After four years of investing in nightly rental properties in Italy, I share my experience and reasons for stepping back from this business. High taxes, booking commissions, management fees, and ongoing expenses significantly reduce profitability. Additionally, challenges like difficulty obtaining loans and market dynamics make it tough to achieve good returns without leverage. Despite this, living in Italy has enriched our lives immensely.
Hello everyone, I'm Brad. If you're new here, I started my YouTube channel, Brad's World, about three years ago to talk extensively about real estate in Italy. This isn't just a casual hobby for me; I moved to Italy in retirement and invested in high-quality apartments for nightly rentals. After four years since purchasing my first property, I want to share my honest thoughts and experiences with you.
I'm an American with a solid real estate background, having renovated over 200 apartments and homes in the United States over 20 years. Ready for a change, my wife Olivia and I decided Italy would be a great place to relocate and invest. We aimed to buy apartments that could generate passive income, which also qualifies as part of the income requirement for Italy's elective residency visa (ERV).
We chose Montipulciano in southern Tuscany as our investment location. It was a lesser-known town compared to popular cities like Lucca, Venice, Florence, or Rome, but it had good potential and was becoming more popular. In hindsight, Lucca might have been a better choice due to its booming tourism, but Montipulciano has become our home, and we are very happy here.
When we started buying properties around 2021, the US dollar was strong against the euro, which helped us financially. We purchased several apartments, but over time, our plans evolved. I was cautious and chose not to use leverage (loans) because I was nearing 60 and didn't want long-term debt.
However, this decision impacted our return on investment (ROI). Without leverage, the ROI on these properties is quite low. Recently, I sold one of my apartments to friends for roughly what I paid, including renovations. Despite generating six-figure gross rental income, the high expenses made it barely profitable.
Owning rental properties in Italy comes with many expenses that eat into your income:
For example, if you have a property worth $1 million and earn $100,000 in gross rental income, over 50% of that income goes to fees and taxes, leaving you with about $50,000, which is a 5% return on investment.
Getting a mortgage in Italy as a non-EU citizen is very difficult. Banks are reluctant to lend to foreigners without strong local connections. Most buyers pay cash, which further reduces potential returns.
Additionally, Italy's low birth rate and population decline affect long-term property appreciation. Many properties remain vacant because the economics of renovating and renting long-term are not favorable.
Despite the challenges with the rental business, Olivia and I are thrilled to live in Italy. We own our home outright, with no mortgage or rent, and pay no property tax since it is our primary residence. Our healthcare costs are about $3,000 per year for both of us, and our overall expenses are lower than when we lived in the US.
Owning a home free and clear in a beautiful place like Montipulciano has given us a freedom we never had before.
If you're considering moving to Italy to stretch your dollar and enjoy a better quality of life, you're on the right path. However, if you're thinking about investing in nightly rentals, be very cautious. The high taxes, fees, and management costs can severely limit your profitability.
Make sure to do your homework, understand all expenses, and consider whether you want to take on loans or pay cash. Also, be aware of the local market dynamics and population trends.
I started my channel to help people avoid costly mistakes and make informed decisions. If you have questions about buying property or living in Italy, feel free to reach out.
Olivia and I love meeting viewers who visit Montipulciano, so if you see us around, please say hello!
Thank you for reading, and I hope my experience helps you on your journey.
Ciao!
Note: This article is based on personal experience and does not constitute financial or legal advice.
