BASIC EXPENSES
The costs of maintaining foreign real estate are generally similar for all countries of the world, although they differ both in general rates and in details determined by the legislation of a particular country.
The amounts that the owner will have to put into his permanent budget, as a rule, include:
- Payment of the real estate tax, which in most states is paid annually and calculated on the basis of the estimated or cadastral, but not the objective value of the object and ranges from 0.1% to 3.5%;
- Utility bills;
- Maintenance of housing (which is also called the costs of managing the facility; security, landscaping, cleaning floors and territory, garbage collection, etc.);
- In some cases, the list is supplemented with municipal fees.
The purchase of real estate, with rare exceptions, is also taxed, the amount of which varies from state to state.
For an owner who does not permanently reside on the territory of his foreign possessions or who rents them out, it is very important to conclude an agreement with a reliable management company (CC). The CC will provide a full range of services for the maintenance of the object (cleaning, supervision, etc.), as well as its leasing (search reliable tenants, transfer of monthly rent to the owner's account, cleaning after eviction of tenants, etc.). You only need to choose a proven agency that has a good reputation in the market, adequately represented on the Internet, has an office and decent recommendations. It is very important to know exactly into which hands you are entrusting your property. This will help to be sure of its safety and prevent unexpected expenses.
If apartments are purchased abroad in a detached apartment building that does not belong to the serviced complex, then the list of costs for its maintenance will consist only of real estate tax and utility costs. And, on the contrary, the richer the infrastructure of the complex, the greater the costs will be required from the owner. If we are talking about maintaining not an apartment, but a house abroad, then the owner will have to include a number of additional services in the list of costs. These may include the work of a gardener, which is a prerequisite for hot European and tropical countries, as well as cleaning the site in the off-season, regular cleaning of the pool, etc. The total annual and monthly maintenance budget will depend entirely on the characteristics of the object and the site – its area, location, infrastructure.
FACTORS AFFECTING BASIC COSTS
The amounts that the owner of foreign real estate will spend on the maintenance of his possessions will depend on a combination of factors such as the level of infrastructure of both the area itself and the building, the status of the residential complex (economy class, business or luxury), the size of the villa and the surrounding plot, etc.
In addition to regular expenses, it is necessary to take into account situational expenses, such as plumbing failure, furniture breakage, etc., which are also paid out of the owner's pocket.
HOW AND WHEN TO PAY?
As a rule, the costs of servicing foreign real estate can be paid remotely by transferring funds to the account of the management company, but the payment of utility bills and taxes is mainly paid with the direct presence of the owner in the country. But there is an opportunity to authorize representatives of the management company, a lawyer, a relative, etc., for whom it is necessary to prepare a power of attorney officially valid in a particular country.
ANNUAL COST AMOUNTS
Experts note that it is quite difficult to calculate the exact amounts of annual costs for the maintenance of real estate in advance. The expenses of the management company are fixed by the contract and their rates are initially known. As for utility bills, then, as in Russia, their payment will depend on current rates and consumption levels. But with real estate taxes, the situation is more complicated – they are calculated by the tax administration, and it is it that determines the exact amount. Although it is possible to calculate approximate rates with a difference of plus or minus 10-15%.
IS IT POSSIBLE TO SAVE MONEY?
You can save on the maintenance of foreign real estate only if you save electricity, gas or water consumption. The expenses of the management company are fixed, as well as taxes. For «global» savings when buying, you can make a choice in favor of real estate in a complex with less developed infrastructure or without it at all – then the maintenance costs will be less. As always, quality costs money.
EXPENSES IN DIFFERENT COUNTRIES
Traditionally, the most developed countries are at the same time more expensive in terms of real estate maintenance.
In France there is a progressive luxury tax, which is levied when buying a property from €770,000 and above. In addition, there are two regular property taxes in the country: on houses with land plots (taxe foncière) and on buildings (taxe d’habitation). Their rate is calculated based on the area of housing. The maintenance of a small house will cost the owner in €1000-1300 per year. And, for example, a villa on the Cote d'Azur can cost €5000-10,000 per year and above if it is located on a large plot in an area with good infrastructure.
