Real estate investments are a great passion for Italian investors. You have surely heard: “there is nothing safer than investing in bricks and mortar”.

1. Is it worth investing in real estate
Real estate investments are a great passion for Italian investors. You have surely heard:
“there is nothing safer than investing in bricks and mortar”. But investing in real estate is
a much more complex business than you might imagine. In this article we will try to
clarify, trying to offer some ideas to think about the subject of the common real estate
investor, who perhaps has the objective of buying a house or who owns family properties
and is considering whether to sell them or keep them.
The house, when it becomes an investment property, is an asset .
This means that it must be evaluated with financial parameters: trying not to fall victim
to some very common biases. For those who don’t have time to scroll through this article,
we anticipate that real estate investments are investments that can be very profitable
when the right opportunity is found. However, the value of real estate in Italy has
depreciated on average in Italy, it is not easy to predict the trends of the real estate market
and find a real estate investment that makes more of the alternatives easily accessible to
investors, such as the financial markets. Real estate investments are also very
illiquid. Buying the wrong property could be a mistake from which it is very difficult to
go back. If you have a sum of money available, we therefore advise you to thoroughly
evaluate the opportunity to invest in the financial markets.
Why is it still popular to invest in real estate?
In Italy the house has a particular value. Partly for cultural reasons, partly due to the large
number of properties available (according to a recently published study, there are around
1.2 for every citizen).73% of the population owns at least one home, the figure is
among the highest in the world. This is certainly a positive statistic as regards the
repercussions on the social fabric of the country. It goes without saying that owning a
home is an element of security and stability . But the great propensity of Italians to
make real estate investments has often not stopped at their first home.
In a large part of the population, the idea is widespread that real estate is a safe
investment , a safe haven in which to invest most of one’s savings. There is also a huge
unused real estate. Many people own one or more houses, perhaps as a result of
inheritances received. Selling these properties can be complex in many cases. The fact
that the house is at the same time a financial asset like any other, but also a tangible asset,
with which emotional ties can also be created, can lead people into confusion, because it
is hard to apply the same rational parameters that are used when considering other

2. investments. For example, an inherited asset, such as the family home could be even
though it has the same market value as another property, tends to be overvalued precisely
because of the emotional bond. This tendency is common and is one of the main
behavioral biases called the “anchor effect”.
Is it worth investing in real estate in 2023?
Another very important financial concept, often overlooked, is opportunity cost. When
evaluating whether investing in real estate is worthwhile, it is not only necessary to
consider the potential absolute return, but also to think about the possible alternative use
of capital. A house you buy could give rise to a small income, through the rent or you
could use the capital to invest in the financial markets. So, how to behave in this
situation? According to Bank Italia’s annual analysis, property prices have remained
stable on average in Italy over the last 10 years, for 67.2% of Italians. 16.6% instead
showed an increase and 16.2% a decrease. The real estate market is a market
where excellent deals can be made, especially when there is a lot of capital available
and a specialist ability to operate .It must be said, however, that investment in
securities also carries risks . Obviously we cannot definitively establish whether real
estate investment is worthwhile. There is no case study that fits all circumstances, also
because each deal has specific peculiarities. However, statistical evidence suggests that in
most cases the financial markets offer greater opportunities for returns on real estate
investments.
Investing in your first home: investing in real
estate with a mortgage
Obviously, when it comes to the first home, it’s a different story. Real estate investment
must be distinguished from the purchase of a first home, which is more of a financial goal
than an investment. When you decide to invest in real estate, you have to think about
whether to do it with your own capital or take out a mortgage. Obviously the mortgage on
the first home is a loan and has costs , but it must be emphasized that the purchase of the
house is one of the few opportunities for most people to take advantage of leverage,
which helps to significantly increase one’s possibility of accumulate wealth over the long
term. For these reasons, you should avoid buying the house in cash and, where it is
convenient, try to maximize the amount you borrow and invest the remaining capital in
solutions with higher return potential and more liquid.
What are the costs of real estate investment?

