Property investment in Italy
Italy is a prime destination for those investing in foreign real estate.
The country simply has so much to offer. From its culture to gastronomy, to religious significance and diverse landscapes, this a country that will always appeal to visitors and residents alike. No wonder that some 60 million tourists come every year, and that doesn’t include local Italian tourists too.
Investors can look forward to rental income, subject to following local rules, and capital growth from property investment in Italy too.
Building a profitable property portfolio in Italy
If you’re aiming to build a profitable property portfolio in Italy, here are some key steps to enhance your chances of success:
- Research: Understand the market. Investigate property types in popular regions and compare rental yields to identify the most lucrative properties to rent out.
- Budget: Establish your budget and consult with an independent financial advisor to develop an investment plan. They can help you account for all your expenses, including taxes, legal fees, maintenance costs and property management fees if you plan to rent out the property.
- Legal advice: An independent lawyer can guide you through the process and ensure all legal aspects are properly managed.
- Property selection: Choose properties that match your investment objectives. Are you looking for long-term capital growth or rental income?
- Diversity: Consider diversifying your portfolio to spread risk. For professional advice, speak to an independent financial advisor and consult your currency specialist for tips on managing your currency risk.
- Regular review: Regularly review your investment portfolio and assess the performance of each property to ensure alignment with your long-term goals.
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Understanding the Italian property market
In recent years, high-interest rates in Europe have largely affected the investment into Italy, with the Euribor rate soaring to a 15-year high.
Italy has seen an increase in short-term let restrictions, particularly in busy tourism areas as short-term lets i.e. Airbnbs are so highly priced that residents are being priced out of the market. These restrictions vary depending on the local council, so if you’re looking to let a property short-term, speak to a property lawyer to understand the rulings in your local area.
On the whole, the outlook for 2024 and 2025 is moderately positive for various real estate sectors in Italy.
Rental yields in Italy
As of 2024, the average rental yield in Italy is 5.5%, but varies by region and property type. The popularity of short-term rentals, particularly in tourist-heavy cities like Rome and Florence, continues to drive demand and profitability.
The COVID-19 pandemic has had a lasting impact on property investments, shifting preferences towards properties that can serve as both vacation rentals and remote workspaces. This trend bolstered the short-term rental market, making it a lucrative option for investors seeking high returns.
Legal considerations for investors
There are a few things that you need to consider as a property owner in Italy. They will vary depending on where you will live i.e. will you live in Italy or an absentee owner?
The first thing you’ll need to carry out any financial transactions in Italy is a Codice Fiscale. This is an Italian tax number. You can apply online.
As a foreign investor, you should be acquainted with the different types of ownership rights in Italy, such as freehold and cooperative ownership and the expectations of each before you sign any contracts. This is where a property lawyer can come in handy.
Should you wish to get an Italian mortgage on your property, that’s entirely possible. You can consult with financial institutions yourself or use a reputable broker to access more lenders. It’s advised to have a quote before shopping for properties, so you know how much you can lend.
Considerations for those renting out property in Italy
If you let your property out short-term (30 days or less) there is no specific form of contract required and it does not need to be registered with the Italian Revenue Agency.
However, should you use the Airbnb platform it will withhold tax of 21% (or in some cases 26%).
For lets that exceed 30 days, you must register your property with the Italian Revenue Agency (Agenzia delle Entrate). This ensures the contract is recognised by the law and can help avoid any potential disputes.
As a landlord, it’s important to be aware of your tax obligations in Italy. Landlords must declare rental income and pay the appropriate tax. Income tax in Italy varies and starts at 23%. There is a flat-tax scheme called the cedolare secca, designed to simplify the tax process for those receiving rental income, which allows landlords to pay an alternative tax of 21% on the full rental amount. This is a good option for those who live outside of Italy. To work out the best strategy for you and your properties, speak to an independent tax advisor.
Those with rental properties in Italy are also required to register their guests’ data in the police portal (Alloggiati Web). To register, landlords must first contact their local police department (questura) to obtain their login details. Once activated, the landlord can log in online and register tenants that way. If guests are staying for less than 24 hours, they must be registered by the landlord within six hours. If guests are staying longer than 24 hours, the landlord has 24 hours to register their data onto the police portal.
The role of a property management firm in Italy
Managing a “fly to let” property from overseas can be feasible for long-term rentals if you have dependable local contacts for emergencies, such as plumbers and electricians.
Alternatively, you can hire a property management company. These firms will screen potential tenants and coordinate with local maintenance service providers as needed. Typically, tenants are responsible for maintaining amenities like swimming pools and gardens, as well as cleaning, while communal fees cover the upkeep of shared spaces.
Short-term and holiday rentals require significantly more effort. The responsibilities include weekly turnovers, cleaning, key management, addressing issues caused by problematic tenants, and maintaining high standards of cleanliness and upkeep. This is crucial, as guest reviews can greatly influence the success of your investment.
While the cost of these services can be substantial, generally ranging from 15% to 30% of the rental income, they should be viewed as a strategic investment for generating revenue rather than merely an expense that reduces profit.