keyitaly.com’s blog

It’s the Holy Grail of property investors everywhere … finding a distressed, rundown property to which you can add value. And it’s neither brain surgery or rocket science to identify Italian properties where you can add value either. In fact in a country with renovation properties in desirable and accessible places to live, and a development market much less mature than that of the UK or the United States, there are myriad opportunities to buy a wreck, develop your own dream home, or indeed make money from a property investment portfolio. The problem here, or let’s call it a challenge if we’re lapsing into positive speaking mode, is that the real gains are always far less exciting and immediate than people want them to be. There are real capital gains and rental income to be made by investing in Italian property renovations, but it’s a long haul. Like any investment, it’s all about doing the homework, doing a lot of hard work and then waiting. So no quick fixes and (usually at least) no instant turnarounds.

But let’s turn it around, and look at how NOT to invest in property. We’re going to look at a UK company here, but there are plenty of parallels in the United States … and the basic tenets hold good for property investment in Italy. For a case study of all the things you can do wrong, let’s look at the collapse of Inside Track in the UK a few weeks ago now. Investors in Inside Track were told that it was an ‘armchair investment’. While sitting in your armchair may do it for investing in stocks and shares, as long as you have a laptop computer open in front of you, that’s no way to invest in property. If you’re buying a property you’ve never seen then you’re asking for trouble. I wouldn’t buy a car I’d never seen, in fact I wouldn’t buy a bag of apples I’d never seen (one reason I don’t shop for my groceries online is I want to pick the best stuff) so why would I shell out a quarter of a million pounds on an apartment I’d never seen in Manchester, Newcastle or Tuscany come to that.

Chuck in the fact that ‘investors’ were piling into new build, which is at the polar opposite of investment properties where you can add value. New builds are sold at a premium – in time they will enjoy capital appreciation, but short term they will only lose value as the lustre of the new paint, spick and span new grounds and shiny Bosch kitchen gradually fades. And then you are competing with ten, a hundred, five hundred other new apartments in the same block. Simple supply and demand here – you put a hundred of anything on the market at once and buyers can pick or choose. Price drops and if you hit a bad patch in the property market (oh look, here’s one now) you’re stuffed. No added value, lots of negative equity. The lessons for Italian property investment are no different. Next week, I’ll be looking at some more traps to avoid and how you should start researching your purchase. In the meantime, check out some Italian investment properties and take a look at the various regions to get you focused on where to buy property in Italy.