Considering Purchasing and Renting a Property in Italy?
Owning a property in Italy where you can stay when you visit and rent out when you’re not there requires very careful planning.
In the book The 7 Habits of Highly Effective People, author Stephen Covey lists habit No. 2 as “Begin With the End in Mind,” suggesting that effective individuals must have a clear vision of their destination before embarking on any endeavor. Purchasing a property in Italy to rent is no exception.
Renting a property implies, on the financial side, greater attention on the return of our investment and, on the legal and logistical side, an understanding of the different rental contracts available in Italy, alongside the ability to effectively provide the support that tenants expect.
Let’s start with the financial side.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
In my professional experience, I have seen countless buyers thinking about the rental aspect as a “cherry on top” factor. In their mind, they will buy a property they like, and they will also have the option of renting it out to an unspecified tenant and for an unspecified amount. This thinking process rarely leads to optimal results, and it must be flipped on its head.
In the spirit of beginning with the end in mind, we must first think about the different rental options and their expected yield first, to identify a model property that would fit our financial criteria. Within this newly formed group, we can then proceed to pick a property we like.
Transaction costs
In a return-on-investment-driven purchase, transaction costs matter a lot. In Italy, taxes on property purchases are higher for second homes (9%) than for first homes (2%). While the taxable amount is calculated by the Italian tax agency on a lower-than-market value figure, it can easily reach the $10,000 to $20,000 range on most purchases.
On top of that, if the purchase goes through an agent, an up to 4% plus VAT (currently 22%) professional fee will be added to the final bill. Lastly, every purchase must be formalized by a public notary, whose costs are also entirely borne by the buyer and will set you back $2,000 to $3,000 plus VAT on average. In addition, optional expenses for a property inspection, renovations and furnishing may have to be taken into account.
On top of these one-off costs, ongoing property expenses must be considered. These include the annual property tax (IMU), the council or waste tax (TARI) and the condominium expenses (assuming an apartment is purchased). The latter can be very high for properties that have, for example, a centralized heating system, elevators or reception services and are shared by every owner proportionally to the size of their property.
It is therefore very important to look at expenses for at least the past two years and to access the minutes of the condominium meetings to check if any big renovation/maintenance of the common areas (roof, facades, staircases) have been discussed, as these costs will also be shared proportionately.
How rental property works in Italy
The second step of the process requires understanding the legal framework for rentals in Italy.
To start, I would personally suggest avoiding renting out a property long term (i.e. over 18 months). Italian rental laws are extremely asymmetric and tend to protect tenants even if they stop paying rent. This situation is exacerbated by the sluggishness of Italian courts in delivering and enforcing their judgments, leaving property owners without a way to evict tenants for years.
That leaves essentially two viable options: transitory rental contracts and tourist short-term rentals.
Transitory rental contracts are an option designed to offer temporary accommodation between one and 18 consecutive months. While they do not offer tenants the same protection as long-term rental contracts, they are subject to very strict and specific conditions: Rent is controlled; only tenants with specific transitory work, health or family reasons can enter such contracts, and only a government-approved contract template can be used.
Any violation of these conditions automatically converts a transitory contract into a long-term rental contract.
The tourist short-term rental option is, generally, the one foreign owners tend to pick, as it gives them the possibility to enjoy their property while generating income when it is not used. But this is not without potential pitfalls.
In recent years, the Italian government and local administrations have increased the administrative oversight on short-term rentals, requiring licensing and authorizations from the municipality, the police and the Ministry of Tourism. Safety prescriptions have been broadened to almost match those applicable to hotels. Taxes have been increased on the income generated from the second short-term rental property onward.
None of this applies to long-term or transitory rental contracts.
About short-term rentals
Short-term rentals also require a very hands-on approach and a range of trusted providers (cleaners, laundry, handymen) to ensure an appropriate level of service. For this reason, most foreign owners rely on local property managers to run their properties, but their fees (ranging from 25% to 30% plus VAT) can dent the overall profitability of the operation, as such expenses — for Italian tax purposes — cannot normally be deducted from the income generated by the property, nor can the electricity, gas and water bills or the condominium expenses.
Purchasing and renting a property in Italy can be extremely rewarding from both a personal and a financial side, but it is a task that requires careful planning and likely the assistance of a local professional to ensure your investment will truly work for you.
Related Content
- Want to Retire Abroad? Five Things to Know About Your Money
- Five Things I Wish I’d Known Before I Retired
- The Five Stages of Retirement (and How to Skip Three of Them)
- Six Financial Actions to Take the Year Before Retirement
- Retirees’ Anti-Bucket List: 10 Experiences You Don’t Want
-
Turning 65 in 2026? Here Is Exactly How to Sign Up for MedicareWhether you’re months away from your 65th birthday or plan to work past retirement age, here are the steps to secure your Medicare coverage and avoid costly mistakes.
-
A Free Tax Filing Option Has Disappeared for 2026: Here's What That Means for YouTax Filing Tax season officially opens on January 26. But you'll have one less way to submit your tax return for free. Here's what you need to know.
-
Georgia Income Tax Elimination: What the 2026 Tax Cuts Mean for YouState Tax Georgia lawmakers aim to axe the state income tax by 2032. We break down the $16 billion fiscal shift, the fate of the state surplus, and which tax breaks are on the chopping block.
-
Is a Caregiving Strategy — for Yourself and Others — Missing From Your Retirement Plan?Millions of people over 65 care for grandkids, adult kids or aging parents and will also need care themselves. Building a caregiving strategy is crucial.
-
6 Financially Savvy Power Moves for Women in 2026 (Prepare to Be in Charge!)Don't let the day-to-day get in the way of long-term financial planning. Here's how to get organized — including a reminder to dream big about your future.
-
Private Equity Is Fundamentally Changing: What Now for Investors and Business Owners?For 40 years, private equity enjoyed extraordinary returns thanks to falling rates and abundant credit. That's changed. What should PE firms and clients do now?
-
I'm a Real Estate Expert: 2026 Marks a Seismic Shift in Tax Rules, and Investors Could Reap Millions in RewardsThree major tax strategies will align in 2026, creating unique opportunities for real estate investors to significantly grow their wealth. Here's how it works.
-
When Can Tax Planning Be an Act of Love? This Family Found OutHow can you give stock worth millions to a loved one without giving them a huge capital gains tax bill? This family's financial adviser provided the answer.
-
Forget Job Interviews: Employers Will Find the Best Person for the Job in an Escape Room (This Former CEO Explains Why)Escape rooms can give employers a better indication of job candidates' strengths than a standard interview. Here's how your company can get on board.
-
The Paradox Between Money and Wealth: How Do You Find the Balance?Wealth reflects a life organized around relationships, health, contribution and time — qualities that compound differently than money in a mutual fund.
-
Billed 12 Hours for a Few Seconds of Work: How AI Is Helping Law Firms Overcharge ClientsThe ability of AI to reduce the time required for certain legal tasks is exposing the legal profession's reliance on the billable hour.