In the UK, the purchase of real estate is subject to stamp duty, the maximum rate of which reaches 12% for real estate valued at £1.5 million. The tax is also progressive and amounts to 2% for objects worth 125 001-250000, 5% for objects worth 250 001-925000 and 10% for objects worth 925001-1.5 million. Since there is no single property tax in the state, the owners of housing pay the so-called municipal tax, which goes to the maintenance of police work, municipal institutions, street cleaning, etc. Its amounts range from £200 to £2500 per year, depending on the characteristics of the object. Utility bills are high here: the annual utility bill for an average facility may well be around 2000.
In Spain the annual tax is calculated at a rate of 0.5% to 2% of the cadastral value of housing. Also, the owners pay a tax "on the condition" (Impuesto sobre el patrimonio), which is 0.2% for objects worth up to €193,000 to 2.5% for elite objects for €12,360 million and above. Plus, non-residents and foreigners who do not have a residence permit in Spain must pay income tax (Impuesto sobre la Renta de No Residentes) even if the property is not rented. It is calculated at a rate of 24% of 2% of the cadastral value. The annual cost of maintaining real estate in general is lower here than in France or the UK. So, for apartments with an area of 90-120 sq. m. m they will amount to about €600-1000 per year. But in an elite residential complex, this figure may be several times higher. The villa will also require higher costs.
In Germany property owners pay the so-called land tax (2.5-3.6% of the assessed value of the plot). In addition to "communal services", payment for gas, water supply and electricity, apartment owners pay for house management services (about 30 euros per month). On average, for an apartment in Berlin with an area of 100 sq. m. m will have to pay about €160 per month.
In Montenegro the amount of tax is calculated based on the area of a residential property and ranges from 0.08% to 0.8% of its cadastral value. In Finland the rate is 0.32-0.75%. And utility bills for a country house with an area of about 120 sq. m. m will be here €100-150 per month.
In a number of countries, for example, in Croatia, there is no real estate tax. The maintenance of real estate here is also relatively inexpensive.
Bulgaria is considered one of the most inexpensive for living and housing maintenance in the European Union, although the amounts directly depend on the specific object taken.
EXAMPLE OF BUDGET CALCULATION FOR AN APARTMENT IN BULGARIA
Annual expenses for the maintenance of real estate in Bulgaria include: property tax, maintenance of the common areas of the building and utility costs.
Thus, the annual property tax in Bulgaria amounts to 0.1 to 0.45% of the tax assessment of real estate for individuals and the book value for legal entities, depending on the municipality. The tax assessment ranges from 40% to 60% of the market value of the property.
At the same time as the property tax, a garbage collection fee is paid. It depends on the cost of the object, prestige and traffic congestion of the area and is up to 1% of the tax assessment per year.
The amount is usually paid quarterly in equal installments. If payments are made at the same time and before April 30, a 5% discount is provided.
If the object is the main place of residence, the property tax is reduced by 50%. This applies to holders of a residence permit and permanent residence.
«Support fee»
The support of the common areas of the building includes reimbursement of the costs of cleaning the complex, protection of the common area, cleaning of swimming pools, maintenance of elevators, landscaping, etc. The support fee is paid once a year at the beginning of the year and depends on the area and the rate per square meter. For the final calculation, the bid must be multiplied by the total area, which includes the built-up area of the apartment (the area along the outer perimeter of the apartment, including the thickness of the walls, the rooms themselves, corridors, bathrooms, internal walls, utility rooms and a balcony)and ideal parts are the percentage of common parts of the building (entrances, stairwells and spans, attics, foyers, facade walls, corridors) that fall on a specific apartment. The support fee is paid on the basis of the owner's contract with the property management company.
The contract specifies the amount of the fee, the procedure for its payment and the services that the company is obliged to provide. The larger and more diverse the infrastructure of the complex in which the apartments are located, the greater the support fee. It usually ranges from €6-18 per sq. m.
