Cash back via mortgage
The developer requires a €5,000 equity advance as well as a 25% deposit, with the remainder due at completion. However (depending on your financial status), up to 80% loan to value mortgages could be available at completion.
This means there could be a cash back option due to you via the mortgage, as you would have paid more equity to the developer than necessary. The cash back could be useful to help cover your VAT and registration fees, as they cannot be added to the mortgage.
Example
Taking a Le Fontanelle apartment, costing €262,429 (representing the average purchase price), as an example: The equity invested over the build period would be €5,000 (advance) plus €65,607 (25% deposit) totalling €70,607. However the equity needed in conjunction with an 80% LTV mortgage would only be €52,486 – potentially leaving around €18,000 available to you as cash back!
18% under bank verified value
Finding discounts in any market can be difficult. But finding discounts in a mature, established market, where new developments are scarce and demand for property is high, is much harder.
That’s why we believe that the prices we have negotiated for Le Fontanelle development represent both tremendous value for money as well as a very rare opportunity.
The development has been valued through the bank by independent surveyor Geom. Stefano Berrettini. His report indicates that housing of similar standard in the region could expect to fetch €3,300 per m2, and smaller units up to €3,500.
Taking the lower valuation, at an average €2,720 per m2, Le Fontanelle apartments are 18% under their true market value.
A 18% discount is great news – offering an immediate equity boost, a respectable safety margin and some leveraging effect. However the discount could be larger than 18%. Bank valuations of property (especially mid-build property), tend to be conservative in nature. This is a fact backed up by our own research on comparable property in the area, which indicates a slightly higher market average, as shown in the table below.
Rental potential
As mentioned on page 6, Tuscany is hugely popular with tourists who fall in love with the place and return year after year. Demand for rental property in Tuscany is high.
The excellent weather and the wealth of attractions mean that the high season is long, starting from around Eastertime (April) and stretching through to September and sometimes October. The low season (October – March) also attracts visitors who perhaps prefer a quieter holiday, and who come to the region for cultural reasons – to visit galleries or to study at one of the many schools of language, cookery or art in the region. We saw 23 tourist buses parked in the San Gimignano car park in March.
The developer at Le Fontanelle has a similar holiday development called Il Pino in the countryside near Poggibonsi which is let to tourists in high season and students in low season. This shows that there are options and other ways to find tenants for your property throughout the year. However, the area has so many non-weather dependent attractions there is still a steady stream of holiday-makers throughout the year.
We found 10 similar properties available to rent in the region around Le Fontanelle – the table below shows these properties and how much they rent for in high season and low season:
From these comparables we can calculate the average yields possible for a Le Fontanelle apartment, in both gross and net terms (please note that the larger apartments will command a higher income):
Assuming a 90% occupancy for the high season and a 30% occupancy during the low season and taking into account management costs of an estimated 15%, we calculate that a net yield of 7.7% could be achievable. This would comfortably cover your mortgage payments.
A net yield of 7.7% could be achievable.
Exit strategy – who will buy my apartment?
Demand for property is strong in Tuscany and supply is very limited with very strict planning regulations. We anticipate this demand will continue to grow and that your apartment at Le Fontanelle will be much sought after.
An apartment with a high quality spec, a communal pool, parking and an excellent position with lots of outdoor space will be hugely popular. In addition, its location on a leafy hillside with views across to a hill-top town and just 5 minutes from the attractions and amenities of San Gimignano and not much further on to larger towns is extremely attractive.
There are three main groups who make up your potential onward sales market:
1. Second home owners from Italy – Italy has an incredibly strong domestic holiday market, and over three quarters of holidays taken by Italians, were taken within Italy. Tuscany is hugely popular too - it is the second most visited area in their own country.
2. Second home owners from outside Italy – Tuscany is well-known across Europe and beyond and many nationalities already own there, including Brits, Germans, French, Dutch, Scandinavians, Americans and Canadians.
3. Pure investment buyers – these buyers recognise Tuscany’s enduring appeal and will capitalise on strong rental demand by renting out for much of the year and restricting personal use to the low season or none at all.
Investor scenarios
As stated, most purchasers in Tuscany tend to buy and hold their property as rental potential is strong, and they want to enjoy their Tuscan retreat themselves over a period of several years. To explore the potential investment profit we present some different strategy scenarios. We have included varying, yet realistic rates of growth in order to present a full spectrum of possible returns.