3. Another aspect that must be considered when thinking about real estate investment is that
of costs . When investing in real estate, the first cost to consider is that associated with
the transaction. The notary’s fee , taxes and costs related to the purchase of the house can
lead to expenses of up to several thousand euros which must be added to the purchase
price when considering the convenience of the investment. Another cost to take into
consideration is the tax burden , which can also be very high if you invest in a second
home. In our in-depth analysis on the taxes associated with the purchase of a second
home you will find all the information to predict this cost item. Finally, any renovation
costs must be taken into consideration (by the way, take a look at our guide ” How much
does it cost to renovate a house? “).
Renting a house as an investment: putting a real
estate investment into income
Putting a real estate investment into income could certainly be a strategy. Average real
estate returns can vary greatly. According to Idealist , among the Italian capitals, Taranto
and Syracuse are the most profitable, with an index of return equal to 11.6%. Followed
by Biella (10.6%), Ragusa (9.7%) and Trapani (9%). On the other hand, the lowest
returns in Italy belong to the owners of rental houses in Siena (3.1%), Salerno (3.2%) and
Venice (4.1%). In Rome, gross profitability rises to 4.6%, while Milan stands at 5.6%.As
can be seen, the higher yields are found in cities where the real estate market is quite
small , therefore, as the yield increases, the possibility of having one’s house vacant for a
period or of seeing it devalued increases. We must then consider the taxes and the risks
associated with the tenant’s arrears, but all things considered, rental yields are one of the
factors to consider when evaluating real estate investment.
Real estate crowdfunding: what is it?
Real estate crowdfunding is an investment in which the investor finances a private real
estate project through a loan, indiscriminately and without intermediation (or with
minimal intermediation). Crowdfunding is usually offered by platforms that aim to bring
together supply and demand (as happens in the vast majority of cases).Real estate
crowdfunding consists, in most cases, in the purchase of a home. Instead of going to a
bank to get a mortgage, the buyer activates a fundraising campaign. The investor receives
the loaned amount with interest.
Real estate is an asset like any other

4. If you’re considering investing in real estate during 2023, it’s good that you start to
understand that the brick is just one of the many ways to invest your savings . It is a fairly
intuitive concept, even if not widely understood, because there is a tendency to attribute a
special status to the house. In reality, the real estate asset, with the exception of the first
home, should be treated like any other financial asset and be valued from a wealth
management perspective. Once this way of reasoning has been assumed, here are the
factors that you should take into consideration if you are thinking of buying a home:
 Valuation : If we look at the real value (which considers the effect of inflation) of
properties over the last 25 years, we can see how it has fallen by an average of
15%. This means that those who had invested in real estate would not have been
able to protect the value of their capital from inflation, which has not even
particularly galloped in the last 25 years. Consider that the geographical location
of your investment is crucial. If the real estate value has in fact remained constant
in large cities such as Rome and Milan, it has however collapsed in other areas of
the country.
 Taxes : If you are thinking of investing in homes today, or if you own unused
properties, you need to consider the tax factor. If the Imus has been abolished on
most first homes, the same cannot be said of second homes. Then there are the
local taxes.
 Rent : Also as a consequence of the high rate of real estate ownership, the rental
market in Italy is not responsive, with the exception of a few geographical
areas. The rate of default by tenants is extremely high and the legal tools available
to landlords are limited.
 Liquidity : Real estate investment is by definition illiquid. Selling your home
takes time and brokerage costs can be very expensive.
 Diversification : If you already own a first home, you are probably very exposed
to the risk associated with the real estate sector. From a long-term perspective, it is
advisable to diversify one’s assets among different asset classes to avoid being too
exposed in the event of a specific crisis in the sector (because it is important to
diversify ).
Ultimately, investing in real estate is still worthwhile in 2023 only in some cases and
above all if you buy a house in a big city or in a renowned tourist resort. In evaluating it,
however, one cannot avoid taking into consideration all the factors listed above. The
important thing is to enter into the perspective that investment properties are an asset like
any other and to which there are alternatives.