Elena and Bogdan are a couple with a family from the Baltics and they buy property at various European resorts so as to build their investment portfolio, thereby protecting their savings from economic risks. In an interview with Tranio.com they gave an insight about their latest purchase: an apartment in Kaprun, Austria.
— Why did you decide to buy foreign property?
— Our family has been spending winter holidays in the Austrian Alps for more than a decade, and we prefer to stay away from hotels, instead opting for
— Was this your first investment in property?
— In which countries have you already invested in property and why have you chosen Austria this time?
— We have already bought property in Estonia, Croatia and the UK. Austria is one of the safest and
— Was your goal to find a "tourist" property or did you consider buying a flat in the city as well?
— We have different properties in our portfolio because we believe in risk diversification.
— Which resorts did you consider besides Kaprun?
— Kaprun is our favourite ski resort in Salzburg. In addition, when we saw an apartment for sale in this area
Read more about this and other Austrian Alpine resorts
— Was it difficult to find a suitable property? What requirements did you have that were imperative?
— We only considered liquid property in excellent locations and
Such projects can only be found
Properties located like the one we bought in Kaprun are rare. Usually, all the plots of land close to ski lifts and urban infrastructure have been built on.
Eventually, we chose a project that was a typical apartment hotel. There is a reception, a wellness zone with a sauna and a steam bath, plus support spaces (an underground garage and a ski closet). There is an excellent restaurant on the first floor, but it is the property of the developer and they let that out separately. This means that
— You have mentioned a management company. Tell us more about how it participates in your project. How much does it charge for its services and what expenses fall
— In our project the developer and the management company are the same, which is good for the property, as the developer understands the needs of the management company and makes a project that is convenient for hotel management from the start.
The company in question is from Zell am See and has already constructed and successfully manages a dozen apartment hotels in the region. We visited some of them together with some
Our management company provides its income and expense statement quarterly. We pay a management fee
— What income options did the developer offer: a fixed or the floating one? What yield level did you expect to have initially and what rate do you have?
Our project is a pooled investment project where the total rental income is summarized, the maintenance costs are deducted, and the revenue is divided between the investors proportionally to the investment amount.
When we were buying the apartment in the complex, the developer made a yield estimate for a decade into the future based on similar projects already operating in the region. According to this estimate, we are going to have a yield rate
— How did the transaction go? Did you have any problems with opening an account, closing the transaction or registering the ownership?
This was our first time buying real estate in Austria, and we were very surprised at how much the purchasing and registration process differs from the other European countries. We were astonished that the demand for investment tourist apartments at the Alpine resorts of Salzburg outstrips the supply by such margins. Not only had the hotel we bought the apartment in not even been constructed, but the construction site was occupied with a building that had not yet been demolished, and
However, the developer published the plans of the future hotel and the prices for the apartments in it, and started the sales in November 2014. In January 2015, less than a quarter of the apartments were available. Before going to Austria we chose two apartments with similar layouts and prices, readying ourselves to decide which was more suitable for us in situ. When we came to the viewings a week later, the first of the apartments turned out to have been sold already, while the second one was being bought by an investor from the UK, who had not yet signed the offer but was about to do so literally on that very same day. When there are more buyers than properties, decisions have to be made and actions have to be taken extremely quickly. The one who signs the offer to purchase gets the property. The buyer should resolve all the issues related to taking out a mortgage loan, finding out the tax implications and choosing the purchase scheme before going on the viewing tour.
We had discussed these issues with our Tranio consultants in advance and got three offers to finance our project from local banks with the assistance
— Was obtaining the loan the most difficult part?
— No, after that we had to literally fight for the apartment. We would like to especially thank
Furthermore, it may seem that we were taking a big risk when signing an offer to purchase — a binding document — without even seeing the draft of the sales agreement and long before the start of the construction. But we saw that other experienced investors were not afraid of signing the documents at that stage and if we had waited we would have missed a highly liquid property.
Now we understand that there are no particular risks in buying
As a result, our apartment hotel was constructed and commissioned on time, and in early December 2016 we were welcomed into our
— And was it possible
— We cannot give an exact answer to this question because we were registering our purchase to an EU company, more than a half of which belongs to its founder who is an EU national. In this case, the registration is the same as for Austrian citizens.
— Are there any benefits from buying such an apartment (VAT reimbursement, second place of residence)?
— The financial authorities of Austria qualified our rental scheme as professional (unlike an amateur one where the investors use the property themselves for many days of the year or where the expenses over the course of 20 years exceed the rental income). As such, we were able to use the tax benefit and recover VAT (20% of the apartment, parking lot and furniture value).
— Tell us more about your apartment. What is the property size and design, what furniture and view does it have?
— There is a spacious kitchen-diner and two bedrooms (the apartment sleeps six in total). There are also two bathrooms, one of them with a sauna, which is important for winter vacations, and a big terrace. The apartment is about 83 m² in total.
It has two entrances and can be divided into
— How many weeks do you plan to spend in your apartment? Are there any restrictions for you as an investor?
— Our rental agreement does not impose any restrictions on personal use, but the financial authorities do. If the owners use a tourist property for over five weeks per year, they become amateur landlords which means they cannot recover VAT.
We can book a stay of up to two weeks in our own apartment six months before arrival or two weeks before we come if tourists
— Do you plan on investing further in Austrian property in the future?
This strategy seems more reasonable to us than placing all of our capital in one old hotel that needs to be renovated: spending our time managing and resolving problems in an unknown business environment; taking the risks of a particular location; and so on.
Some properties in our personal "hotel", including apartments in different cities and countries, will rent out better in winter, the others — in summer. Our goal is to assemble up to 50 sleeping accommodations in apartments at different resorts and only in new projects managed by successful professionals.
We are sure that a tourist property in the Austrian Alps is not only a nice place for a family vacation but also an excellent
An extra bonus that comes with Austria is the pleasure of spending vacations in your own apartments at the top resorts in the country. This is the kind of retirement we deserve.