1. Hold mid-term up to 5 years with full 80% LTV
Investor description
This investor has bought their apartment at Le Fontanelle with a view to holding it over a period of 5 years before selling it. They intend to rent their property out over the high season, and enjoy personal use in the low season only, to maximise their rental income. They will have paid the 25% deposit required and the €5,000 advance, but will look to obtain a mortgage for 80% LTV. This could provide cash back from the mortgage and they will use the excess to help cover acquisition costs.
2. Hold long-term (no cash back)
Investor description
This purchaser is a Tuscany fan and is more of a “lifestyle” investor. They will hold onto their property for 10 years or more. They want to enjoy their apartment for personal use, and while they will rent it out for some of the high season, they will use it themselves too. This could reduce their rental income but they will keep all equity in their property meaning their mortgage payments will be less (for the purpose of illustration, we have reduced the rental income by 25%).
* Your fee will be refunded if:
1. You decide not to proceed with the purchase of a unit at
Le Fontanelle within 48 hours of receipt of the full brochure.
2. You are unsuccessful in securing a unit due to over-subscription.
Fee becomes non-refundable after:
1. You have been allocated an apartment
2. You have agreed to purchase an apartment within 48 hours of the launch of the full brochure.
Ongoing costs include:
Maintenance - approximately €100 per month
ICI, equivalent to UK council tax, approximately €1000 per year
Ongoing utilities bills.
Apartment descriptions
APARTMENT 1
On two levels. Ground floor with living room, kitchen and WC; first floor with two bedrooms and a bathroom. Build area: 108.5 m². External space 120m².
APARTMENT 2
On the ground floor composed of living room, kitchen and walk-in cupboard, two bedrooms, two bathrooms and walk-in cupboard. Build area: 80.9m². External space 108m².
APARTMENT 3
On the first floor with living room, kitchen, two bedrooms, two bathrooms and walk-in cupboard. Build area: 80.9m². External space 63m².
APARTMENT 4
On the ground floor composed of living room with American kitchen, walk-in cupboard, two bathrooms and two bedrooms. Build area: 84.6m². External space 73m².
APARTMENT 5
On the ground floor with living room, kitchen, walk-in cupboard, two bathrooms and two bedrooms. Build area: 81.1m². External space 84m².
APARTMENT 6
On two floors. Ground floor with living room, walk-in cupboard, dining room with kitchenette, bathroom and laundry. First floor: two bedrooms and bathroom. Build area: 139.9m². External space 200m².
APARTMENT 7
On the first floor with living room, kitchen, walk-in cupboard, two bathrooms and two bedrooms. Build area: 76m². External space 22m².
APARTMENT 8
On the first floor with living room, kitchen, walk-in cupboard, two bathrooms and two bedrooms. Build area: 73.8m². External space 33m².
APARTMENT 9
On the ground floor composed of dining room with kitchenette, living room, two bedrooms and one bathroom. Area: 81m². External space 100m².
APARTMENT 10
On the first foor composed of dining room with kitchenette, living room, two bedrooms and one bathroom. Area: 82m². External space 100m².
APARTMENT 11
On the ground floor composed of living/dining room with American kitchen, bathroom, walk-in cupboard and two bedrooms. Build area: 94m². External space 120m².
APARTMENT 12
On the ground floor composed of living/dining room with American kitchen, bathroom, walk-in cupboard and two bedrooms. Build area: 103.6m². External space 49m².
APARTMENT 13
On the first floor with living room, kitchen, two bedrooms with en-suite bathroom. Upstairs under roof storage area. Build area: 140m². External space 64m².
APARTMENT 14
On the first floor with living room, large kitchen, walk-in cupboard, two bathrooms and two bedrooms. Upstairs under roof storage area. Build area: 134m². External space 60m².
Tax in Italy
As with all tax systems, the rules in Italy are complex and you are strongly advised to seek professional advice from a tax specialist. However, here is a guide as to what you can expect as a UK investor purchasing a property for investment purposes.
Property Related Taxation
Land registry taxes
Known as Imposta di Registro, Imposta Ipotecaria and Imposta Catastale, these charge 7% of the value of the property1.
VAT
Value-added tax known as Imposta sul Valora Aggiunto (IVA)2.
The ordinary VAT rate is set at 20%3.
Property Transfer Tax
Transfer tax, cadastral and mortgage taxes are imposed as a lump sum of €129.11 on transfers of properties subject to VAT. Alternatively, transfer tax rates may vary from 3% up to 15% depending on the type of property4.
