Jun 2nd 2023 THE BUY-TO-LET MODEL

Many investors own or are looking for a future-proof and rewarding investment. This is leading them to rethink their approach and come across wealth accumulation with holiday properties. Many traditional forms of investment are losing importance due to low interest rates or even negative interest rates. This is why the property market is booming, as it is a proven method for secure, sustainable and long-term investments in the current economic situation.

In general, the number of purchases of holiday properties and alpine chalets in Austria has risen enormously in recent years. Holiday properties in the Alpine republic in particular have been purchased as they offer lucrative value appreciation thanks to their attractive tourist location, excellent infrastructure and stable environment.

The buy-to-let model

In the buy-to-let model, an investor buys a property with the intention of letting it out. The main aim is to generate ongoing income from the rental income and at the same time benefit from a potential increase in the value of the property. This type of investment is particularly attractive in markets with high demand. Both resorts and investors benefit from holiday properties thanks to the buy-to-let model.

The buy-to-let model works as follows:

"The investor buys a property that is protected by the land register. The capital is secured and the value of the property increases continuously due to the care provided by the operators. Finally, the investor also acquires the right to operate a business and earn money by letting the property. This is also interesting from a tax perspective because he can claim VAT as an entrepreneur."

Tax reform - acquisition of holiday property

Incidental property purchase costs

• Land transfer tax: 3.5 % of the gross purchase price
• Costs of land register entry: 1.1% of the gross purchase price
• Costs for drawing up the purchase contract/trustee processing: approx. 1.5% of the gross purchase price
• Estate agent's commission approx. 3% plus 20% VAT
  

Value added tax

The purchase of the property is subject to VAT (20%) and the VAT paid is refunded by the tax office as input tax. In the ongoing marketing, the purchaser generates accommodation sales that are subject to Austrian VAT at the reduced rate of 10%; this VAT must be paid to the tax office.

Income tax

Income from the management of real estate is subject to taxation in Austria. In the purchaser's country of residence, this income is exempt from taxation subject to progression in accordance with the current double taxation agreements. Due to the clear focus on returns, time-consuming proof of a hobby takes a back seat.

Advantages of investing in a holiday property

• as a valuable and lucrative investment
• as a retirement provision
• to realise a profit
• Protection against inflation and devaluation
• reasonable return

The buy-to-let model offers an excellent opportunity to invest in property in Tyrol. The high demand from tourists, attractive rental yields and the potential for value appreciation make Tyrol an ideal location for such investments. However, investors should plan carefully and consider all relevant factors in order to maximise the benefits of their investment.

We at Tirol Real Estate will be happy to provide you with personalised advice and support for your buy-to-let investment in Tirol. Contact us to find out more about the best investment opportunities and strategies to help you achieve your financial goals.

^Sources:

^{https://perterer-immobilien.com/de/Ferienimmobilien-als-Investment
https://www.alpenimmobilien.at/blogs/buy-to-let-modell-die-eigene-ferienimmobilie-mit-herz-und-verstand-finanzieren.html}