Restoring a farmhouse in Italy - the costs!

Following on from the last blog - all about the undoubted excitement of restoring a farmhouse in Italy - it's probably  a good idea to consider the cold hard facts of the costs. Some costs are very straightforward and fixed - but many aren't, and if you don't know your facts the Italians will see you coming!

The costs will fall into two categories - the cost of buying the property in the first place, and the cost of the renovation. The first of these is relatively straightforward, but will undoubtedly be higher than you are expecting. The second is a minefield, so I hope that the next few weeks of blogs will help just a little with some of the issues.

For most people, the easiest way of finding a property to buy in Italy is via the internet. There are a growing number of estate agents with shop windows, but in the more rural areas they are the exception rather than the rule. There are many derelict properties ripe for renovation if you look in the right area - but not many Italian owners bother to market these as "for sale".  They may be situated in the middle of a field, and have probably been in the family for years, and it is only when interested foreigners come to look that they consider these properties have any value. When we first started to look around eleven years ago, agents found derelict properties and sought out the owners to see if they would be interested in selling. In our area, somebody must have paid £100,000 for a derelict property at some point, because every one that we went to see - whatever the size or the state of the property  - had the same price tag. £100,000! Of course, this was open to negotiation. Things have changed a bit though, and many more derelict properties are actually being advertised - with the price already agreed with an agent.

When searching the internet, you will find many sites for agents. Do some research, though, because not all agents are registered - and the rewards for agents here in Italy are not inconsiderable, as you will see later in this blog! If you want a property to restore though, then basically your only chance of finding such a property will be via an agent - unless you know the area and the locals quite well. If, however, you are looking for a restored farmhouse, you could look at the Italy Magazine website. They have a section on their property for sale site which is not very helpfully called FSBO - which means For Sale By Owner. If you buy direct, you can avoid the agent's fees. The downside, though, is that then there is nobody to guide you through the process of buying the property!

However unappealing a property may seem when you first see it - obviously you need to have vision. And when you know what you want to buy, it is important to remember that the costs of buying go considerably beyond the purchase price and restoration costs of the property.

The first thing to consider is the agency fees. As mentioned above, being an estate agent in Italy can be an exceptionally lucrative business. They charge the property vendor at least 3% of the sales value - and they charge the purchaser - anything from 3% to 8%. I have even heard of agencies charging 10% - so before deciding on your agent, check out what they are going to charge you. Personally, I would try very hard to hang in there for the 3% fee, and get it in writing. Even at this rate, it means that for selling an average sized restored property for - say - €600,000, they make €36,000!  Obviously it is considerably less when they find a property for restoration, as the selling price would hopefully be a fraction of this.

The next cost to consider is the purchase tax - and the level charged depends on how you buy the property. If you plan on living in Italy, and can claim residency before you buy, you will be charge 3% purchase tax if this is your 'prima casa' - your main dwelling. If you buy as a non resident, you will be charged 10% purchase tax, unless you buy through a company, in which case the tax is 4%. The important thing to note here is that the tax is based on the 'cadastral value' and not the price that you pay for the property, and the cadastral value - certainly for restored properties - is always considerably lower than the actual purchase price, which is good news! But it is worth checking what this value is before you make a commitment.

There are a few other small fees - a 1% stamp duty (based on the cadastral value), notaio's fees (the notary who completes all the paperwork) which can be anything from 1-2.5%. The geometra - a cross between a surveyor, an architect, an engineer and a project manager (there is no real equivalent in England, but he or she is a very useful person) - will charge a fee which will depend on the work he does. It could be €200, it could be €2000. It's worth checking each and every one of these charges before you commit.

On the whole, a reasonable piece of advice would be to add 10 -15% to the purchase price - depending on the cadastral value, and whether you plan to live permanently in Italy or not. This is equally true whether you buy a restored property or a ruin. The only thing to watch

The next blog will look at the possible restoration costs - but trust me, to have a beautifully restored farmhouse situated in the heart of rural Italy - it is all worthwhile!