The rental perspective 1 - featured in A Place in The Sun Magazine
February 18th 2006
Purchasing with rentals in mind - More and more people are purchasing property with renting in mind and over the next two issues Mark Slaviero from property sales and rentals company Homes in Italy will be covering what aspects to consider when purchasing and also how to make the most out of renting your property.
Buying to Let
Italy may not be at the forefront of the overseas buy-to-let market as other countries can offer year round letting, Italy has often been viewed as a specialist market but more and more people are looking to gain a return from their Italian property. Many people are simply looking at creating an income to offset mortgage payments and other outgoings such as utilities and community tax (which are a snippet when compared to overpriced Britain). Others are looking for more of a substantial income and view the buy-to-let scenario as an excellent way of creating a nest egg for the future.
Either way, it is imperative for the potential purchaser to undertake the research from the outset to ensure that it is a viable venture, and that the property and the location will gain the rental yields that are expected.
Italy has been a popular holiday destination for many years and with the introduction of the low cost airlines, many new regions have opened up, allowing people to move away from the traditional package holiday approach and adopt a more tailored route for their holidays. Gone are the days of the seaside hotels, as people want something different; it is estimated that even more than 50% of holidaymakers are choosing this alternative. This is all good news for the property rental market but if renting the property out is going to be more than an occasional pastime, it is important to select the right type of property.
Choosing the property
Purchasers should seriously keep the rental market in mind when selecting a property to buy and try to ascertain the target audience and the needs of that audience. It is important to establish the market and keep them at the forefront of your mind when viewing. Are you aiming at younger professionals, families or the more mature client? An apartment in Rimini for example would appeal to families and the young at heart, whereas properties in the Lakes would suit more of a mature clientele. The type of rental property in Italy is varied; the typical farmhouse, the city apartment, the hill town or village house, the ski chalet, villa or seaside retreat.
The style and layout of the property are important but the location is key. The sorts of questions you need to ask yourself are as follows: is the property easy to access? Is it suitable for children? Does it have parking? Would you be happy renting there?
Is it within easy access of the airport? What are the local amenities? Bars? Restaurants?
One-bed apartments for example will still rent but if the lounge is large enough to sleep additional guests then this will be a bonus. Pools will also boost rentals of countryside properties, so if this is key to your plans make sure that planning permission will not be a problem, if the property does not have a pool.
Doing the research
It will be worthwhile to check with rental companies, through rental brochures or on the web to see the level of rental income that you can expect in the area. Tuscany for example is a large region and rents in the Chianti region will not be found in the more mountainous region of the north. If the property that you are looking at has been rented before, try and obtain some sort of account or details from the estate agent or current vendor. Also renting before you buy is an excellent way to understand and discover the potential of the area.
Finding the next undiscovered area and being the only rental may not be the best strategy but if there are a few rented properties dotted around, then this is a good sign as someone has tested the market first.
A lot of holidaymakers prefer to be one hour from an airport and if the journey is more than 90 mins, then many potential clients will be deterred. Make sure that the area is well served by an airport and that it has operated for some time or there are a few carriers that fly there because if the airline pulls out, so will your potential rentals. Also look at the number of destinations that the airport serves in the UK; Pisa, Rome and Venice for example have flights from throughout the UK and a large potential audience. Make sure that you check the schedules as some of the destinations may only be seasonal.
Doing the sums
Once you have found a suitable property it is important to be realistic with the rental income gross rental yields are from 5-10% of the property value per year and can be as high as 15% in some cases. It is unlikely that the property will be occupied all year round, so its important not to overestimate the income or rely on it totally to pay the mortgage or running costs as you may have to take into account a difficult season. Buying this sort of property is a medium to long-term venture if you want to gain real returns.
Figure in any agencies commissions (which vary from 15 35%), advertising costs, furnishing and equipping the property, specialist insurance (third party covering injury to guests) and property maintenance.
It is also important to be aware of the tax implications of renting in Italy you should take into account income tax, which you are required by law to pay in Italy. Income up to 10,000 Eur is taxed at 18%, 10,000 15,000 at 24% and 15,000 to 30,000 at 32%. You will require a Commercialista (accountant) to assist you with your return. Italian authorities often find it difficult to make non-residents comply with the regulations but be aware that the authorities may apply fines.
Choosing the location
Italy is very diverse and research on the location is essential. The season is the longest in the south (Amalfi, Sicily) where you can rent up to 20 weeks but it is also mild in Liguria and Sardinia in winter, other parts of Italy rent an average of 10 weeks.
