What is a holiday property?
The term “holiday property” generally refers to a property that is only used for holidaying or during specific seasons. This limited usage has different economic and legal consequences, which will be discussed in greater detail below.
Do holiday properties make good investments?
A holiday property is still a property asset, protected against inflation and crisis-resistant. Like with any property, its quality will depend on the exact location, size, furnishings and – in particular for holiday properties that follow the buy-to-let model – the quality standards of the operator.
What does it mean if a property is designated for touristic use?
Holiday properties are usually built on land that is designated for touristic use. This means that the owner is obligated by law to put the structures that are erected on the land to touristic use. This rule aims at preventing a glut of holiday homes that stand empty most of the year. Holiday properties utilise existing infrastructures provided by the local authority and must be offered as holiday accommodation to outside guests, at least during the main seasons.
Does that mean that I can’t use my holiday property for myself?
The purchase a holiday property qualifies as an entrepreneurial activity. You can use your property through the operating company that looks after your property for you.
What is the buy-to-let model and how does it work?
The so-called “buy-to-let” model is becoming increasingly popular for holiday properties. With this business model, the owner purchases a property (usually an apartment, serviced flat or even a hotel room). Ownership of the property is duly recorded in the land register. Owners not only benefit from the property as a safe investment, but also have the option of using the property themselves. Furthermore, they may generate rental income as the property is rented out to outside guests as a holiday let. This is usually managed by the managing agency/operator.
Do I need a hotel operator?
It is the responsibility of the managing agency/operator to take all the steps required for generating rental income, starting with international marketing, including design and operation of advertising platforms, management and administration of the individual units, settlement of accounts with the owners and looking after the guests on site. The hotel operator’s tasks are manifold and come with a high level of responsibility.
Am I investing in a hotel then?
As the owner of a holiday property, you will not be investing in a hotel, but in a hotel property. You will be registered as the owner of this property in the local land register. Operational and hotel management remains the responsibility of the operator. The owner of the property has no responsibilities whatsoever when it comes to the ins and outs of hotel management.
Do I qualify for tax deductions?
One advantage of a holiday property lies in the fact that the VAT share of the purchasing price is tax-deductible. This means that the purchasing price of the property is reduced by the VAT amount.
What ROI can I expect?
Naturally, investors are always keen on achieving a good return on their investments. In these low-interest times, achieving these is becoming increasingly difficult. In fact, this is one of the reasons why investing money in property has become so popular. If the property is located in an attractive region, the investor has not just the advantage of a steady yield, but will also see the property increase in value. It is usually a good idea to dig a bit deeper when promised significant returns on investment. What really counts is the net ROI that is achieved on a sustained basis, i.e. the amount that the investor is left with after all expenses have been deducted.
How is the purchasing process managed?
In Austria, property purchases and sales are usually managed by lawyers or notaries. Usually, the purchasing contract is preceded by an offer to purchase, which outlines the most important parameters. The detailed purchasing contract is then drawn up based on this offer.
Is my money safe?
When you purchase a property that has not yet been completed at the time the purchasing contract was concluded, the regulations of the Austrian Property Development Act apply. This means that advance performance obligations arise for the developer. Your rights with regard to the property will be recorded in the land register. The purchasing price is paid on the basis of a pre-defined step-by-step plan.
In any case, the purchasing price is paid into an account-in-trust that is set up by the notary or lawyer. This account-in-trust serves to protect the rights of the purchaser. Payments to the selling party may only be made once all the conditions of the purchasing agreement have been met. In Austria, a detailed legal framework exists for this process that protects the purchaser from all associated risks.
Is it possible to purchase a property via an Austrian company?
It actually happens quite often that holiday properties are purchased via Austrian special-purpose entities. This is possible as long as the entity is headquartered in the EU. Whether the proprietor also needs to be an EU citizens will depend on the individual situation. The details will be confirmed on a case-by-case basis.
Am I purchasing a model or a finished apartment?
If you are interested in the 3-Seen apartment building, you will be purchasing an apartment that is ready for occupancy. All rooms and apartments are ready to be used by guests. Purchasing a finished object additionally increases the safety of the investor, also because the risks associated with the construction phase are fully eliminated.
What taxes do I have to pay in Austria?
When purchasing a property in Austria, the following fees and taxes apply:
Property transfer tax:
3.5% of the purchasing price, including supplementary services
Ownership registration in the land registry: 1.1% of the purchasing price, including supplementary services
Contract and notary fees: by arrangement
Legal and administrative fees: relatively low, approx. € 200.00
How high is the overall transaction cost?
In addition to the fees and taxes listed above, contract and notary fees will apply, as well as financing charges if the purchaser is registered as holding a mortgage on the property in the land register. In this case, an additional 1.2% of the pledge sum will become payable as a fee.
Do I need to pay agent fees?
As a rule, agent fees in Austria amount to approx. 3% of the purchasing sum.
Can I consult an Austrian bank for the financing of my property?
Yes, you may apply for financing at an Austrian bank. The extent of the outside capital (mortgage) that is granted to you will depend on your credit rating and the quality of the property.
