely read about empty villages in the countryside, as younger generations have left to find employment in larger cities.
If you are considering investing in property today, or if you own unused real estate, you need to consider the tax factor. If Imu has been abolished on most first homes, the same cannot be said of second homes. Then there are local taxes.
If you already own a first home you are probably aware of being exposed to the risk associated with real estate. From a long-term perspective, you should diversify your assets among different asset classes to avoid being over-exposed in the event of an industry-specific crisis (why it is important to diversify).
Ultimately, investing in real estate frequently still pays off in 2023 and it should still pay off in 2024 and 2025, especially if you are buying a house in a large city or a well-known tourist location. When evaluating it, however, you cannot avoid taking into account all the factors listed above. The important thing is to enter into the view that investment real estate is an asset like any other, that there are risks and to which there are alternatives.
What is ROI on real estate in Italy?
The calculation of the yield of a property involves several steps. First, you need to determine its gross annual income, which is mainly determined by its rental attractiveness. This can be done by researching the average rental values in the area. Next, you need to subtract the operating costs associated with the property, such as maintenance, taxes, and insurance, from the gross income to obtain the net income. Finally, to calculate the yield, you divide the net income by the purchase price of the property and multiply the result by 100. The yield can be used to compare different investment opportunities and determine which property will generate the most income for each euro invested.
Here is a summary of the steps involved in calculating the yield of a property:
|Determine the gross annual income of the property by researching the average rental values in the area.
|Subtract the operating costs associated with the property from the gross income to obtain the net income.
|Divide the net income by the purchase price of the property and multiply the result by 100 to obtain the yield.
|Compare the yield of different investment opportunities to determine which property will generate the most income for each euro invested.
What we can do for you:
- provide prospective foreign investors with an extensive and diversified portfolio of properties and businesses currently on the market, including full data concerning the businesses’ standing, such as last Balance Sheets;
- provide studies on future potential development, numbers and increasing potential possibilities of the businesses of interest;
- provide investors with alternative listings of properties in need of renovation but with approved licenses;
- provide wide-ranging start-up services and assistance to obtain the necessary tools to run and develop a business in Italy (website creation and development, creating booking and Airbnb accounts);
- provide reliable and comprehensive fiscal and legal assistance throughout the purchase, business incorporation and establishment phases, such as assisting with the Italian invoicing and bookkeeping rules and helping clients prepare for bank financing and mortgage applications.
The contents of this page should not be taken as an authoritative statement of Italian law and practice. Neither the author nor the publisher are responsible for the results of actions taken on the basis of information contained in this summary, nor for any errors or omissions. This text is not intended to render legal, accounting or tax advice. Readers are encouraged to seek professional advice concerning specific matters before making any decision.