Buyers who seek to save on the maintenance of real estate, choose apartments not in resort complexes, but in residential buildings where there is no "support fee". However, they will still have to pay for the cleaning of common areas in the building, the maintenance of mailboxes, entrance locks, etc. Usually this amount is 50-100 euros per year.
Owners of private houses do not pay a support fee, but they have added expenses for the maintenance of the company for which the transaction is being executed. Since land in Bulgaria is not sold to non-EU residents, a company with a minimum authorized capital of 2 leva/ 1 euro is created to buy a house. Even if the company does not work, it is required to pay €200-300 for annual accounting.
Utility costs
Water and electricity consumption is paid monthly according to meter readings. Tariffs depend on the locality and suppliers.
Electricity in Bulgaria is supplied by three main companies that cover three territories of the country. There is a day and night rate. The average cost of the daily tariff is 0.1 /kWh, the night tariff is 0.006/kWh. You can save money by consuming at night. Water and sewerage on average cost about €1 /m3.
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As an example, we can consider the rates in the resort complex "Santa Marina", Sozopol, Burgas region. So, the water supply here is calculated at the rates: cold water = 0.82 /m3, hot water =9.709 /m3. Electricity: daily tariff = 0.104 /kWh, night tariff =0.059 /kWh. The support fee is – €13 /sq. m. Depending on the level of the complex, its location, service, etc., the support fee may well be more than twice lower, and the quality of service will remain at a high level. Santa Marina also offers five swimming pools, restaurants, bars, shops, a medical center, postal services, bicycle rental, car rental, a travel agency, a children's center and classes for children in several languages, a fitness center, a beauty salon, a spa, massage rooms, tennis courts.
So, the maintenance of an apartment with an area of 56.1 sq. m, purchased in 2007 at a price of 63,416, will cost approximately 1200 euros per year, provided that you stay for three consecutive summer months. The amount will consist of the following items. The transaction tax rate will be €5984, real estate tax + garbage collection €55, support fee €730.98, insurance €125, winter care €102, cleaning after winter €40.
Living expenses during the three summer months will consist of payment: Internet – €40, TV package – €30 + connection €10 = €80, hot water €107, cold water €17.4, electricity – €56, plus the services of a management company.
Taxes can be paid remotely via the Bulgarian service epay.bg or internet banking. In Bulgaria, there are no problems with opening an account in local banks. For those who are not friends with the Internet, management companies come to the rescue. For a small fee, they will pay taxes and utility bills. In case of non-payment, the services are disconnected immediately, in addition, you will also have to pay for the reverse connection. The amounts of taxes and utility bills can be found on the website of the community and service providers or the portal proverka.eu .
The calculation of services for the maintenance of real estate in other popular countries is carried out according to a similar scheme with a certain difference characteristic of each state.
FIVE TIPS FOR BUYERS ABOUT THE CONTENT OF FOREIGN REAL ESTATE
- Before buying , be sure to adequately assess your capabilities and assess whether you will really be able to maintain foreign housing in three, five, 10 years.
- Do not refuse to purchase housing in serviced complexes with developed infrastructure: this is very convenient in terms of the maintenance of the facility and peace of mind about its safety, as well as in the off-season (when you can come to relax, go to the fitness center or pool on site, etc.). It is better to pay extra for additional services, if possible.
- When choosing apartments or villas in residential complexes, make a choice in the direction of those with a management company, because it makes life much easier in case of household problems (broken plumbing, forgotten keys, etc.). Otherwise, you will have to look for workers yourself and solve the difficulties that arise, which it is often problematic in the absence of an object. In addition, if you need to rent out a property, the services of a management company will come in handy.
- Try not to accumulate debts for utilities or taxes abroad: if everything is calculated and paid on time, then the costs will not be so significant.
- If the payment for the services of the management company seems too high, discuss it with other owners and try to reduce it by collective efforts.
Portal HomesOverseas.ru thanks Natalia Zavalishina for her help in preparing the article (DistantProperty) and Irina Dzyuina (Advex Corporation. Real Estate»).
photocredits: flickr / dmitry kruglyak
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