The garage: a multi-faceted real estate asset
The garage is a real estate asset that can offer a range of investment motives:
- minimum direct maintenance activity;
- no complex technical systems;
- convenient space for protecting vehicles;
- rental income;
- profit thanks to capital gains from resale, based on the prevailing market;
- additional low-cost living space for storage or other uses, including hobbies, where allowed.
Major cities—increasingly more traffic-congested and with almost exclusively paid parking—favor the choice of having a garage that benefits from tax optimization if it is part of the main property.
According to the most recent data from the Internal Revenue Agency, in Italy, during the first three months of 2020, 67,210 garages and parking spaces were sold. (Source: Il Sole 24 Ore)
What is the average price of a garage and relative expenses?
The average price of a garage ranges between €20,000 and €60,000. In the centers of major metropolises like Milan and Rome they can even exceed €150,000.
Purchase-related expenses include:
- notary for the deed, normally based on a percentage of the purchase price;
- registration tax which varies depending on whether the garage is part of the main residential unit or not;
- cadastral and mortgage tax of €100 if purchased from a private individual, €400 if purchased from a company subject to VAT;
- VAT: varies from 4% to 22% as explained below.
Registration tax and VAT
The registration tax varies if the garage is purchased from a private individual or a company. Given below are the various percentages depending on the specific situation:
If purchased from a private individual:
- The registration tax is 2% on the first home (only for apartments purchased after 1982). This discounted tax is applicable even if the garage is purchased at a later date but becomes annexed to the appurtenance of the main residential unit without a garage or parking space.
- The registration tax is 9% if the box is not an appurtenance.
If purchased from a company:
The first, general classification is based on the type of seller. If the seller company built the property certain rules apply, if the company just owns the property to sell, others are applicable, as is explained in more detail below.
- To garages not built by the construction company, a VAT rate of 22% in addition to the 4% mortgage/cadastral tax is applied, unless they become appurtenances to the apartment. In this case, if there is no other parking already included with the property, the first home discounted tax of 4% is applied.
- When the garage was made by a construction company, for garages not appurtenances, the builder VAT rate of 10% plus the 4% mortgage/cadastral tax is applied.
Income and advantages of purchasing a garage
Income varies depending on the city and location. According to a study carried out by Idealista, in the first three months of 2020, in Milan and Rome, indicatively, income could be up to 6%, in Turin 5.6%, Genoa 4.5% and Florence 5.8%.
Therefore, from an economic-financial standpoint, purchasing a garage offers a number of positive aspects:
- the income is much higher than the cost of the debt calculated on the spread with the Euribor rate in effect (at the time of writing of this article, the rate was negative);
- the cost of managing a garage rental is negligible compared with the potential income;
- As can be deduced from the two points above, net pre-tax income is appreciable.
Re-sale is easier than with other types of properties, often netting a profit (capital gain) on the purchase price.