Yes, I know. Italy is a basket case, especially the South.
But I must say that what I saw in Sicily was a good number of decent real estate opportunities.
I was there a few months ago with Keith, my real estate agent in Turkey who is also a full-time investor like me. We were sniffing around for deals in Europe and Sicily had some interesting metrics. So we both flew there and spent over a week driving around and seeing what the reality is on the ground.
Amazing, affordable lifestyle
It almost feels like the inflation crisis never touched Sicily. We’re talking 5 euro pizzas in villages, or 10 euros in prime touristic areas, €2 beers, etc. The food and drink are amazing, the people are good fun, and the landscapes are lovely. Italy is Italy, I don’t need to sell the lifestyle.
But the overall value is amazing. I can categorically say that Sicily is now more affordable than the vast majority of Eastern Europe and the Balkans.
Southern Europe is the new Eastern Europe
without the economic dynamism.
And real estate is a steal
We checked out a bunch of properties in a few towns. We particularly liked Syracusa. If done right, one can definitely earn 4%-5% + net yields after all expenses and taxes.
In many cases, there are much lower taxes involved when purchasing a single property in Italy. Taxes go up from the second property onward, so I see Italy as a one property play. But there are some ambiguities in the Italian tax system, as with anything Italy-related.
Why real estate in Sicily?
One of the aspects I really like about Sicily, is not only that an investment property can double as a lifestyle property, but that the seasonality is much lower than in other European destinations. The weather is great most of the year, so Europeans absolutely love to come down even in Winter.
Catania airport and Palermo airport are both pretty major airports with daily flights to literally everywhere in Europe. Low-cost flights, every day of the year. These airports operate like machines.
So your investment or lifestyle property is always a short and cheap flight away from pretty much everywhere in Europe.
How to play real estate in Sicily?
I’d focus on either the major cities (excluding Catania, which feels like a meteor landed right in the middle), or just some nice rural property.
Real estate is incredibly cheap. In many cases even near-prime real estate is less than €1,000 per m2. But these properties require a gut-job.
The key is to do a good job with the renovation. The gap I see in the market is that most investors are local Italians, or Europeans on a budget. The end result is that remodeling jobs are on the cheap side, so most Airbnb owners end up competing on price rather than quality.
There is a massive market of Scandinavians, North Americans, and other Europeans that have bigger budgets and wouldn’t mind paying for quality, which would result in higher net rental yields for investors as there is less competition in this segment.
I found Shalise. She is American/Canadian, studied in France, and speaks Italian fluently. She an interior designer and specializes in helping investors find the right properties, she does all the ROI numbers/projections, and then helps manage the whole renovation process with local teams. She can definitely make your property pop out on listings, and I’m pretty sure her management fee will be more than covered by not getting played/overcharged by random Sicilian contractors 🙂
Sicilians may be very charming, but sometimes dangerously so 🙂
Here’s my analysis of the Syracusa real estate market together with Keith.
Feel free to get in touch with Shalise, my project manager in Sicily. She can help you from A to Z.
You can also combine this with getting residency in Italy and benefiting from tax incentives.
And as always, I keep repeating this, get started with the Turkish citizenship by investment programme. $400,000 in any Turkish real estate gets you and your family Turkish citizenship within a year. After three years you can sell the real estate. Feel free to get in touch with Keith about this.
There’s a lot of pressure in Turkey to raise the minimum or even cancel the programme.
To a World of Opportunities,
The Wandering Investor.
Services in Italy
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Transcript of “Why invest in Siracusa (Syracuse) real estate in Sicily? Good ROI”
LADISLAS MAURICE: Hello, Ladislas Maurice from thewanderinginvestor.com. Today, we are in Siracusa in Sicily, in Italy, and we’ll be explaining why we believe that this is an interesting market for real estate investing, and we’ll be giving some concrete examples with all of the ROI calculations. Keith, how are you?
KEITH: Doing great, thanks.
LADISLAS MAURICE: Cool. So why are we here, right? Typically, we focus more on emerging markets, and what we felt is that there is an increasing amount of flows going into Southern Europe. Before, those flows were going to Eastern Europe, with a lot of investment going into these countries, a lot of free EU money that was being sent there. But now, with the whole situation in the East, there is a lot less investment going in that direction, and there is an increasing amount of also EU money flowing to the South. You have countries like Italy that are going to be receiving huge amounts of direct transfers from the European Union over the coming years.
