This is an introduction to an amazing investment opportunity.
If you are an investor or entrepreneur looking to invest in a property making an instant profit, the auction market is a sector of the property market to keep in mind. Many are repossessed properties that are reintroduced on the property market by Courts, and when that happens, it comes with a lower selling price. Of course, care is needed as buying at auction may bring higher risk. Italy, at the moment, offers many of these kinds of properties in different towns and locations. With the right guide and good advice, a purchase can turn into a very profitable investment. The purchase price can also go low to 1/20 of the property's value, meaning that the margin between the selling price and value may allow an instant profit.
HUGE PURCHASE PRICE REDUCTION
Why does this happen? A huge reduction of the price, in comparison to the normal market value, can happen when the property has been put on sale through different hearings over months. Every time the property goes on sale and a hearing take place, if it is unsold, the starting bidding price is reduced by 25% for the next hearing. So, the property bidding price can be a small fraction of the real value after a few months or even years.
QUICK TURNOVER OF THE PROPERTY
So, for a potential buyer, it is a fast market, as properties are usually advertised to go on sale just 3 or 4 months before the hearing is to take place. Time is the key to this kind of investment.
INDEPENDENT FREE EXPERT REPORT
The Court documentation (sourced through an authorised website of the Ministry of Justice) includes a free expert report and a valuation indicating all the plot details, including any potential issues. The information provided by the website in the Court Report is believed to be complete and appropriate, as independently provided by the Court for the judicial purpose.
The documentation is usually all in Italian. It is made available and can be integrated by requesting further documents or questions from the Court professionals. The expert report usually contains details about the property, size and composition, details and plans, location, issues (if any exist) and permits needed, if applicable. This will also outline a detailed description of the property, reporting all finishes and fixtures, including plumbing, heating system, electrics, drains, supplies, etc. It usually also provides photos of the property.
OUR AIM & MISSION
We provide our clients with the possibility to make an immediate gain margin, investing in estates that have been repossessed by the banks and are now sold at a significantly lower price through the Italian Courts.
Legal advice is crucial in this kind of business.
We can answer your questions and indicate the foreseeable risks from the preliminary phase.
So, our assistance is not only for the purchase of the property but for the full analysis of the deal.
This is to provide our clients with the best deal with the lower risk possible. Over the years, we have been involved in a large number of transactions like these, gaining the right experience to finalise such operations.
Our operational scheme is straightforward. We start by learning about the client's idea and goals to gather all available opportunities the market offers. We can search for properties all over Italy or in a specific area or region. The results will depend on the availability of the market at the moment of the research. The variety of possible investments in this kind of market is vast. The criteria used to detect suitable properties differ from the ones used by the usual market:
Flats, studios, Barns, stables, Beach establishments or thermal baths, Buildings and venues for sports training, Buildings constructed for industrial and commercial purposes, Buildings for agricultural activities, Castles and estates with high artistic or historical value, Clinics and hospitals, Convents, Boarding schools, Sports facilities and buildings, Garages or vehicle storage, Gymnasium or other sports-related buildings, Hotels and B&Bs, Land, Low-grade low-income housing, Luxury residences, Offices, Parking spaces, Portion of buildings, Buildings under construction or in the process of being renovated, Residential homes or villas, Rural homes or buildings, Shops, Boutiques, Theatres, Cinemas, Concert halls, Warehouses and storage depots, Workshops, etc.
There can be many outcomes depending on the client's need: normal property investments, holiday rentals, wholesale, real estate joint ventures, developing co-working spaces, hospitality structures, care homes projects, shopping malls or event centres, serviced apartments, etc. After the finalisation of the procedure, should the client wish and if needed, we can also accompany the client through the further steps of the investment, providing the contacts and dealing with trusted
professional experts in the field of Property Development, Construction and Design Management.
So the above-mentioned operational scheme can be outlined as follows:
STEP 1 - SOURCING THE PROPERTY
Preliminary research is made in line with the request, needs and wants of the client. Then properties are proposed to the client for preliminary selection.
STEP 2 - ANALYSING THE DOCUMENTATION
Once the preliminary inspection is carried out regarding location and valuation, a deeper look at the procedure is given, analysing the path to be followed to purchase the property and scrutinising its documentation.
As previously said, in Italy, repossessed properties are always checked and valued by an expert nominated by the Court. The expert report usually analyses all the issues and gives the valuation.
As previously said, the convenience of investing in a property at a Court auction is purchasing a property always under the market value that has already been viewed, checked and valued by an impartial Court expert. If the Client decides to continue with the procedure, we will obtain a Power of Attorney, authenticated and with Apostille, so that we can act on the Client’s behalf throughout the procedure.
STEP 3 - MAKING AN OFFER FOR THE PROPERTY
The court papers that usually are summarised in the "Avviso di Vendita" outline the procedure in detail.
