Rental deal in Rome: €409,400 purchase, €2,915/month — sanity check?

[travelsAndGrove]

Before I pay for deeper checks, I need to know whether the attractive headline survives realistic costs. This five-bedroom detached house in Rome is priced at €409,400, with expected rent of €2,915 a month and a gross yield near 8.5%.

The building looks sound. My forecast allows for empty periods, a managing agent, ordinary repairs and a separate buffer for a major job, but acquisition costs could still change the result substantially. I may also be too optimistic about insurance or tenant turnover, depending on whether the house is let as one unit or by room. What expense would you verify first, and what net return would make the management burden worthwhile?

 

[ames.river]

Start by replacing the purchase price with the full acquisition cost in the denominator. Then obtain property-specific figures for transaction fees, annual property tax and insurance rather than using broad percentages. Those items can turn an attractive gross yield into fairly ordinary cash flow.

Is the €2,915 based on letting the entire house to one household, or renting the five bedrooms separately? That changes vacancy, management and turnover assumptions considerably.

 

[romy.oak]

I’d put more emphasis on tenant turnover than on one large repair reserve if the rent assumes separate room lets. Five tenancies can mean more frequent gaps, cleaning and reletting work. If it is one lease, turnover may be lower but a vacancy removes all rent at once.

Also run financing at a less favourable rate and with no rent during a changeover. The cash return may be much more sensitive than the 8.5% headline suggests.

 

[travelsAndGrove]

The €2,915 is for the whole property on a long-term tenancy, not separate rooms. That makes Gabriel’s point about total rent loss during vacancy more relevant than repeated room turnover.

I’ll ask for itemised acquisition costs plus property-specific estimates for annual tax and insurance, then model cash purchase and financed cases separately. I had been focusing heavily on repairs, but the all-in purchase basis may be the larger weakness.

 

[romy.oak]

With a single long-term tenancy, I’d model at least three cases: normal occupancy, a full changeover period, and a combined vacancy-plus-repair event. Keep operating yield before financing separate from cash-on-cash return after financing.

Personally, I’d want something around 5.5% net before finance and after recurring operating costs, calculated on the all-in acquisition cost—not merely €409,400. That is a preference rather than a Rome rule; if realistic figures land only slightly above safer alternatives, the concentration in one property and one tenant would not compensate me.