Apartments in major tourist cities (Florence, Rome and Venice) and Ski resorts may have almost year round letting potential. With budget airlines, people can now pop over for a long weekend with relative ease. Apartments in Venice sleeping up to 4 people can range from £700 to £900 a week in high season with many at the higher end. The average weekly rental in Florence is around £800 per week and Rome £600 per week. Expect a lot of competition in Venice.
Puglia is currently flavour of the month and with extensive publicity is attracting large number of visitors, especially of interest are the traditional Trulli around the beautiful areas of Alberobello and Ostuni, which can rent for an average of £500 per week in high season. Be careful, however with some up and coming areas as although property prices will be attractive, visitor numbers may not provide a good enough rental return.
Central Italy continues to be extremely popular with Tuscany and Umbria at the forefront of the letting scene. With rolling countryside, impressive cities, walled medieval towns, cypress trees, rolling vineyards and olive groves, there is no shortage of visitors. The most popular rentals are undoubtedly the typical farmhouses with pools in the countryside, which can range greatly in price from £1,500 to over £3,000 a week in high season depending on location and size of property. Dont forget that this type of property is going to be seasonal. Northern Umbria around Citta di Castello and also Lake Trasimeno attract more modest rents, as does the northern Tuscan areas of Bagni di Lucca and Barga, where a typical mountain house sleeping up to 4 can rent between £300 and £500 in high season. The Umbrian hill town of Assisi attracts 5 million visitors alone, and there will certainly be a tourist market out of season at peak times such as Easter and Christmas.
The lesser known Marche and Abruzzo again are a good investment in terms of purchase prices but are not yet fully on the tourist trail, so a greater effort on the marketing front would be required to attract your rental audience.
The wonderful lakes of northern Italy have been firmly on the tourist map for years, attracting a mostly northern European clientele and the odd Hollywood film star. Lake Garda leads the field and is abound with colourful resorts such as Riva, Salo and Sirmione and is very diverse being surrounded by countryside, olive groves and pine trees. Lake Maggiore and Lake Como and their resorts are also popular and offer some stunning and dramatic scenery and vast open expanses of water. The lakes are also within easy access of the key cities in northern Italy (Milan, Bergamo, Verona) and also ski resorts, which will assist with out of season rentals. An average 1-bed apartment in Como can expect around £500 and a 2 bed around £700 per week in high season. Expect Garda and Maggiore to be slightly higher.
Liguria in the north west has long been popular and has a mild climate, is easy to access and is connected to the south of France, offering potential renters great options for day tripping. Seaside resorts such as Alassio, San Remo and Diano Marina attract a large Italian audience and other highlights include Portovenere and Cinque Terre. The terraced hillsides behind the coast are full of olive groves and lemon trees and offer reasonable purchase prices, with good rental returns. Two bed apartments to rent in the more popular resorts vary from £700 to £900 in high season and a small one bed hill town apartment can even achieve between £250 and £300 a week.
The island of Sardinia is another great destination for rentals with turquoise sea and outstanding sandy beaches. Until recently the island has been more difficult to access and has been regarded as a more expensive and exclusive holiday destination. This however has changed with the inclusion of Olbia, Cagliari and Alghero on the low cost airline schedules and the island really is opening up to greater opportunities. The Costa Smeralda on the north East may be a little expensive but the resorts to the east of Alghero (Porto Torres, Santa Teresa di Gallura) and around Cagliari are quite reasonable and easily accessible from the airports. Expect to achieve £300 - £500 for 4 sleeps in high season. Villas can command from £1,500 a week, depending on size and location.
Another coastal area, which has been a favourite for years is the Amalfi coast. Again, this area has been accessed mostly through package deals but Naples airport is now offering a greater choice of flights. Sorrento, Positano and Amalfi are firmly on the tourist trail, not only for the British and the breathtaking coast and scenery, thriving resorts and warm environment will ensure a continual influx of visitors. A property able to sleep up to 4 people, should be able to achieve a weekly rental of at least £400 in high season and those with exceptional views can achieve as much as £600.
Getting ready to rent
As long as you have undertaken the research, chosen a property, which is suitable for renting and has the potential to bring you the returns, there is no reason why you should not succeed. All you need now is to make sure that you are exploring every angle to manage, promote and market your property properly to secure its maximum potential.
Next issue: Getting the most out of renting your property.
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