Municipal Tax on Immovable Property
Any owner, resident or non-resident, of property located within Italy must pay the municipal tax annually on property, Imposta comunale sugli Immobili (ICI). The taxable base equals the sum of the estimated value for the type and class of property, as determined by the Cadastral Office, i.e. the cadastral income, and a given multiplier. The municipality where the property is located sets the tax rate at no less than 0.04%, and no more than 0.07%5.
Personal Taxation
Personal Income Tax (IRE)
Italian resident individuals are subject to IRE on their worldwide income. Non-Italian resident individuals are subject to IRE only on certain items of income considered of Italian source. For individual taxpayers, the taxable period coincides with the calendar year (6). Progressive tax rates apply, with a maximum rate of 39% and minimum tax rate of 23%. In addition a 4% solidarity surcharge tax is due for the portion of income exceeding €100,0007.
Tax residence
Individuals are considered Italian residents if, for the greater part of the calendar year:
a) They are registered in the Italian civil registry; or
b) They have their residence or domicile in Italy, as defined by the civil law.
According to the Civil Code, ‘residence’ is the place of habitual abode; ‘domicile’ is the place where an individual has their main centre of interests8.
Inheritance and Gift Tax
Inheritance and gift tax were abolished in 2001. Subsequently, only gifts made to persons not having a certain degree of relationship with the donor are subject to other indirect taxes such as transfer tax, cadastral, and mortgage taxes9.
Business Taxation
Corporate Income Tax (IRES)
Corporate income tax (IRES) is regulated by the Consolidated Tax Code (CTC). Italian resident corporations are subject to IRES on their worldwide income. Non-Italian resident corporations are subject to IRES only on Italian source income. The flat tax rate on taxable income is 33%10.
Regional Tax on Business Activities (IRAP)
Regional tax on business activities, Imposta regionale sulle attività produttive (IRAP), is a local tax applied on the value of the production generated in each taxable period by persons carrying out business activities in a given Italian region. Non-Italian resident corporations are subject to IRAP only on the production generated through Italian permanent establishments11.
UK Tax Specialist
If you would like to speak with a UK accountant in regard of your tax position, we use Drew Hazell at Tayler Bradshaw and find him highly knowledgeable. His number is
01799 525 407.
1. barclays.co.uk
2. Ibid
3. investinitaly.com/context
4. Ibid
5. Ibid
6. investinitaly.com/context
7. investinitaly.com/context
8. investinitaly.com/context
9. investinitaly.com/context
10. investinitaly.com/context
11. Ibid
The Ready2invest fee
The Ready2invest fee for an apartment in Le Fontanelle is £2,500 + 20% VAT payable for every individual reservation made.
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What our fee covers:
Finding the Deal
Finding the deals through our network
of international finders.
Personally visiting all developments for
face-to-face meetings with key personnel and viewing the sites.
Negotiating the discount using R2i reputation and buying power.
Financially structuring the deal for maximum returns.
Completing extensive research and due diligence on:
• Title
• Planning
• Legals
• Country and town
• The development
• The developer
Securing protection for your investment.
Sourcing reputable local English-speaking lawyers in every country wherever possible.
Negotiating favourable fee structure with lawyers.
Service
Our Investor Relations staff help you through your entire investing process.
Their roles incorporate:
Answering any questions you may have during your investment process.
Guiding you through the contract and payment process.
Helping arrange a Power of Attorney if necessary.
Help organise and liaise with mortgage companies where necessary.
Arranging site visits (1 week’s notice needed).
Help source and organise furniture packs where appropriate.
Help source local letting agents
where appropriate.
Update you on the progress of
your investment.
Provide a friendly ear for any worries
or queries you may have regarding your investment.
What we don’t do:
We don’t arrange mortgages
We don’t convert currency
We don’t manage finished property
We don’t advise on tax
About Ready2invest
When Jonty and Alise Crossick sold their retail business and moved into property in August 2003, they invested just £300,000. Twelve months later they were sitting on a property portfolio worth over £7 million with equity of over £3.5 million.
In October 2003, Jonty and Alise set up Ready2invest Limited to share their property strategy with others and deliver a professional investment brokering solution in a fragmented market. The company has become well known for its thorough research and due diligence, and for negotiating and engineering exceptional deals in the marketplace.
“We think like investors, we behave like investors and we personally invest in the developments we launch. Ready2invest grew out of a need to group together with other like minded investors in order to create the buying power to get great deals.”
