Fantasizing about buying a second home in Europe? You’re not alone. In recent years, a significant number of Americans have been crossing the Atlantic in search of the vacation home of their dreams. And with the current state of the U.S. housing market, European markets are beckoning more than ever.
According to Knight Frank’s recently released Global Residential Cities Index, which covers for the first quarter of 2021, real-estate prices are down over the past year by 4.3% in Venice, 3.8% in Lisbon and 3% in Seville. In contrast, home prices in virtually every U.S. market have increased over the past year. If a villa on the Spanish coast always seemed like a pipe dream, it doesn’t have to be. The Escape Home’s Neve Wallace asked American owners of European homes, real estate agents, and property managers if investing in a European second home is worth it. Without hesitation, they all agreed that if you want to bask under the Tuscan Sun, by all means, do it. But, they warned, it’s not worth it if you’re underprepared. We asked them everything you should consider before becoming second-home owners in Europe.
Narrow it down by geography
First and foremost, you must determine where you want to be. American Emily Towe, who owns an Old World farmhouse in a Portuguese village right outside Lisbon, recommends that you drive down the coast” and spend at least a month in the area you’re thinking of settling down in. That way you can “really absorb and get a really good feel for the country” before you decide to invest.
A good real estate agent makes all the difference
Once confident about the location, Jeff Curtis of the Barcelona and Costa Brava sector of Sotheby’s International Realty, says the next step is finding a real estate agent who understands the differences between the U.S. and local European housing markets. Particularly in Barcelona and Costa Brava, Curtis warns that local agencies don’t collaborate with each other.
“If you like four different houses and they’re all connected to different agencies, you have to start the process with each different agency.”
There is no Multiple Listing Service, so local agencies will do their best to protect their rights to the sale. For someone accustomed to the U.S. real estate market, it’s crucial to have somebody who knows the local market and can provide guidance.
However, Curtis pointed out two notable trends in the European real estate market that are particularly advantageous for Americans.
“[The market] is very attractive to Americans who have been in bidding wars and have lost deals,” he said.
Across the Atlantic, the competition and need for speed doesn’t exist at the same level.
“Properties can be on the market for several months or even a year or more and there’s nothing wrong with [the property], it just hasn’t found its new owner.”
Secondly, Curtis pointed out that real estate is significantly cheaper in Europe than in desirable vacation destinations in the U.S. For example, he said that while a nice seaview home in Malibu might go for $15-20 million, in Spain, you can find something comparable for $1-2 million in a “luxury type market.”
Figure out the red tape
Once you’ve selected the property you intend to purchase, the actual process of buying as a foreigner varies from country to country. In Portugal, Towe and her husband were able to acquire a Golden Visa, which is available for foreigners in several European countries. This involves gaining residency through an investment program; the client invests in the house and they do not have to permanently live there. If they do choose to do so, these programs usually offer participants the opportunity to qualify them for citizenship. In France, Andy Meyers, a New York City resident and owner of a vacation hillside retreat in Southern France, had different options. His house, rather than being deemed a residential property, is technically a non-active corporation, which exempts him from regular residential property tax. Because the expenses of the house exceed the income, he does not pay much in business tax. It is crucial to research and seek advice on the best option in your country of interest. However, it’s important to note that both Curtis and Towe warned of slow bureaucratic processes.
“Americans think [the European market] is the same as the U.S. market. It’s not, Curtis said.” “It won’t move as quickly.”
A house manager is a must
Lastly, the final step is finding an excellent local property manager. Meyers insisted it is one of the most important aspects of owning a foreign home.
“Absolutely, positively get yourself a local person who will check in and manage the house,” he said. “No one who has purchased a second home for the first time is prepared for the persistence of repairs.”
Meyers, like many American-based owners of second homes in foreign countries, spends most of the year away from his vacation home. When something goes wrong and he’s not there, he can’t fix it, he relies on his house manager, Patrice Bertocco
Bertocco, who works for Elite Riviera, a French property management company, detailed how he manages several dozen homes from Nice to Cannes. He calls himself a “concierge,” and makes sure he stays within a one-hour radius so that he can be at any home in time to fix any problem. He said he checks on each house once every two weeks at a minimum to make sure the gardeners, pool technicians and maids are all working according to the owner’s wants and needs. He coordinates the transportation from the airport and welcomes guests to their homes and keeps the owners and guests up to date on recommendations for restaurants, activities and museums in the area. In worst case scenarios like theft, Bertocco is on hand to deal with the police. Meyers made it clear that it is important to have a house manager that you trust, and said that Bertocco was an invaluable resource to him.
“There’s no way I could [own this house] without a [property manager].”
Ultimately, once all is set in order, owning a second home in Europe can be an immensely rewarding decision. Both Meyers and the Towe’s raved about their experiences.
“It’s balanced by the absolute beauty of the place,” Meyers said, when asked how he weighs the distance. “The food is better, the views are magnificent, the hikes, the museums, just daily life is wonderful.”
Towe seconded that sentiment.
“I think [living in Europe] is something everybody should do in their life if they can. It’s enriching. Life is a lot more fun when you don’t know exactly what’s going on, and there’s so much opportunity.”
In the news…
Upstate New York’s housing market “freak-out”
The pandemic turned real estate into a zoo as Manhattanites fled the concrete jungle for homes with more land. In-demand properties would receive 15 or more offers, and those with a pool? Forget it. Curbed spoke with brokers in three of the most insane upstate markets: the Hudson Valley, the Catskills and Kingston.
Wall Street is coming for residential real estate
Residential real estate has fared fantastically well throughout the pandemic. Commercial property? Not so much. So it’s no surprise that entities like pension funds, big banks and investment firms are buying up single-family homes. “Single family as an asset class didn’t just fare [well], it shined,” Doug Brien, the CEO of Mynd Property Management, told CNN. Earlier this year, funds managed by property investor, Invesco Real Estate, gave Mynd $5 billion to buy 20,000 homes in the United States, and Allianz Real Estate and private equity group Centerbridge led a $1.25 billion equity investment to acquire more than $4 billion of new single-family homes. All this is to say, your corporate landlords will be increasingly commonplace. Proponents claim this helps drive up rental standards and streamline processes, while others claim they are unreachable and “uncaring,” quick to threaten eviction.
The problem with residential elevators
Last month, a 7-year-old boy was killed by an elevator while staying with his family at a vacation home in the Outer Banks. Residential elevators have long been the subject of scrutiny — they are particularly dangerous for children, who are at risk of being trapped between the elevator doors and crushed. This is more prone to happen in unfamiliar settings, such as on vacations. In turn, federal regulators have reached out to platforms like Airbnb and Vrbo to require homeowners to close off elevators inside their rentals until safety inspections can be performed.
Tis the summer of … vacation rental nightmares
It’s hard enough to book a vacation rental these days — now you have to worry about the rental, well, remaining a rental. With the market for second homes as hot as it is, many owners have chosen to up and sell, leaving those with bookings out of luck. Have you experienced something similar? We want to hear about it.
By the numbers
That’s the amount of single-family homes owned by institutional investors — just 2% of the total inventory, but a number that’s certainly set to rise in the coming years.
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On the market
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