Two weeks ago I wrote about why Rome leads my search. I said I wanted a one- or two-bedroom, 60 to 85 square meters, in Prati, Flaminio or Della Vittoria. I said I’d rent it out while I’m in LA and use it myself when I’m in Europe.
Then I priced it.
What €400,000 buys
I went through the real listings in Prati. Two of the closest to my budget: one on Via Germanico at €399,000, one on Viale Giulio Cesare at €395,000. Both 54 square meters. Two rooms. Under 600 square feet.
That’s below the bottom of my own range. In LA, it’s a nice studio. It also works out to about €7,300 a square meter, well above the official averages for the neighborhood. The averages, it turns out, are not for sale.
And the price isn’t what you pay. Purchase tax on a second home is figured on a government-assessed value, not the price, which is one of the stranger things I’ve learned. The agency fee usually runs around 3 percent plus VAT. Then the notary, the lawyer, the geometra, and the bank’s own charges if you borrow. On this apartment, that’s somewhere between €45,000 and €60,000 on top.
The loan
My Italian broker quoted me 60 percent of the price, 3.54 percent fixed, for 25 years. On this apartment that’s about €240,000 borrowed and about €1,200 a month. I’d still bring around €160,000 of my own, plus the buying costs.
The rent
A one-bedroom short-term rental in Rome brings in about €24,000 a year on average, according to AirROI. A well-done place in Prati could beat that, so I gave it €28,500.
Then the costs, which is where my real estate brain stopped smiling:
• 21 percent flat tax, charged on the gross, not the profit: about €6,000
• A local manager, since I’m 6,000 miles away: about €6,400
• Airbnb’s fee: about €4,400
• Utilities and internet: about €2,400
• Building fees: about €1,800
• Rome’s property tax on a second home: about €2,000
• Insurance and repairs: about €2,000
That’s about €25,000 a year going out before the mortgage, which leaves around €3,500. The mortgage is €14,500.
The number
About €900 a month out of my pocket. If it only rents like an average Rome one-bedroom, closer to €1,100.
Part of that payment pays down the loan, so it isn’t all gone. It still leaves my account every month.
And the weeks I’d want to be there, spring and fall, are exactly the weeks it rents best. Every week I stay costs me twice. I’d be paying €900 a month to not stay in my own apartment.
What I’m doing with it
Rome isn’t off the list. A few things move this number a lot. Borrowing less. Renting to students or professionals for a few months at a time instead of tourists by the night. Looking one neighborhood over, where the price per square meter drops. And checking that the building even allows short-term rentals, because not all of them do.
I’m running those next. When I find the real apartment, I’ll run the real numbers.
If you’d rather watch me do this math out loud, the full video is on YouTube Sunday morning. [Watch: What It Really Costs to Own an Apartment in Rome as an American] (link goes live Sunday)
— Joe
If you own a place in Italy and rent it out, does the rent actually cover it? Hit reply. I read every one.
A scenario, not a prediction, and not financial or tax advice. Your numbers will be different.