We are happy to assist you with the financing process. As we have been active in the property market for many years, we can rely on tried-and-tested networks.
When is the apartment handed over to the buyer?
As a rule, the apartment is handed over to the investor once the purchasing price has been paid into the account of the trustee/notary who has managed the contract implementation process.
What warranty rights do I have?
The rights of property buyers are regulated in great detail by Austrian law. As a rule, a 3-year warranty period applies, during which sellers must ensure that the property is free from faults.
How is my entry in the land register structured?
The 3-Seen apartment building will be co-owned by several parties, each of which will be allocated a specific unit. This process is referred to as “establishment of joint ownership”. Ownership here refers to the right of using a certain property exclusively and to freely dispose of it.
Who will manage the property and who chooses the property manager?
In accordance with the regulations of the Austrian Condominium Act, the joint owners are responsible for managing the property. They are represented by a property management company. In our specific case, the hotel operator will appoint the property manager, who is then responsible for managing the property vis-a-vis third parties, and to divide the total cost for these services among the owners in accordance with the Austrian Condominium Act.
What are property expenses and how high are they?
As a rule, the total running costs of a building are divided proportionally among the joint owners (based on the share of co-ownership). The shares of co-ownership usually correspond with the size of the apartment. The exact share of running costs will be determined by an independent expert as part of the appraisal report.
Certain items, such as heating, water and electricity costs, are not determined based on the share of co-ownership, but on actual usage, as measured by the meters installed in the individual apartments. The property expenses include the following items: Heating , Wastewater , Electricity and lighting of shared areas , Waste disposal, Building insurance , Maintenance supervisor , Snow removal , Cleaning of shared areas , Chimney sweeping , Heating maintenance , Elevator maintenance , Maintenance of shared areas , Internet, (Cable) TV , Amortisation fund for future maintenance , Maintenance of other technical services.
We estimate property expenses to be approx. € 5.4/m² of the apartment per month. These expenses are paid in advance, with the final billing completed at the end of the financial year. As we operate on a seasonal basis, our financial year runs from 01/06 until 31/05 the year after.
What commission do I pay to the hotel operator?
To ensure that owners enjoy their holiday property to the full, they require a hotel operator to take care of all the tasks that arise from the administration of a hotel property. The operator of the holiday property takes care of maintenance and marketing, the renting out of the holiday apartment to tourists, billing, guest relations and much more. The contracts set out the scope of services to be rendered by the hotel operator in detail.
The operator’s fee consists of a share of the rental income from the apartments. The share of the rental income that is payable to the hotel operator also depends on the size of the unit. In our case, the share is actually higher for smaller units, as many cost items are fixed costs per unit.
As a rule, the share payable to the hotel operator will largely depend on the services rendered by the operator. The higher the number of services, the higher the commission payable to the operator for the rendering of these services. In turn, the services rendered by the operator will increase the rental income, thus justifying the higher share of the operator in the total income.
Who will handle the processing of the rental income?
We have dedicated hotel software in place to processing the rental income of the individual unites. To make the invoicing as straightforward as possible for the hotel operator and the investor, the fees that were agreed between the hotel operator and the investor are implemented in these programmes. This means that every guest receives a transparent invoice that provides a detailed overview of all the cost.
What sort of rental income should I expect?
Please refer to the detailed calculations provided. Our prognoses are based on research for the ski resort of Kühtai, in particular on our own experiences as operators of the Jagdschloss Kühtai that span several years. The development of the resort has been highly positive, which shows that we are on the right track with our way of running and presenting a hotel.
Do I need an Austrian tax consultant when purchasing a property in Austria?
Given the fact that tax law differs greatly from country to country, it makes sense to have an Austrian tax consultant check the fiscal framework for your holiday property in Austria. Again, do not hesitate to come to us for advice. We can recommend consultants from a tried-and-tested network that we have built up over the years.
Using the property for spontaneous holidays
To ensure that you use your holiday property in accordance with the applicable laws, you must use the property in the same way as a third-party guest, i.e. for a limited period of time and for holiday purposes only. To guarantee that you are able to use the property for these purposes, you must inform the hotel operator of your intention with sufficient notice so that the apartment is kept vacant for you during this period. For this reason, spontaneous holidays in your own apartment are only possible if your apartment happens to be free at the time, if the hotel operator is able to organise a different apartment, or re-arrange an existing booking in such a way that your apartment becomes vacant. However, please note that it is the primary task of the hotel operator to utilise your apartment in the best possible way. For this reason, we advise investors to let us know of their intention to use their apartment as soon as possible.
Do I have to pay rent for using my apartment?
The fee payable to the operator for using your apartment will depend on the agreements made between the investor and the hotel operator. As a rule, operator’s fees are calculated on an annual basis and are independent of who is using the apartment. However, the rent is naturally limited to the reimbursement of expenses on the part of the operator, as any additional fees would in any case be paid back to the investor.
The question of use by the owner and the fees associated with such use are discussed in detail and on a case-by-case basis. Ultimately, they are contingent upon regional regulations, rules on tax deduction entitlement and many more.