IL Postcard

The Best Buy in Italy Right Now

Date: 06/13/2008 Author: Lief Simon

Saturday, June 14, 2008

Learn more about investing in international real estate in International Living Postcards—Saturday Edition

Few places in the world offer real estate as cheap as what you’ll find in Italy…even if you’re buying with U.S. dollars. Right now you can buy a 60-square-meter house in the Abruzzo region for €10,000.

Of course, there is a catch...the house needs complete renovation. Still, spend €60,000 on renovating and you’re still into the deal for less than $110,000. Yes, for the same total spend, you’d be able to come up with several locations as cheap as Abruzzo…but likely none as attractive. You’re less than 45 minutes from the beach…and the same distance from the ski slopes.

Abruzzo’s population sought opportunities elsewhere after World War II, leaving many properties vacant. But now owners are selling these properties, which means dozens of small houses and apartments are currently on the market at prices below €30,000 ($45,000). If you’ve got €50,000 ($75,000) to spend, your choice of properties goes into the hundreds.

The abundance of derelict housing is an opportunity because this region is now coming onto the radar of more people looking for the next cheap place in Europe. The Abruzzo region sits on the Adriatic side of Italy, across the sea from Croatia. It has 22 ski resorts in its mountains, and Rome is a 90-minute drive away. Few locations in the world offer skiing in the morning and an ocean cruise in the afternoon. Plus, you have easy access to Rome and its airport...and there is a regional, international airport in Pescara (on the coast), which is already served by flights from England, Germany, and Spain.

I believe that everything is in place for the Abruzzo region to take off, just like the Languedoc region took off in France. In the Languedoc, a new high-speed train from Paris and low-cost flights into the provincial capital drew the attention of domestic and international tourists. The French went there to buy second homes; foreigners bought for retirement. The appreciation in the Languedoc in the past five years has been strong and steady, and a good model for what will likely happen in Abruzzo.

The access to Abruzzo from the rest of Europe is expanding thanks to the Pescara airport and the short drive time from Rome. This market hasn’t moved much for decades, but it’s starting to be recognized as another option to Tuscany (prices in Abruzzo are as much as 50% less than in Tuscany).

I don’t see buying something ready to use as the best investment play in Abruzzo. Renovating an old house would be the most interesting thing to do, as right now properties in need of renovation seem to outnumber renovated properties.

The charm of the properties in need of renovation is their age and location. Most ready-to-move-into properties are new or in the cities...and not that interesting from a vacation rental or expat purchase perspective. While you wait for capital appreciation, you can rent out these types of properties at reasonable yields…figure 4% per year.

The growth in demand for unrenovated properties has started and now is the time to position yourself. You should figure on holding the renovated product for five years; I’d expect steady growth early on, and then perhaps bigger appreciation in three to five years. Plus, own property in Italy for five years and you pay no capital gains taxes.

As a low-cost way to get into international real estate and diversify your investment portfolio, you aren’t likely to find a more fun option.

IL’s roving Europe editor, Steenie Harvey, turned me on to the Abruzzo region, and I met one of her contacts, Nikki di Girolamo, at the Ultimate Event last month. Nikki’s company offers full turnkey services in Abruzzo that include sales, renovation services, and rental management. Nikki is a Brit who is married to an Italian guy...so she speaks your language yet understands the market. And she has renovated a few properties herself. That’s experience you’ll want to tap into.

You should read Steenie’s full report on Abruzzo in the current issue of International Living magazine, which gives a good selection of what properties are on offer right now.

Lief Simon
For International Living

Editor’s note: Nikki proved so popular at IL’s Ultimate Event that we asked her to join us in California at the Live and Invest Overseas Conference, Oct. 3. The theme this year is Pockets of Prosperity: Where to Bullet-proof Your Retirement in a Recession Economy.

Nikki is just one of more than 100 experts we’re gathering to show you how you can enjoy the best retirement ever…no matter what happens to the U.S. economy. Places will fill up fast once we officially announce this event…but if you’re interested in joining us in California, here’s a sneak preview.

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