The perfect house for rental investment will have the following characteristics;
1. two bedrooms
2. terrace and small garden - consider a swimming pool
3. maximum one mile or 2 km from a town center with 2000 plus inhabitants and close to important local industry
4. plenty of day trips and tourist activities
5. quiet spot
6. superficial or basic renovation work.
7. vibrant area
A person will buy a property and rent it out to a tenant. The owner is responsible for paying the mortgage, taxes and costs of maintaining the property. Ideally, the owner charges enough rent to cover all of the aforementioned costs and more in order to produce a monthly profit. The most common strategy is to be patient and only charge enough rent to cover expenses until the mortgage has been paid, at which time the majority of the rent becomes profit. Furthermore, the property may also have appreciated in value over the course of the mortgage.
Finding the right Rental Property
There is the matter of finding the right property - you will want to pick an area where vacancy rates are low (due to demand) and choose a place that people will want to rent. There are two types of tenant, long term, local Italians and holiday makers.
Finding the right Rental Property - Italian Tenants
Italian, local tenants in Abruzzo, have typical characteristics .
1. Small Properties - Most Italian families do not rent. The big market is young couples and divorcees. Therefore smaller rental units (maximum two bedrooms) represent the big market. Studio flats or one bedrooms are great.
2. Low cost - young couples and divorcees think a lot about monthly costs. The rent needs to be competitive or utility costs low (for example; use of solar energy to reduce electricity bills)
Italians do not like to commute - they love their car, they never walk and typically do not use public transport. The property needs to be near to work, but not necessarily in the town center.
3. Views and terraces - the local market is not too interested in views, outside space and terraces except for drying clothes.
4. Italians love fireplaces
To summaries, a small property, low cost, near industry or work, one balcony for drying clothes, fireplace.
Finding the right Rental Property - Holiday Home
The holiday maker has a more vague requirement as they could be from Italy or anywhere else in the world. They may be looking for lively night life, relax on the beach, gorgeous views, swim in the pool, low cost etc. However the actual house is less important as it offers more of a base to move about from than a feature in itself.
1. Research the area for activities which you can advertise about the area.
2. Holiday makers prefer to walk in the evening to bars, shops and restaurants and avoid the car. But they have the time to walk longer distances
3. They like to go on day trips and are happy to travel some distance
4. They like support from tourist information
5. The house can be bigger as whole families, with friends may go on holiday together.
6. tourists tend to like piece and quiet
The key is to have a clear idea when you start looking.
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Renovation |
There are a lot of advantages to choosing an investment property to renovate and then re-sell or rent out;
1. put a personal touch on the property,
2. you do not need to undo what somebody else has already spent money doing,
3. in Abruzzo there are a lot of houses that need renovating giving you more choice and more competition
4. the initial outlay is lower
5. If the property is partially habitable you can enjoy your investment quicker.
The pitfalls are varied;
1. lack of experience with local materials (like stone)
2. higher than expected costs
3. serious surprises that were not budgeted for
4. dealing with builders, architects, etc
5. lack of control due to distance and language
Big renovation jobs do not make sound investment opportunities if the above points are true. However, habitable, smaller renovations offer excellent opportunities.
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Equity
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The second way to earn money on your investment property is equity, the house being worth more when you sell it. This increase in value can be due to work or changes you have made to the house, improvements in the area or improvements on a larger geographical area.
Equity - work on the house
The Abruzzo market offers massive opportunities to make improvements on houses to earn equity either in the short term (flipping) or long term.
1. The idea of dressing a house, making the property look more appealing due to superficial changes, is not appreciated by the locals as important. So cleaning the house, painting and small maintenance can really add value to what may initially seem a house in need of vast renovation
2. Renovating a house for short term benefit is risky and needs to be examined case by case.
Equity - improvements in the area
A perfect location is one where, in the long term, say ten to twenty years, you are virtually guaranteed to see the area grow and improve. Abruzzo seems to offer this all over. However, it would be good to consider;
1. focus on areas with amenities like bars, restaurants and shops. These need to look like they are profitable, full of people.
2. avoid areas with a lot of empty, derelict houses. It may be a dying area.
3. Look for life - people, traffic, road signs, adverts, noise
4. New infrastructure, building work, signs of investment on a bigger scale
5. most cities in Abruzzo are developing nicely
6. aim closer to the beach or big cities