What are the real costs of maintaining overseas real estate?
- How to properly estimate all costs when buying foreignreal estate?
- How do housing costs and property taxes vary from state to state?
Introduction
Many investors considering buying property abroad often do not consider all the possible costs associated with running an apartment in London or a house in the Alps. In the budgeting process, it is necessary to pay attention not only to the purchase price, but also to taxes, fees, utilities, insurance premiums and other costs associated with owning real estate.
Rental property management
If your goal is to buy a home to rent out, it is recommended that you seek the services of a professional property management company. The services of such companies can cost you anywhere from10to15%of the rent, depending on whether they emphasize finding tenants or just maintaining the property. In the UK, the management company usually charges a minimum of12%of the annual rental income. In case the property is not rented out, the following is withheld4%of the estimated income.
Building maintenance fees
In addition to this, owners of properties within the UK are required to pay a building maintenance charge each quarter (service charge), the amount of which may vary from500to3500pounds sterling per annum. This tariff is set either by the tenants or the management company and depends on the list of services provided, such as:
- concierge work,
- security,
- video surveillance and many others.
Duties of owners in Germany
When buying an apartment in Germany, the new owner automatically becomes part of a community of tenants who collect fees for the maintenance and repair of public areas (entrances, roofs, basements). These fees are usually approx.40 euro centsper square meter per month. Today, property owners often conclude contracts with management companies, the cost of whose services can vary from20to35 eurosper month.
Luxury real estate costs
Maintaining a premium property can make serious financial demands. Often owners have to pay extra for pool cleaning and garden maintenance services. For example, in France, Germany and Spain, the cost of a management company for villas with a pool and garden can range from2to3 thousand eurosper year. Duties of such companies may include:
- regular site visits,
- Contracting with service personnel,
- bookkeeping.
For example, cleaning services can cost up to60 eurosat a time, while maintaining a swimming pool can cost about800 eurosper month, and the same level of costs will be required for gardening services. Thus, the total cost of maintaining a villa can reach several tens of thousands of euros per year.
Real estate taxes
Regarding property taxes, in most European countries, building owners pay an annual property tax. This tax is based on assessed value, not market value, and ranges from0.1%to3.5%depending on local regulations. Therefore, it is necessary to carefully consider all costs associated not only with the purchase, but also with the management of the property, so as not to encounter unexpected problems in the future.
Estimated value of housing
In most cases, the value of housing determined for inventory or appraisal purposes is significantly lower than that which could be obtained on the market. This is because such valuation depends largely on the technical characteristics of the property, including its degree of wear and tear and condition.
Factors shaping market value
When analyzing market value, not only do the conditions and condition of the property itself play an important role, but many other factors play a role as well, including:
- location;
- developed infrastructure;
- level of transportation accessibility.
Market value is formed as a result of the interaction of supply and demand in the real estate market.
Property taxes in different countries
In Spain, property tax is 0.4% for urban properties and 0.3% for country properties. Montenegro applies a taxation system depending on the size of the property, and the rate ranges from 0.08% to 0.8% of its cadastral value. In Germany, property owners are obliged to pay about 1.9% of the cadastral valuation, but owners of real estate, the value of which is less than 120 thousand euros for individuals and less than 20 thousand euros for legal entities, are exempt from tax.
Taxes in Finland and France
Finland imposes a tax on residential property ranging from 0.32% to 0.75% of its valuation. France has two main taxes:
- taxe foncièrethat deals with houses with land;
- council taxapplicable only to buildings.
The amount of these taxes varies depending on the size of the property; for example, the owner of a 90-meter apartment will have to pay about 400 euros per year, while a house of 120 square meters along with 100 square meters of land will require about 1,000 euros.
Taxation in Croatia and Ukraine
Some countries, such as Croatia and Ukraine, do not levy a property tax at all. In the UK, there is no single tax on all properties, but owners are required to pay council tax annually. These funds are used to finance police and fire departments, as well as the maintenance of municipal institutions and educational organizations.
Methods of payment of municipal tax
Payments can be made either once a year, quarterly or monthly. The amount of council tax varies from £200 to £2,500 per year, depending on:
- of the region;
- the number of residents;
- object category.
All homes in the country are categorized into eight classes (A to H), where the H category includes the most expensive properties.
Additional taxes in Spain
In addition to property taxes in Spain, owners also pay a wealth tax, which ranges from 0.2% for properties worth less than €193,000 to 2.5% for properties worth more than €12,316,000.
Utility payments
As for utilities, their cost is based on actual consumption, as almost every house has meters. In general, residents of Western Europe have higher gas, water and electricity costs than residents of southern countries.
In the UK, for example, water charges average £450-460 per year, and electricity and gas costs can be as high as £1,400 per year. For residents of other countries, these amounts may vary, but the only trend everywhere is a steady increase in tariffs.
Conclusion
In conclusion, it should be emphasized that buying foreignreal estate is not only an exciting process, but also a serious step that requires careful planning. As the author of this article, I realize that many potential buyers may underestimate the financial commitment associated with owning an apartment in London or a cottage in the Alps.
All of the costs mentioned above - taxes, fees, utilities, as well as the costs of management companies and other expenses - can significantly increase the total amount that will need to be budgeted. At the same time, it is important to remember that proper assessment of these costs at the planning stage will help avoid unpleasant surprises in the future.
Main costs when buying real estate abroad
- Property taxes
- Fees and utilities
- Services of management companies
- Additional maintenance costs
As you can see, property owners in different European countries will face different conditions and rates, as well as dealing with management companies that can vary greatly in their services and costs. For example, maintenance fees can easily reach several thousand euros per year, especially when it comes to properties with additional amenities such as swimming pools or extensive garden areas.
Tax policyalso plays an important role in cost management. Understanding the different tax rates and conditions in Euro-countries will help to better assess the overall level of costs. I encourage anyone thinking of buying property abroad to pay special attention to these issues.
By weighing the pros and cons, you can avoid many financial disappointments and enjoy your property without worry. Good planning and careful consideration of all aspects of real estate ownership will not only allow you to make the right choice, but also ensure that you are comfortable and safe in your new home.
Ultimately, successful ownership of overseas real estate is the result of a thoughtful approach and informed decisions.
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