Over the past two years, the company has built up a customer base of over 20,000 investors, and has achieved over €300 million of off-plan sales in many countries across Europe, each with its own administrative and legal procedures.
“Our job is to build trust with the developer and trust with you. If you know that the properties we offer are well researched, superbly priced, judiciously selected and located in prime spots, then we believe you will buy through us. If the developer is confident that we can sell a lot of properties quickly and efficiently, thereby taking some of the pain out of his transaction process, we can negotiate unbeatable deals with him. The result? You, the investor, wins. The developer wins. And we win.”
Mortgages
Italy is a mature property market and its mortgage system is also well-developed. There is a wide range of mortgage products available both from UK and Italian lenders.
In order to make the process as simple as possible for purchasers at Le Fontanelle, we have negotiated a favourable deal with the oldest bank in the world and one of the biggest banks in Italy, Banca Monte dei Paschi di Siena (MPS). It was founded in 1472, and was formerly the bank of the Popes and Italian royalty.
Ready2invest investors can apply for an 80% mortgage with MPS to buy at Le Fontanelle. Interest rates are currently between 5 – 6% over a term of up to 25 years. The entire application process and approval will be undertaken in the UK with a partner company, meaning the administration and bureaucracy will be conducted in English.
These are status-based mortgages, similar to those in the UK and you will be required to apply for these in much the same way as you would for a property purchase here. It is worth noting that there is an age restriction on this offer – the upper age limit is 70 years old.
Lawyers
Italian law is similar to the French system of notaires. In Italy they are called Notaios and they act independently of the developer and the investor. We are currently negotiating with a notaio for best prices and will let you have the contact details as soon as this process is completed to our satisfaction.
As a guide, the fees payable to the notaio is approximately 1% of the cost of the property and this fee is payable at the time of completion.
Currency
Currency Exchange
Small differences in exchange rates make a big difference to the end amount you pay, and specialist companies compare extremely favourably to the High Street banks. Ready2invest currently works with Moneycorp and Complete Currency, currency conversion companies in London that offer an extremely personal service and excellent rates.
Moneycorp
Moneycorp, the UK’s leading foreign exchange company, can help you achieve the best exchange rates, making your money go further. They have been trading foreign currencies since 1979 and are the only foreign exchange company in the UK to have been certified to ISO 9000 Quality Assurance.
In addition, you can take advantage of the following benefits:
No commission charges or receiving bank fees.
Fast, efficient worldwide transfers.
A dedicated dealer to guide you throughout your currency transaction(s).
Extended office opening hours
Monday - Friday 7:30am - 10:30pm
and 10:00am - 4:00pm Saturday.
Moneycorp offers a very straightforward, efficient and cost-effective service. Exchanging and transferring money is an easy three-step process:
1. Open a trading facility - you can register online by visiting the Moneycorp website at http://www.moneycorp.com/ or calling their London office on +44 (0)20 7589 3000
2. Book a transaction - once a trading facility has been set up, a dealer will call you and discuss your individual requirements with you. Rates are booked with your dealer over the telephone.
3. Transfer your funds - dependent on the date you require your currency
Our contact, Ben Nicholson, is always available to take your calls at their London office and can be reached on +44 (0)20 7823 7500
Complete Currency
This company offers a range of foreign exchange products to ensure its clients maximise their potential within the foreign exchange market, taking advantage of exchange rate fluctuations and safeguarding their investment. The company will provide fast money transfer with a full variety of foreign exchange products with no hidden charges.
The directors of Complete Currency have over 30 years of currency trading and money transfer experience at your disposal, and they will see to it that you get the best exchange rate.
Call our contact Steve Rowe on +44 (0) 207 709 2060 for a quick consultation, mentioning Ready2invest, between 8:30am and 8:00pm or take a look online at www.completecurrency.co.uk.
Next step
To reserve an apartment in Italy without delay, please complete and sign the Reservation Form and return it to us with a reservation cheque for £2,500 + 20% VAT.
Reservation cheques should be made payable to Ready2invest (Le Fontanelle).
Once allocation of apartments has been completed, a further €5,000 as an equity advance will be required immediately.
If you are as excited as we are about investing in Italy, then call us now on +44 (0)1273 627 900 and speak to one of our property consultants.
For full registration details including the Registration Form and a list of Reservation Terms and Conditions, please download the full brochure as a PDF below.