I do all things real estate for a living. I have bought and sold countless properties, remodeled remotely, flipped, built multi-million dollar new construction and run short term rentals. I have owned properties in 6 countries and even completed a land subdivision in one of them. What I am saying is that I am no stranger to the rules and bureaucracy that come with real estate ownership. When everyone said remodeling a home in Italy is hard, I said “Hold my beer, I got this.” (Never mind that I don’t really drink beer but you get the point.) Little did I know… We have not even officially started the project and I have never been this stressed.
Everyone said time moved differently in Italy and I certainly understand that concept in general. Plus, honestly, I am in no hurry to do the project and it could take 4 years for all I care. That would mean finishing up about the time our daughter heads off to college and we’ will be wanting’ll want to spend significantly more time in our little slice of heaven. But you see, I am a budget person. And our palazzo is big, like really big. While it has great bones, it needs a lot of work including all the mechanical systems, new roof, extensive cosmetics and all new bathrooms and kitchens. Given the size, the budget is correspondingly big.
Luckily the Italian government, in order to kickstart the economy post Covid, is offering up to 110% toward seismic and energy renovations. Yep, 110%. There is a lot in our project that may possibly go under this umbrella including exterior and interior seismic strengthening, new roof, terrace, Solar PV with battery backup, floor coverings, wall coverings, heating system, windows, elevator, HVAC and boilers. This bonus was the whole reason we, or maybe just I, as Matt seems a lot less concerned, decided to do this crazy venture. If it weren’t for these magical yet elusive bonuses the Italian government is giving, we would not be entertaining the remodel. At all. When I started the project, I figured I could get everything except kitchens and baths, wall partitions and electric within the bonus. And I thought I would get it 100% paid for by the government. Silly me.
While this sounds great in practice and has actually had a tremendous boost on the economy, it has also served to dramatically increase costs on materials and labor. Covid contributed and then came the Russian attack on Ukraine with prices going through the roof. If things were covered 100%, no biggie, right?
However, we discovered 110% does not really mean 110%
The major issue is that you have to front the remodeling money and then have income in Italy to take the full deduction yourself over 4-10 years. We don’t have any Italian income. Seems others were in this same boat, so they created some other options. 1. you could ask the contractor to make a discount on invoice where they would get the tax credits, ideally in exchange for the 10% overage so the home owner never pays a penny. 2. The banks were offering to buy the credits in exchange for 8-15% which would generally leave no more than 7% out of pocket. Cool, right? Well, not so fast…
We already knew the builders were no longer keen on discounting the invoice so we were full steam ahead on the bank option. But time was not on our side. By the time we went through the longer-than-it-had-to-take purchase, there were only a few banks buying the credits. Luckily one was the very bank we had our accounts with.
Yeah!
But about 15 days after we purchased our property and much quicker than we could have gotten our budgets together, our bank also stopped buying.
Boo!
So we’re back to square one: trying to figure out how we can afford our remodel and seeing if there’s any way we can get the superbonus.
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