Are beach houses worth the cost

propertyHow you can solidly finance your dream holiday home

On the way from the beach to the hotel, just past the ice cream parlor, and then next door a look into the shop window of the local agent - these are holiday rituals: five rooms, a shady garden, and from the terrace you can still see a bit of the sea, for 575,000 euros . That would be something! You already have plenty to talk about at dinner.

Compared to the prices at home, small dream houses in the south often don't seem so unrealistic. Especially when you calculate the possible income from the rental, 1000 euros per week is not uncommon in the high season, experienced holidaymakers know. However, as you can guess, it's not that simple. That is why Capital has put together the most important costs for everyone who is thinking about a holiday property abroad - a small budget planner for the big dream, so to speak.

According to a study by the broker Engel & Völkers and the rental platform Fewo-direkt, Germans spend an average of 235,000 euros on a holiday home abroad. They pay a little less for a second home inland, i.e. on the North and Baltic Seas or near the mountains. Three out of ten buyers get by with a maximum of 150,000 euros, a third pays 150,000 to 250,000 euros and a further third more than 250,000 euros. Unsurprisingly, the most expensive properties are in Switzerland (350,000 euros on average), closely followed by Spain (315,000) and Austria (280,000). In France and Italy, 200,000 to 230,000 euros are enough.

The first major difficulty faced by overseas property buyers will be financing. Because basically foreign real estate has to be paid for with own funds for the most part - banks mostly hold back in such transactions: German institutes usually do not accept foreign real estate as collateral. Because if payments are not made, they have significant problems accessing them. And although foreign banks have access to the property, they fail because of the borrower's salary. That is why they only grant small loans, if at all. More than 50 percent of the house value is therefore hardly included, unless you use the German property as security - but this is also a risk that you have to be aware of.

Hardly surprisingly, almost half of German buyers pay for the house or apartment in the south entirely from their equity, according to the Fewo-direkt study. Only 16 percent said they had made the purchase with a mortgage or fully through a bank loan. Around 40 percent needed a loan in addition to equity, but it was mostly manageable. After all, every fifth holiday home owner said that the purchase almost failed due to finances. Language barriers, laws and red tape are other major obstacles.

And you should still have reserves after transferring the purchase price: Only then will the property transfer tax become due, which is downright lavish in some countries. In Belgium, for example, it is 12.5 percent of the purchase price in many places. In Italy it is ten percent for second residences (first residences are considerably cheaper there at three percent), in Spain it is also six to ten percent. Greece now only demands around three percent, and buying a house in the Netherlands is the cheapest with two percent.

Even more than in the case of own homes in this country, owners of vacation properties should know the other ancillary costs exactly before they embark on the adventure. Capital therefore sorts possible income and the most important costs on the following pages.

# 1 rental income

It sounds lush when many holiday home owners state their rental income in the Fewo-direkt survey as more than 10,000 euros per year, some even as high as 25,000 euros. In return, however, every fifth person has to be content with a maximum of 5,000 euros a year (just over 400 euros a month), and a further 30 percent only with 5,000 to 10,000 euros. Half of the holiday home landlords get a maximum of 833 euros per month from the property - mind you, before costs. And the ongoing business expenses are quite generous. They can amount to up to 40 percent of the rental income, say real estate experts from the analysis company Bulwiengesa. The Bulwiengesa analysts also advise that the property should be rented for at least 23 weeks per year in order to generate an acceptable return. But only a third of the landlords manage that.

# 2 property tax

The level of property taxes varies, of course, depending on the country, in some places it also varies within the states and their regions. For example, in Spain they range from 0.2 to 0.6 percent, in Italy they can be around 0.4 to 1.01 percent, and Switzerland levies taxes from 0.5 to 3 percent. The British have the highest tax rates with up to 3.4 percent (here, however, there are discounts in some regions and for certain groups of owners). The USA and the retiree paradise of Florida are also growing strongly with three percent of the property value. On average, US vacation home owners have to shell out $ 2,200 a year. In Europe, a house worth 200,000 euros usually costs 1200 euros annually, but it can also be 6000.

# 3 insurance

Not only the buildings themselves, but also the furnishings should be insured. Maybe even against burglary and vandalism, if the house is a little out of the way. Household contents insurance for the primary residence is not enough. You can use them to protect the things that you take with you on vacation to a limited extent, but not the permanent furniture in the holiday home. The price for the extra policy is based on the property value and the location of the house, in the case of the household contents policy also on the sum insured and the length of stay. You should calculate at least 300 to 500 euros for the building insurance, a four-digit sum for the household insurance.

# 4 administration

If you rent out your house, you usually need a manager on site who will hand over the keys, organize the cleaning and also check that everything is in order. For the basic key handover service, owners should calculate at least 100 to 150 euros per year. Some agencies that also do the cleaning charge around 20 percent of the rental income plus sales tax.

# 5 electricity and gas

How much electricity or heating costs are spent each month depends, of course, on how wasteful or frugal the home users are. And of course whether the house has a sauna, pool or whirlpool - and whether it is in warm Spain or in cold Denmark. In Denmark, where electricity costs are certainly not among the lowest - and the houses often have a sauna and jacuzzi - holiday home providers expect comparatively lush monthly costs of around 200 euros in summer and around 400 euros in winter. In Spain you should get there with 50 to 70 euros.

# 6 redevelopment

The last big item is the renovation, for which you should spend a large sum every few years. According to their own statements, half of the holiday home owners recently invested around 5,000 to 10,000 euros in improvements. Above all, they brightened up the outdoor areas, treated themselves to new furniture and freshened the bathrooms. Telecommunications technology should also be kept up to date on a regular basis. Because everyone wants to finally switch off during the holidays, but over two thirds of holidaymakers still say: fast internet and WiFi are a must.

# 7 garbage collection

The costs for this can hardly be named in a general manner, but they can be requested from the local communities. In Spain, it is said, you would usually get there with 150 to 200 euros a year. In Italy, on the other hand, there is a service tax (for street lighting, sewage), which is based on the cadastral value of the house and is between one and a maximum of 3.3 per thousand, which is 200 to 660 euros per year for a 200,000 euro house. If you want to be sure of the calculation here, you start with roughly what you pay for your German primary residence.


Do you already know ours Newsletter "The Week"? Every Friday in your mailbox - if you want. Here you can sign up