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Investing in Italy


The magnetic pull of Italian properties is undeniable, yet beneath the surface lies a landscape of ownership intricacies and legal nuances awaiting exploration. By understanding the buying process, non- resident buyers can navigate the Italian property market successfully and achieve their investment objectives


By ARMANDO SACCO

June, 2024




When Tracy from Texas fell in love with a typical Tuscan countryside home with approx. 40 acres of olive groves and vineyard on rolling hills, that was for sale in the Arezzo province, she was unaware of the strict regulations governing renovations for such properties.


The property was in such bad shape that she thought she could tear it down and rebuild it, which is so common in the US.  Instead I had to educate her that municipal and regional regulations demanded that she had to renovate the actual existing building. The lack of knowledge could have led Tracy to face delays and additional costs in the purchasing process.


Drawing upon my experience as a seasoned real estate agent spanning Toronto, Canada  to Italy, I have witnessed the aspirations and challenges faced by international buyers like Tracy, adding layers of complexity to the acquisition process. from historic property designations to regulations surrounding agricultural land and neighbouring rights.

For instance, if the villa you’re eyeing is classified as a historic property, there may be additional regulations governing renovations or modifications. If adjacent to the villa you are also buying an agricultural lot of land, your neighbours might have “right of first refusal”. When you are buying any piece of real estate, it is crucial to have all zoning requirements checked. 


Also, buyer’s rights differ: in general in North America you apply the buyer beware approach, in Italy it’s the seller who must guarantee that the property is up to code. If not, this needs to be disclosed and sometimes could effect pricing or the closing of the deal. Additionally, consider the tax implications. Italy levies a range of taxes, including transfer taxes (imposta di registro), which typically range from 2% to 9% of the property’s value, depending on various factors. Engaging a local legal expert well-versed in Italian property law early in the process will help you navigate these challenges and prevent surprises down the road.




Current trends in the Italian real estate market, particularly in popular regions such as Tuscany, the Amalfi Coast, or Sicily


Suppose you’re considering investing in a luxury apartment overlooking the Amalfi Coast. Understanding current market trends is essential to get the most out of your investment. In recent years, we have seen a notic4eable uptick in demand for high-end coastal properties, driven by both domestic and international buyers seeking exclusive retreats. This demand has led to increased property values and rental income potential. For instance, a seafront apartment in Positano may command premium rental rates during the summer months, offering attractive returns for investors. Keeping an eye on such trends can help international buyers identify lucrative investment opportunities in popular regions like the Amalfi Coast. Obviously, if you are approaching a premium market, expect to pay premium prices. Other factors that could effect the return of the investment (ROI) may be, for example, the need of capital expenditures, ongoing local taxes, condo fees and many other factors.



 

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The buying process for non-residents


Let’s imagine you’re a non-resident interested in investing in a vineyard property in the picturesque region of Piedmont. As a foreign buyer, navigating the Italian property market involves understanding the unique buying process and associated costs. Firstly, you’ll need to obtain a codice fiscale, a tax code required for all property transactions in Italy. This could involve applying in person at the Italian Revenue Agency upon arrival in Italy. Once you have your codice fiscale, you can proceed with the purchase process.


However, it’s essential to be aware of the additional costs involved. For example, Italy imposes transfer taxes, registration fees, and notary fees on property transactions. When buying a property in Italy, the closing deed is not managed by lawyers. A public officer, namely the notary,  will handle all activities involved with closing the transaction, checking for leans on the property, title restrictions, building licensing, and translation costs.


Costs can also vary depending on the property’s value and location. For instance, purchasing an estate in Piedmont may incur higher transfer taxes compared to buying a residential property in a smaller town. Additionally, factor in legal fees and agent commissions, which can further contribute to the overall cost of the transaction. I also suggest speaking with an international CPA and decide the fiscal structure you need to serve your purchase.



Some of the most desirable types of properties


When choosing a property, several factors come into play. For example, consider the property’s location – a villa with panoramic views of the countryside may attract more interest from tourists and potential renters.


Additionally, assess the property’s amenities and potential for renovation or expansion.  A villa with a pool, olive groves, and a guest house may offer diverse revenue streams through vacation rentals, weddings, or agritourism activities. Furthermore, factor in long-term appreciation potential. Investing in a region with growing tourism or infrastructure development may yield higher returns over time.



Consider your “why”


Why do you want to make your real estate purchase in Italy? What are your expectations? What do you want to achieve? Is it a place for retirement or is it an investment? By carefully considering these factors, with an international real estate professional, you can choose properties that align with your investment goals and lifestyle preferences.




Potential challenges that international buyers commonly face when purchasing property in Italy


Language barriers can complicate negotiations and contractual agreements, leading to misunderstandings.


Moreover, Italy’s bureaucratic processes may result in delays or unexpected hurdles during the transaction. To mitigate these risks, leverage professional expertise. For instance, working with a bilingual real estate agent who understands both your needs and the local market can streamline communication and offer invaluable guidance.


Additionally, conduct thorough due diligence to uncover any potential issues with the property or its title.



Last but not least, financing!


I was assisting Andrew from Florida with the purchase of a second home in Rome, near the most iconic Dolce Vita street, Via Veneto. Approximately 650 square feet of a cozy condo unit, just steps from the American Embassy. Andrew thought he could hunt for financing options with the Italian financial institutions, to learn quickly that the Italian banking system is very restrictive and conservative. At that time not one bank wanted to finance Andrew’s real estate purchase.


Nowadays a handful of banks are starting to consider financing foreign buyers, however LTV is maxed out at 50%. How did it go with Andrew? I suggested he investigate the opportunity back home to obtain a HELOC (Home Equity Line of Credit) from his bank. That was the solution to the problem, and since Andrew became an “all cash” buyer, that gave us some extra negotiating power in Andrew’s favour. So first, do your homework then start building your team to help you make that Italian dream, reality.


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