«You don’t need millions; an ordinary person can buy a hotel.» An architect found 3 affordable hotels in Italy

The times when only very rich people could buy a hotel in Italy have sunk into oblivion. Now the cost of some interesting and beautiful hotels or guest houses does not exceed the cost of an apartment in one of the capitals of Europe. However, some sort of a psychological barrier still remains and not all potential buyers consider such an investment opportunity. Together with the architect Anton Garustovich, we found three interesting and inexpensive hotels in Italy in the Realting.com database, and now we will tell you what you need in order to buy them and what to look for if you want to stay in the black.

«A unique situation has developed in the commercial real estate market in Italy»

— Not so long ago a businessman from Belarus turned to me, he wanted to buy «something on the seashore.» The request was as vague as they come, so I suggested that he pay attention specifically to commercial real estate. For an ordinary resident of post-Soviet countries, an offer to buy a hotel, for example, in Italy on the seashore sounds a little strange, but in fact, it is a cool case to purchase such a property that will generate income and become a place to stay at any time.

Perhaps I will surprise you, but hotels, for example, in Italy, now do not cost any «crazy» money — there are very interesting properties for € 100,000 — 250,000. The businessman from Belarus that I mentioned above ended up buying a hotel and a restaurant with his friends, spending no more than € 140,000.

Prices on the commercial real estate market in Italy have really fallen, and quite a few properties are now being exhibited at prices that are several times lower than those originally announced. The reasons for this unique situation are very different: some, due to covid restrictions, can no longer maintain their hotels, others do not have enough funds to pay off their mortgages, and some just want to leave the country, where there are rather strict restrictions. As a result, the hotel business is now going through hard times, and that is why an ordinary person can buy a hotel in Italy without a huge start-up capital. This is a long-term purchase that, if properly managed, can become a passive source of very good income.

This situation, of course, has its own risks. The key point here is the correct appraisal of the property and reliable legal and financial information. Everything should be transparent and understandable in the documents so that it is clearly visible what costs will be required, all licenses should be checked and validity periods indicated. There are, of course, many more legal aspects, and here it is important to find a good specialist who can advise you before buying. 

A step-by-step guide to checking hotels before buying. What to look out for

— Let me give you a simplified step-by-step guide for checking hotels before buying. Of course, this does not negate the need for experts to participate in the transaction for the sale of such properties, but I will still give you a general idea of the verification process.

1. The first and most important thing to understand before buying a hotel is the target audience of the property. You should analyze who exactly will come to this hotel, whether there is some kind of attraction nearby, its accessibility to the sea, a big city or something else that will attract tourists to these places. Is the hotel focused on the local population or other EU countries (if so, which ones), or is it supposed to be a seasonal holiday for tourists from the CIS? In any case, you need to understand what age and social status your guests will be, and create a «client’s avatar», as all this is of fundamental importance.

In the same way, it is necessary to assess the status of the hotel itself, its technical condition and its potential. Without such an analysis, you will not be able to properly set up a business model, which means that the income from the hotel will be unstable. 
By the way, here I would also mention the plans of the municipality for this hotel — it is also worth asking about them before buying. Sometimes it so happens that the city has a clear strategy for attracting tourists to these places or plans for the reconstruction of the area. All this can significantly affect the work of the selected hotel — both for the better and for the worse.

2. Next, you need to find out who the property is registered to: a legal entity or an individual. If the property is registered to a company, then it is necessary to check the participation of this company in litigation or the participation of the company and real estate in auctions. Of course, buying a hotel from a company that is bogged down in lawsuits is very risky. Sometimes it can be a bargain (most often such hotels are sold at a significant discount), but an extra headache in such a deal is guaranteed — the buyer cannot do it without very meticulous lawyers.

Here I would also mention the mandatory check for tax arrears. If there are such problems, then you need to find out what form of ownership the company has — in some cases, the company is responsible for debts only within the authorized capital, that is, no arrest will be imposed on real estate. 

In cases where the property is registered to an individual, it is necessary to find out the age of the owners. From experience, I can say that if the owner or one of the owners is at a very old age and incapacitated, the registration process will drag on for a very long time — up to 6 months only for the re-registration of the property.

