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What is the best property to invest in Austria
Where it is best to invest in Austria – real estate options, better regions for buying villas and apartments, features of buying real estate.
Investing in residential real estate is a conservation of funds and a reliable source of income, especially if the property is favorably located.
Austria is a safe country to invest in real estate. Even the 2008–2010 crisis did not lead to a decline in this market. In addition, Austria is a land of tenants: 43% of all Austrians rent housing. Of the European countries, only Germany overtakes Austria in this indicator, and the average for Europe is 30%.
In this article, we will tell you which property is the most profitable to invest in and which cities of Austria are better suited for buying properties.
Where to buy property
The most popular rental properties are located in the largest cities in Austria - Vienna and Graz. In both cities, due to the increase in jobs and the influx of students, the population is growing significantly. Therefore, buying investment apartments or hotels in Vienna and Graz is a great opportunity to make money.
The steady growth of the Viennese property market attracts both Austrian and foreign investors.
Many are looking to invest in real estate of Vienna, which has been named the most comfortable city in the world by the consulting agency Mercer for five years in a row. The Austrian capital is located in the heart of Europe and is an important cultural, political and economic center. Viennese architecture, famous coffee houses, numerous parks and gardens make this city particularly attractive.
The demand for rental and purchase of housing is consistently high here, while real estate prices in Vienna are low compared to other European capitals. For example, in the thriving district 20, you can buy a comfortable two-room apartment in a new building for only 214,000 euros, and including VAT refunds, its price will be 190,720 euros. (The price of apartments in Austrian new buildings includes VAT in the amount of 20% of the cost. However, if you buy apartments only for the purpose of renting, then VAT is refunded.)
Graz is also a very liveable city located 200 km south of Vienna. In 2003 it was awarded the title of European Capital of Culture. Graz offers attractions for all tastes: churches, fortresses, palaces, museums. Thanks to the many educational institutions, hospitals and industries, the demand for rent, especially for small apartments, is very high.
The most profitable property types in Austria
The Austrian real estate market offers the investor a huge field of activity. However, it should be understood that not every object will bring a guaranteed income. Therefore, you need to invest in those objects that are in the greatest demand. At the moment, these are:
- commercial real estate
- mini-hotels
- tourist property
- apartments in large cities
The demand for these types of real estate is growing every year. Accordingly, the sooner you decide to invest, the greater the final profit will be.
Investment in commercial real estate
Commercial real estate is one of the most profitable investment options, it will bring you stable and high profits. The benefits of buying an investment property can be illustrated with an example.
Shopping center with an area of 1600 sq. m will cost you about € 2.5 million.
All areas in the shopping center are leased and generate an annual income of € 192,000 (gross).
Tenants pay utility bills directly to the relevant city services (under direct contracts). Accordingly, all problems of non-payment or delay in payment of bills are solved without the participation of the owner.
Gross rental income includes 20% VAT, which is paid to the government. The rest amount of € 160 thousand (net income) belongs to the owner. In the case of an object purchase for € 2.5 million, the investor's income will be 6.4%. However, this shopping center can be bought for € 1.25 million, using a bank loan, and that way the investor can increase the return on invested capital to 9-10%.
Usually, when investing in commercial real estate in Austria, a bank loan is used for 60-70% of the value of the object. Depending on the conditions of the bank, a loan can be obtained for 10-20 years at 2-3% per annum.
The management of such real estate does not cause much trouble to the owner, since most commercial properties have contracts with service companies that are engaged in cleaning the premises and the surrounding area, minor repairs, etc. The tenants themselves pay for these services.
Investment in mini-hotels
Mini-hotel is a small hotel (up to 20 rooms) located in the most popular tourist areas of Austria. Usually such establishments provide services according to the B & B (Bed and Breakfast) system. Previously, such hotels were a common type of family business, but now young Austrians prefer city life and a position in a cozy office, which is why many mini-hotels are for sale.
The cost of such objects in Austria ranges from 500 thousand to 3 million euros and more. Do not forget that mini hotels are a more complicated investment than apartments or commercial buildings. A mini-hotel is not just an investment, but a business. If an investor is not ready to devote maximum of his time to a mini-hotel, then profitability will be "eaten up", for example, by a large manager's salary or high taxes. The average profitability of hotels usually reaches 3-5%, although sometimes it can reach 7%.
Tourist property
To stimulate revenues to municipal budgets, the Austrian authorities have established a special status for new buildings in popular resort areas - "tourist property". The essence of this innovation is as follows: the assignment of such a status to new residential properties means their subsequent leasing to a management company, which will attract tourists with a complex of hotel services. The owner of an apartment (or a hotel room in a hotel) stays in them for a predetermined period (several weeks a year), and rents out the rest of the time.
Tourist real estate is somewhat more expensive than residential apartments - the cost of apartments in such new buildings starts from 200 thousand euros. The yield varies depending on the specific object, but on average is about 3-4%.
Residential property
The most affordable investment is residential property. Investors should take into account small apartments that have a high rental potential. Prices for small apartments in new buildings start from about 100 thousand euros in Graz and from 150 thousand euros in Vienna.
Thus, with a budget of 300 thousand euros or more, you can think about buying several apartments. Three apartments for 150 thousand euros reduce the risk compared to one apartment for 450 thousand euros. You can easily sell them one at a time if needed.
Sometimes packages of investment apartments go on sale, according to the principle "wholesale is cheaper". For example, in Graz you can buy a package of 11 apartments with a total cost of 2 million euros.
The return on residential real estate is about the same as on tourist apartments - 3-4%. However, the liquidity is much higher here: if necessary, they can be quickly sold if these apartments are located in the largest cities of Austria with high business activity and have a favorable location.
The most profitable apartments in Vienna and Graz are sold out in the early stages of construction. At the same time, you should not be afraid that due to the developer's dishonesty you will lose your funds. Home buyers in Austria are reliably protected from this situation by the Developers Act. The funds are not transferred directly to the account of the developer, they are first transferred to a specially created trust account, which can only be managed by a trust manager. Funds are transferred to the developer in stages and only after the completion of certain stages of construction. Completion of these stages is confirmed by an act of an independent construction expert. Thus, the developer has an incentive not to be late in fulfilling their obligations.
Risk free investments
Austrian development companies that build apartment buildings often take over the management of the completed properties and look for tenants for the sold apartments themselves. This service frees investors from the worries about their real estate. Any repairs that arise are organized and carried out centrally.
In some cases, management companies even offer investors a "guaranteed lease". This means that the owner of the apartment will receive income even if the apartment is not rented. The amount of this income is clearly specified in the contract and usually ranges from 3 to 4% of the value of the property.
The maintenance costs of investment apartments in Austria are minimal. Utility bills here fall on the tenant. At the same time, real estate tax is also included in utility bills, therefore the owner is exempt from it. From the money received, you will need to deduct monthly payments to the repair fund, the services of the management company, which, under your power of attorney, is engaged in sublease, and income tax, but with the participation of a competent tax consultant, this item of expenses can be significantly reduced.
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