And also, what we like, also, what I like about Italy is the fact that prices are low. They crashed in 2010, following the great financial crisis, which hit Italy particularly hard. Prices just went down, stagnated until 2021, and then the last two years, they started going up a little bit again. Is Italy a basket case? Yes. Does Italy have population demographic issues? Yes. Does it have too much debt? Yes. Italy has always been a basket case, and Italy will probably always be a basket case, but it is priced accordingly, and that’s actually quite attractive, especially compared to other Southern European markets, which you, Keith, were exploring as well. Correct?
KEITH: Yeah, exactly. I think if you compare to Spain and Portugal, and Portugal in particular, where I feel, right now, there’s not a lot of room for upward growth in prices, so yeah. And Spain, I think, we discussed it a lot, just the whole situation with the subsequent capital gains, it seems very hard to make any money in Spain.
LADISLAS MAURICE: Yeah, that’s the issue. Spain is attractive, but when you take into account the purchasing costs, selling costs, capital gains taxes, I don’t quite see many people making a lot of money in Spanish real estate when they’re just going themselves and trying to do deals. But here in Italy, and we’ll discuss taxes in a bit, as long as you keep it at, like, one investment, it’s actually quite attractive.
Why invest in real estate in Sicily
LADISLAS MAURICE: Keith, I remember, we were talking about Italy together, and you recommended Sicily. Why?
KEITH: Yeah. Well, I started to hear a lot about Sicily, and it’s a place I’ve followed for quite a while, and was always interested to really get into nitty-gritty, and get into the numbers and see what’s actually there. And just a sense, really, that the prices had bottomed out. You want to be jumping in around that point where prices have bottomed out. And I think what we saw in the past week or so, week or 10 days, is that that’s the case. We saw a lot of very low prices, very reasonable prices. We started figuring out the yields. Even after taxes, they’re half decent. If you combine the lifestyle component with potential appreciation and a reasonable yield, I think that’s a nice combination.
LADISLAS MAURICE: Yeah. We’ll go into the exact calculations in a bit. Also, what I like, personally, is that when I compare, like, beautiful towns, like we are right now in Siracusa, because we went–
KEITH: Yeah. I mean, this is, like, Dubrovnik. You could be in Dubrovnik, right? But it’s, I think, a third of the cost of somewhere like Dubrovnik. Yeah?
LADISLAS MAURICE: Yeah, yeah, like half. And I think that’s what’s really interesting, is that the world has changed fast. Prices in a lot of these Eastern European and Balkan destinations have really increased a lot. And now you find yourself in a situation where buying in a beautiful historical city like Siracusa, I mean, Catania Airport is one hour away, with direct flights to all over Europe is actually cheaper than buying in Dubrovnik, in Kotor Old Town, in Budva Old Town, essentially, like, Old Europe is now coming at a discount compared to New Europe. And I’m not sure it’s entirely justified, I’ll put it this way.
So, Old Europe, is it too cheap or is New Europe a bit too expensive? Probably a little bit of the two. But overall, here, when you buy, I mean, this old town, we’re looking at un-renovated properties, €2,000, €2,500 a square meter, you could not find this in Kotor, or Budva Old Town. I feel that there’s just, overall, great value for money.
KEITH: Yeah. I think we both came to the same conclusion, yeah. I think also we ended up mainly focusing on Siracusa as opposed to Catania. And the main reason for that was it was nothing about the yields. I think it was a little bit about the appreciation. We just didn’t like the city as much there. We felt that the lifestyle component was a bit off. We couldn’t imagine spending a month or two in that city, but somewhere like here, I think you could easily spend a month or two.
Short-term rental demand in Sicily
LADISLAS MAURICE: Yeah. And also, what I like from a rental point of view, is that there’s a lot more demand here. There are people all year round. I mean, this place is packed. We’re in early April right now. Look, the reality is airports in Sicily have direct flights to everywhere in Europe for really cheap, and there’s a massive domestic market as well, so rental demand is a lot stronger. Though taxes are high, let’s put it this way. They’re quite high. At the end of the day, you still end up with net yields that are higher than in a lot of Eastern European countries because the occupancy rates are just so much higher.
KEITH: Yeah, the gross yields are stunningly high. I mean, you could really–
LADISLAS MAURICE: Yeah, the gross yields are outrageous, actually. It’s pretty common to find gross yields of 20%. Let’s look at this first. We’ll be looking at two apartments.
Siracusa apartment tour and numbers
KEITH: Yeah, the first property, it was €139k. I think you could get it down maybe to around €130k. Very nice two-bedroom apartment, fully renovated, tasteful renovation. Had nice patina walls and nice open kitchen. Bedrooms were completely separated, so you felt there was some privacy there as well. Quite a good location, about a 15-minute walk to the very center of Old Town. And in the immediate area, it had lots of amenities, so I quite like that one. And the net-net yields on that came to about 5%.
