Investor profile- Have you done a self asessment?

Hello and welcome to the first of a series of posts designed to instruct you in the ways of Italian Auction Participation!

Auction Participation is more or less an easy process. As an Italian resident it can be a little scary to tackle. As a non-resident foreigner there are quite a few additional challenges to face due to laws, finances, and language, which might make it seem impossible. I’m here to squash that notion and help you invest in that Italian Villa you’ve always dreamed of.

Instead of summarizing it all in a single blog post, I have opted to share smaller segments over time in order to help you as a reader in understanding and retention of the information I will present. Due to the nature of this endeavor, be aware that I will give you all the information you need in order to do it on your own, but I imagine in most cases, you will require some ‘feet on the ground’ to complete the entire process due to costs of travel. In these cases I will provide over time a list of resources to assist you in the realization of this investment goal. Additionally, I will always be present and available through communication to lend support in any way I am able.

Well with that said, here we are! On the path to owning an Italian property whether it be Villa or apartment. Taking the first step is always the most difficult part. I need to add a disclaimer here:

Disclaimer

I am an independent party whose sole purpose is to provide support information. In the case you decide to ‘take the plunge’ regarding any investment, be advised that I highly recommend you speaking with a specialized attorney and accountant to lend you counsel and support. This information is being presented for free and it is expected that you use common sense in putting it into practice. Any resource that I present whether paid or free to use should be considered with the utmost attention to your financial and personal identity. I intend to share only support tools that will provide value and are trustworthy. Any potential problems you may have with these tools should be presented to said third party for resolution. I myself will do all I can from an external perspective to help you when I have the capacity.

Not the most exciting blog content ever written, but necessary nonetheless.

Understanding your Investment Profile

So what exactly is Step 1 when purchasing an Italian auction? Well, it’s probably not what you expect. It is crucial however. We need to determine what kind of investor you are. If you have ever worked with an investment brokerage you will have already participated in something similar. An investment brokerage is required to understand before offering you any product, if it is going to be suitable to you based on some key data that you provide them through a questionnaire.

I am no brokerage, but I do believe it is important to understand for yourself what kind of investor you are. How will you react if you lose money? Are you afraid of risk? These are some of the questions you need to ask yourself. Many of you will already have a good idea of where you stand with this. Common sense would say, ‘How can I afford an investment in Italy if I can’t even afford my rent each month?’ But believe it or not, there are others that will read this that need the coaching.  

If you’d like to know more about brokerage investment profiling just visit FINRA’s website when you have time.

Your Italian investment profile

Let’s get practical. If you are considering investing in Italy, I am willing to show you the way. Italian auctions are a great way to get started. Just stick with me and you’ll have all the tools you need to start earning passive income to help you be free to move abroad or follow any path that lies ahead of you.

To start here are some questions you need to answer for yourself. Don’t worry about not having all the answers. Much of it can be answered over the next few weeks.

Today I want to answer these questions for myself.

How soon will I retire?

(Not really a large emphasis on this, but sometimes useful to plan for the day when you have the freedom to move abroad)

My goal is to retire on my 45th birthday, at least in regards to my need to work on a daily basis to provide for the needs of my family.

What is my intention with the property?

My intention is to buy and hold the property in order to earn passive income. I plan to hold multiple types of property such as: single family dwelling, vacation, multi-family dwellings.

How often will I be in Italy?

Initially I will keep my residency in Italy while building my portfolio. After adding to my portfolio to the point that my passive income supports it, I intend to gain residency out of Italy and continue to invest in cash flowing properties both in and out of Italy.

Will I manage and attend the auction personally?

An easy ‘Yes!’ For many of you, a possibility is that you will need some local assistance which I intend to explain in detail. These days there are even digital options for auctions in Italy if you really want to avoid direct participation.

Finished or fixer-upper?

While searching auction properties, you will find both. If you choose a fixer upper you will need an entirely different set of resources than a finished property. Personally, due to my budgets and capacities, I choose to buy a fixer upper. I enjoy the remodel and find that I can get a better deal for rental properties.

How much money can I invest?

For me this is a little bit of a hypothetical question. Being already engaged in this work, I can tell you my target price range. I tend to only search for properties that have a purchase price of less that €50,000. For previously won auctions we have paid an average of €24,900 per property plus taxes. (In Italy there are taxes due upon purchase of property.) Feel free to view our current properties which can be found for now on my personal blog.  

How do I plan to manage it?

Being here locally, I have the opportunity to manage it myself. As I expand my portfolio to other zones in Italy, I intend to build a network of property managers to care for the property in my absence.

How will I pay for the maintenance?

I will purchase properties that produce a sufficient cash flow to cover maintenance costs. I will keep a reserve of cash available for unforseen circumstances equivalent to 40% of the annual operational costs of each property.

What is my exit strategy?

After 5 years as a rental, I will re-evaluate the market to find potential equity gains that can be reinvested. Anytime after 5 years that provide an ideal return on investment, I will liquidate the property and use the gains to purchase multiple properties.

I like this method due laws about Italian capital gains that I will explain another time. My strategy could just as easily be to sell the property the moment that the property has a specified gain in order realize growth of capital at a faster rate. A good policy is to consider everything is for sale at anytime the market provides a strong selling position. Securing a great purchase price is a great way to guarantee a strong selling position at a faster rate.

How will I react if something goes wrong?

Being able to manage emergencies when they arise is important when dealing with real estate. I admit that in the past I have responded poorly at times. Specifically the recent past! But we can always improve ourselves. The difficult part is when we are far away from the problem and don’t know how to resolve it.

The best solution for this is to be prepared to face any possible outcome. We need to inform ourselves to know the answers to any problem that may arise before it becomes a reality so we can immediately take action.

In summary

Determining what kind of investor you are can save a lot of time and money. It will help you define what kind of properties you should be looking at which will in turn keep you focused and avoid needless frustration.

That’s a good start but there are many other questions ahead.  Now go ahead and answer these questions for yourself! Congratulate for getting started, remember when you are looking for more tips check out the the Self Retire blog.