Every auction usually has tailored guidelines given by the Court.
This is analysed and discussed together with the client before making any kind of offer.
After the pandemic, the majority of the auctions have taken place digitally, so this can be done remotely. Compared to physical auctions, an average increase of +185% has been recorded in auctions carried out electronically or in hybrid mode.
In the majority of the auctions, but this can be confirmed only after reading the "Avviso di Vendita", the procedure is as follows.
The expert report usually contains details about the property, size and composition, details and plans, location, issues (if any exist) and permits needed, if applicable.
This will also outline a detailed description of the property, reporting all finishes and fixtures, including plumbing, heating system, electrics, drains, supplies, etc. It usually also provides photos of the property.
Further details can be found through the auctioneer, the keeper and the professional expert who carried out the report. Before making an offer, agreeing and organising a site visit with the auctioneer and the keeper is usually possible.
Based on the expert report, the starting price for the auction is given.
Every time the property goes unsold, there is a price reduction of 1/4 of the previous starting bidding price. Plus, despite a starting bidding price being indicated days before the beginning of the auction, it is usually possible to offer what is called a "minimum bidding price", which is the starting bidding price but reduced by 1/4.
The auction winner will usually have 120 days to finalise the payments for the purchase.
A deposit of the 10% or 20% of the amount offered is usually required upon offer. Every auction usually has tailored guidelines given by the Court, so that differ depending on the case.
FINANCING THE INVESTMENT
In particular cases, we will be able to facilitate the obtention of financing through Italian Banks. Italian Bank law is stringent in providing financing to foreign investors; however, it is possible to obtain it in some cases with the right contacts. In purchasing at auction, again, time is the key. The financing will have to be organised in advance so you don’t encounter any issues with accessing a mortgage. Upon request, we are able to provide this service as well.
DEVELOPING A PROJECT
An analysis of the investment's strengths, weaknesses and threats is already there with the impartial expert report provided for free by the Court.
You only need to consider the opportunity, which is sure to bring a profit margin equal to the difference between the bidding price and the property value.
However, the fact that the real estate business is very rewarding does not mean there are no industry challenges. You must abide by the law and also deal with competition, and that is why we are here to help. To compete favourably in the real estate industry, we can connect and hire the services of trusted businesses and professionals in the developing process on the client's behalf through our network.
Upon request, we can also assist the client in developing and managing the property project after the purchase. Of course, that will be done with the help of professionals in our network specialised in each field requested while we can handle the legalities.
AUCTION PAYMENT AND EXPENSES
Purchasing a property at auction is also advantageous from a payment point of view. When the court awards a property, the first thing to consider is that the payment for the whole amount is usually due within 120 days, not immediately.
And most importantly, it is given free of any mortgage and charges.
However, all costs need to be considered in the case of an investment property: the price offered, taxes and duties that must be paid for the transfer of the property and the cancellation of mortgages, the costs for the remuneration of the delegated auctioneer that is acting for the Court, the condominium expenses not paid by the debtor and other small amounts, if applicable.
TAXES & DUTIES
The amount of taxes and their calculation depend on the cadastral income of the property and on two other factors: if the buyer intends to buy this property as a residential home or use it as an investment, and if a private individual or a builder/company purchases the asset. Furthermore, the cancellation of the mortgage and any property charges should be considered. We will be able to give you a calculation upon request.
COURT'S AUCTIONEER PROFESSIONAL'S FEE
Usually, 50% of the remuneration to the delegated auctioneer must be paid during the asset transfer phase as well as the reimbursement of general expenses. In general, the fee is calculated on the offered price. So, if that is equal to or less than €100,000, the fee will be equal to € 550.00. If it is higher than €100,000 and equal to or lower than €500,000, the fee will be equal to €825.00. Finally, if it is higher than €500,000, the fee will be equal to €1,100.00. However, if the Judge considers it fair, they have the power to vary this fee. To these amounts will be added the social security contribution (4%) and VAT if provided for by the tax regime of the auctioneer.
ADDITIONAL RELEVANT INFORMATION
FOR FOREIGNERS INVESTING IN ITALY
WEALTHY FOREIGNERS' TAX
Italian Tax scheme to attract Wealth from Abroad.
From January 2017, there is an extremely interesting law for wealthy foreigners who are interested in moving to Italy.
Foreigners who decide to transfer their residence to Italy may choose to pay a FIXED RATE of EUR 100,000.00 (hundred thousand/00) per year despite their foreign income level.
ITALIAN VISAS & INVESTORS
Italian Visas for Foreign Investors.
Investors wanting to stay more than 90 days in Italy, and wanting to take residency there, require a Visa.
In order to avoid an unpleasant situation, it is always best to check the situation, planning it forward. In Italy, there are different kinds of Visas to be considered. In 2017, it has been introduced the "Italian Investor Visa", which however require several factors to be requested.