I thought about becoming an influencer so that I wouldn’t have water left in my throat at the end of the month, but since I’m not very good with social media, I started to evaluate the tourist rental business, which has been booming lately. Will it be appropriate? I tried doing some simulations, here’s what I discovered.
New short term rental business
Everyone is talking about it, some friends have already done it, but is short-term rental really a viable business? I’ve asked myself this a million times, and probably like many others, but the government’s decision to tighten the 2024 budget law has pushed me to get to the heart of the matter.
First of all, I need to decide where to buy the second house. In order not to mislead anyone, let’s try somewhere by the sea and an art city. Salento has been doing great in recent years, so I’m trying Porto Cesareo. When I look at various real estate sites, I see that special requests for a villa of approximately 80 square meters, a few steps away from the sea, start from approximately 150 thousand euros. Then 10 thousand euros will go to taxes and notary fees. Therefore, my investment will amount to 160,000 Euros in total. How much can I earn from this?
simulation
In order not to leave the house empty, I only consider the four summer months from June to September and a rather low rent: 600 euros per week in June and September, 800 in July, 1,100 per week between July and August and the first and last of August for 2,800 Euros for two weeks between mid-August. The total amount is 14,100 euros, which is not bad at all considering that we are only talking about four months. Now I will have to pay tax on this figure: I can opt for 35% of the regular tax, or 21% of the flat rate tax just because I am renting this property (with the 2024 budget, this rate rises to 26 percent from the second to the fourth property). Let’s summarize: 14,100 euro income minus 2,961 euro exchange rate tax and about 1,817 euro IMU for the second house: I pocket 9,322 euros a year, or 5.8 percent of my initial investment. A fixed deposit account returns 4 per cent, while a ten-year BTP returns slightly less, just for some comparison sake. On a very rough calculation, it will take just over 11 years to pay back the investment (not taking into account changes in rental income and tax costs).
What if I don’t have that much money to invest? I might consider a mortgage but would it still be affordable? By taking out a mortgage of 120 thousand euros with a fixed interest rate of 3.40 percent, I will be committing to pay 851 euros per installment for 15 years, that is, 10,212 euros per year, which is just below the amount I will earn with the summer rent of the house. (On weekends, long weekends and Easter I can earn extra compared to earnings calculated with rent). So, with an initial investment of only 30 thousand euros, the house would be mine after 15 years. And from the age of 16 onwards I was able to book a holiday to the Maldives every year.
Short-term rental: by the sea, in the mountains or in art cities?
Now let’s try to see where you earn the most, let’s try Rome, a city of arts, considering that it attracts millions of visitors from all over the world every year. I suspect that the earnings will be significantly higher, given that the house (in the center) can be rented at any time of the year.
A 60 square meter “large loft/open space, finely renovated and fully furnished” estate agency a few steps from the Pantheon is asking 135 thousand euros. Total 150 thousand including agency fees, registration tax and notary. A roughly identical penthouse in the same area rents for 392 euros for two nights.
Doing the butcher’s calculations, as my grandmother used to say (I’m skipping some of them this time so as not to bore you too much), if we managed to rent the house for 53 weekends of the year, we would earn almost 14,500 euros a year. after taxes (dry tax rate and Imu). Sometimes we will rent the penthouse for more than two nights and at higher prices (during peak season, long weekends and holidays), other times the house will remain empty, so calculating the rent at 106 nights out of 365 seems like a good compromise in my opinion. An investment of 150 thousand euros will provide a return of over 9.5 percent. If I wanted a mortgage by investing only 30 thousand euros right now, I could cover all the installments with rent, and I could even get an extra 4 thousand euros a year.
Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