LADISLAS MAURICE: When we looked at the market, we put about €80 a night. We put some discounts for weekly stays and for Airbnb fees. Look, the reality is, the occupancy rate here, according to the stats, is about 56%, which is quite high for a tourism destination, 56% occupancy rates. On average, people stay here about three days per stay. But we looked at the market, a lot of the offering is quite weak. It’s a lot of Italians–
KEITH: Ground level.
LADISLAS MAURICE: Yeah, ground floors. A lot of Europeans just buying cheap things, and doing cheap renovations, and just being cheap, targeting cheap people. But if you go a little bit more premium, like that guy did, you can definitely do better. That’s why you put 65% occupancy rate. But objectively, when we were speaking to him, he was telling us that he was actually 24 nights out of 30, which is higher than 65%, so his net yield is actually a lot bigger.
Taxes on real estate in Italy
LADISLAS MAURICE: What’s important to know in Italy is that when you buy real estate, if it’s your first property, you pay only 2% transfer taxes, and then there are some notary fees. But if you buy your second property, then that jumps to 9% plus notary fees. If you sell within the five years, then they’ll charge you that 7% delta.
Italy is really a market where you want to come and just buy one property. Same thing with taxes, the taxes are on your gross rental income, and it’s 21%. But if you have a second property, a third property, it’ll be 26%. Everything pushes people towards just buying one property, which is fine for people who just want some Italy exposure, or some lifestyle, you just buy one property, and then it just all works in your favor.
KEITH: Yeah, I agree. I think everything is kind of geared up towards this one-off investment in Italy due to the tax structure.
LADISLAS MAURICE: And also the capital gains taxes, there aren’t any after five years. Again, you buy here, you buy one property, and then you can, essentially, in your mind, it’s a five-year thing. That’s just the most reasonable approach to investing here in Italy.
KEITH: Yeah, I agree. As you see, in a lot of different countries, five years ends up being the magic number, and indeed, here as well.
Additional apartment tour with numbers
LADISLAS MAURICE: Tell us about the second property, Keith. Because we went in there, we actually made an offer on it.
KEITH: It’s pretty low, the offer. [laughs] Yeah, they’re asking €145k. Again, historical place, super-high ceilings, right on the main road, one of the main areas, lots of activity around, just very close to the Old Town, but outside of it, which I like, actually. For me, in terms of lifestyle, I’d rather be there than in the Old Town, with the windy streets and the buildings so close to each other, so that was really attractive. Full renovation job, 90 square meters. We estimate the renovation there about €70,000. That’s a big chunk of the overall cost but you come out with something that is really fantastic.
LADISLAS MAURICE: Yeah. And also, net-net yields of about 5% after all taxes.
KEITH: Yeah. I think you do better but we debated that.
LADISLAS MAURICE: Yeah. I think it’s possible to do better, because there is year-round tourism here, there are cheap flights from Catania Airport to everywhere in Europe, and there’s a very strong domestic market as well. I mean, Italy is a big economy in spite of all its issues.
KEITH: I feel we were stingy as well on the nightly rate. I think that with the type of renovation I had in mind, we’d get a higher nightly rate. I’m sure about that.
LADISLAS MAURICE: We prefer to be conservative but yeah, there’s a very strong domestic market. Tourism season here is eight months of the year, unlike other destinations where it’s, maybe, three months, four months. Here, it’s really eight months of tourism.
KEITH: It’s a good solid eight, nine months.
LADISLAS MAURICE: Yeah.
KEITH: I’ve been here in December, weather was fantastic as well.
LADISLAS MAURICE: Yeah. Overall, I find that there’s a lot of value to be found here in Siracusa, in Sicily. Again, when I compare to other cities in Eastern Europe and the Balkans, it’s just things have turned around, and actually the better value is here now. And even when it comes to lifestyle, when it comes to food, the food here is, I mean, we’re in Italy, it’s going to be better than anywhere in Eastern Europe, or the Balkans, or actually, most of the world. And it’s surprisingly affordable. I mean, the restaurants where pizzas were, like–
KEITH: Yeah, very cheap. I’d much rather be here than in Dubrovnik. And this is about 40% of the cost of Dubrovnik, or maybe half, if you say so. But to me, even if this was the same price, I’d still choose here.
LADISLAS MAURICE: Yeah. Yeah, yeah, yeah, much better value to be found here for lifestyle and for real estate as well.
KEITH: Yeah, that’s right. So hope to see you back here.
LADISLAS MAURICE: [laughs]
KEITH: [laughs]
LADISLAS MAURICE: Sounds good.
