Year 2010 – buy to let case studies*

 
The first example is based on the two bedroom, one bathroom flat Alloro at Ville degli Olivi.

 

The apartment enjoys a good size panoramic terrace, and benefits of all the privileges of a Realitalia Managed property in Italy, such as the Basic Management Services, the Optional Management Services/Concierge Services and the Letting Management and Promotion as well as access to shared facilities as gardens and a swimming pool.

In this area – thanks to the excellent access (Pisa airport at 40 minutes) and to the many possibilities that this location offers (sea at 35 minutes driving, Florence, Pisa, Lucca, Siena etc at a short drive) – our local partners in 2010 achieved a letting occupancy of 20 weeks.

This was obtained without any particular letting management system in place, for this reason we feel there is room for improvement.

Nevertheless the following example has been prepared considering the occupancy level achieved in 2010.

On the basis of this experience we worked out the following expected figures*:

  • Letting gross income, 20 weeks of occupancy, deducted the Letting management system fees, Euro 15,000
  • 60% mortgage** at 2.40% interest (September 2010) for 20 years monthly installment (178,200, terms and conditions vary) Euro 935
  • Mortgage broker fee equal to 0.80% of the mortgage Euro 1,425
  • Mortgage fee and costs, including an expected 1,350 building insurance fee (it can greatly vary depending on the property), Euro 1,950
  • Mortgage tax (2% or 0.25% if applicant is going to be resident in the property) assuming the higher rate Euro 3,564
  • Additional Notary cost in connection with the Mortgage deed Euro 2,000
  • Annual service charge Euro 1,500 (Basic Management Services)
  • Annual consumption/contribution to sinking fund Euro 500***
  • Cost to purchase the property (notary deed around 3,000 and minor costs) Euro 4,000
  • VAT applicable to purchase reduced rate of 4% if resident, 10% if investment/second home purchase Euro 29,700
  • Standard Furniture package (Euro 25,000 + VAT) Euro 30,000

 

The equity expected to complete the purchase is Euro 195,000 (165,000 + 30,000 Standard Furniture Package) on which – in accordance with the numbers highlighted below – we expect a gross return on equity (ROE) in excess of 7.5% (9% with the Free Furniture Package promotion).

This figure does not take into consideration any capital appreciation potential that – where achieved – would increase returns considerably.

The second example is based on the three bedroom, two bathroom house Faggio at Borgo in Chianni.

 

The house enjoys a good size garden from which you can directly access the communal garden and the swimming pool, three bedrooms, two bathrooms plus an en-suite shower room, and of course all the privileges of a Realitalia Managed property in Italy, such as for example access to shared facilities as gardens and a swimming pool, and of course the Realitalia Management System.

Taking into account the occupancy level considered above.

On the basis of this trend we worked out the following expected figures*:

  • Letting gross income, 20 weeks of occupancy, deducted the Letting management system fees, Euro 20,000
  • 60% mortgage** at 2.40% interest (September  2010) for 20 years monthly installment (272,000 terms and conditions vary) Euro 1,423
  • Mortgage broker fee equal to 0.80% of the mortgage Euro 2,200
  • Mortgage fee and costs, including an expected 1,500 building insurance fee (it can greatly vary depending on the property), Euro 2,400
  • Mortgage tax (2% or 0.25% if applicant is going to be resident in the property) assuming the higher rate Euro 5,440
  • Additional Notary cost in connection with the Mortgage deed Euro 2,500
  • Annual service charge Euro 2,250 (Basic Management Services)
  • Annual consumption/contribution to sinking fund Euro 750***
  • Cost to purchase the property (notary deed around 3,500 and minor costs) Euro 4,500
  • VAT applicable to purchase reduced rate of 4% if resident, 10% if investment/second home purchase Euro 37,600
  • Standard Furniture package (Euro 32,000 + VAT) Euro 38,400

 

The equity expected to complete the purchase is Euro 274,000 (236,000 + 38,000 Standard Furniture Package), on which – in accordance with the numbers highlighted below – we expect a gross return on equity of about 7.5% (8.5% with the Free Furniture Package promotion). This figure does not take into consideration any capital appreciation potential that – where achieved – would increase returns considerably.

What we expect to obtain within the first three years of letting operation in the Chianti Pisano:

 

  • We believe there is scope for improvement due to the Realitalia Letting Management and Promotion System and of course due to the unusual care of the products selection and finishing of our Italian property.
  • We believe that the fact we offer a properly organized concierge service available to guests (as well as to owners) would produce more returning clients, more word of mouth and especially room for a price increase compared with the existing local market.
  • We believe that in the event we are able – as planned – to offer more indoor facilities, in particular a SPA center located in the area, this could produce more occupancy, especially in the medium and low season, giving guests an opportunity to spend some time in the Chianti Pisano out of the traditional season.

 

To discuss it further, please call us +44 (0)20 7851 4456 or write to us, we will promptly contact you back.

 

*All the information provided is complimentary and for guidance only, it contains approximate figures that can vary at any time. Generally speaking all the information provided for by Realitalia is not intended to be necessarily complete and/or to supply any tax or legal advice. Realitalia suggests you always seek independent and competent legal and tax advice before you enter into any binding relationship to purchase any real estate in Italy;

**This information is for guidance only and it is subject to the bank acceptance upon the client’s application. Mortgage information was supplied by Mr Armando Bechi, www.armandobechi.com (Mortgage Broker). Thank you Armando for your collaboration;

***Please note that in the yearly running costs it was not included any figure for the payment of ICI tax and/or any other tax that might be due on your Italian property.