3. Information you need to know about the hotel (from a constructive point of view):

1. The hotel room fund. If the hotel provides accommodation for up to 25 rooms, then such a hotel, according to Italian law, does not need fire certification (this is a plus for the buyer). If the hotel has more than 25 rooms, then a fire certificate is required — this will require additional financial and time costs. 
2. Whether there is an elevator If there is an elevator, then a certificate of elevator equipment is required.
3. Availability and status of a hotel business license. It can be active, frozen or surrendered. In the case when the license is surrendered, it will take some time to collect documents (all necessary certificates) for the municipality to get the license again. Therefore, of course, it is better to look for a hotel with a valid license.
4. Hotel Star Rating. It often happens that it is enough to write an application for increasing the number of stars from two to three, for example. In Italy, as a rule, the hotel business is a family business and they simply do not want to engage in increasing the star rating, even when there are all the necessary parameters for this.
5. The technical condition of engineering structures, load-bearing walls, etc. Here you cannot make do without the help of specialists, and you will have to spend money on paying for their services. However, a specialist’s assessment of the technical condition of a building can save you from buying buildings with hidden problems (and, therefore, additional expenses).

4. What you need to know about the one-time expenses for the purchase of commercial real estate in Italy:

• The tax on the purchase of commercial real estate is 22% of the cadastral value (this is VAT on the sale value if the seller is a legal entity) OR 9% of the cadastral value if the seller is an individual.
• The cost of notary services ranges from 2% to 5% of the sales value.
• Various government fees and duties are around € 500.
• The real estate agency commission is usually 5% of the hotel value or a fixed amount between € 6,000 and € 10,000.

Hotel in Emilia-Romagna for € 304,500

— I chose this hotel because it is located in a resort town that is a UNESCO World Heritage Site, just an hour’s drive from Milan. This is a thermal resort, which means that the target audience has already been determined — tourists who want to improve their health or undergo treatment courses will come here. In general, healing at thermal springs is a current trend of our time; Europeans come to such hotels to relax and get a boost of energy. Therefore, the target audience here is Italians, Germans, Austrians, French, and Belgians (and residents of other EU countries) aged 40-65. From experience, I can say that this is a solvent, very benevolent audience. 

Another advantage of this facility is the potential development of the city in the short term. The fact is that American companies have bought most of the hotels specializing in relaxation and wellness associated with thermal springs in the area and plan to develop this direction, transforming and positioning the whole city as «the best thermal resort in Italy.» It turns out that at the start you buy a property in a very promising location.

The hotel has 16 rooms in total (including 2 rooms for the disabled). There is no included restaurant. The hotel is in excellent condition, its license is valid, at the moment it belongs to the category «two stars». No additional investment is required.

Hotel maintenance costs: annual tax — about € 4000, electricity bills — about € 300 per month, gas bills — about € 4000 per year, plus heating and hot water.

The owner has an agreement with the hotel business school, whose students and teachers periodically stay at this hotel; existing long-term agreements are very good for business. 
If necessary, you can register at this hotel and get a residence permit in Italy.

Hotel in Piedmont for € 395,000

— I chose this three-star hotel for the stunning nature around it. This is a truly unique commercial property because it is located in northern Italy at the foot of the Alpine mountains. This location immediately determines the target audience of the hotel — hunters and tourists who choose active holidays will come here, as there are several ski resorts nearby.

The hotel, according to the owner, was built for the last Olympics in Turin and has already fully recouped the investment. It continues to function and generate income, its license is valid, the guest stream is established. By the way, the license of this hotel allows it to be used as a hotel complex, a sanatorium, a home for the elderly, or a center of culture and meditation.

The hotel has its own pool and spa area, several restaurants (which can become an independent source of income). The hotel part consists of 22 rooms, each of which has its own bathroom. There is a large parking lot on site.

The structure of this hotel can be split up and used with different management if desired.

Hotel in Tuscany for € 209,000

— The «Villa Verde» hotel is located in a small Tuscan village on the provincial tourist road by the famous village of Castiglione di Garfagnana in the Lucca area. The place is sunny with wonderful panoramic views.

The building, with an area of 600 sq. m., is made of stone in a rustic style, which houses 11 double bedrooms with a bathroom, three single bedrooms, and various auxiliary rooms, a kitchen, a restaurant, a bar, service bathrooms.
The land of about 6.000 square meters consists of a part of a meadow overlooking the restaurant for parking and gardening.

The hotel is very interesting in terms of interior design: the floors are chestnut wood, there are original architectural elements of the Renaissance, and in some rooms, there are real frescoes. One of the options for use is the reconstruction of the building for residential apartments to sell it by apartment. It also has its own restaurant, which can be used separately from the entire complex. 

This 2-star hotel was closed before the pandemic and has been out of service for a while. After the purchase, it will require some kind of investment, which is why the cost of the property is reduced. Its license is frozen and needs to be restored.  

And even more interesting and beautiful hotels in Italy can be found on Realting.com, in the section «commercial real estate in Italy».