The horizon of a real estate investment
Ours is a very hectic world.
To the point that, at times, it can make us forget what the correct time horizon for our investments is. It is undeniable that buying a second home, by definition, is largely a matter of investment. Even when we are guided by a desire that we have carried in our hearts for years, even when in our mind the image of us enjoying the summer holidays in a house owned by some dream beach reigns immense… even in in those cases we cannot forget that a second home is always a second home. We don’t live there all year round and neither is it the center of our social relationships. Even from a strictly regulatory point of view, it’s not our residence.
The second home is the achievement of a dream but also a significant asset choice.
A subsidized first home loan from a bank cannot be used for it and therefore we will mainly use, for the purchase, the capital already in our possession, (more or less liquid and more or less restricted) even if by some now, given the rates at historic lows, the demand for mortgages for the second home is in sharp and continuous rise. Speaking, therefore, of asset investment, we cannot fail to include this choice and all its consequences in the right time frame. Otherwise we will risk making the wrong choices or becoming unreasonably apprehensive about aspects of the purchase when there is no reason.
A real estate purchase has its own time horizon which, despite its variability, averages around 15 years.
Of course, we can also imagine real estate transactions with a shorter duration. But on the other hand we can also carry out real estate transactions of longer duration. We are talking about time horizons and not peremptory dates. Certainly, although there does not seem to be an upper limit, we have a minimum benchmark that gives us some indication. This parameter is represented by the 5-year threshold. Below this threshold, in fact, according to Italian law, the presumption of speculative operation in real estate transactions with consequent extra taxation on the capital gain of the sale takes place.
Two words about…
When you buy a property you pay a certain amount. The legislation provides that a re-sale within 5 years from the purchase, is a purely speculative operation (made only to earn!). At this point the re-sale price is compared to the purchase price and in the case of a positive spread (you sell at a higher price than the purchase price), you have a tax on this sum. There is therefore no prohibition on reselling your property in the first 5 years of possession. Simply take this extra tax. Which will trigger (it should be noted) only in case of extra revenue. If you resell at the same purchase price (or less) you do not pay any capital gains. Conversely, when you sell a property after 5 years from its purchase there is no type of taxation in any case. Even if we had to resell at double the price of buying. This, as you can imagine, convinces everyone to put their property up for sale at least after 5 years, just to avoid any taxation and maximize their income.
When buying it is important to understand that your purchase choice therefore has a time horizon ranging from at least 5-7 years to 15-20 years.
Worrying excessively about what laws and conditions are in place right now is wrong.
Not that anyone takes the liberty of saying that the present economic and regulatory scenarios should not be examined. But not even this thing should be emphasized. It is more correct to see which scenarios are expected to arrive. What will the area where I buy will be in 10 years? What directions will real estate regulations take in 10 years? What about the rest of the economy? Those who have bought properties in all the past decades have always made a good investment. The Italian knows. And the thing is there for all to see. Someone has also made money by making other investments, of course.
But no one can say that buying real estate is something that has never had an unfavorable trend over the period of many years.