The price of a property is not yet the cost of the investment.
A property may cost €150,000, show a good projected yield and look very convincing in the presentation. But before I judge the result, I want to understand what the investor pays on entry, during ownership and on exit.
As I already described in the article “Seaside property as an investment: how to choose one with growth and income potential”, when choosing a property it is important to look not only at the location and the promised yield, but also at the entry price, real demand, management and the ability to exit the investment.
Here we take the next step and count what usually stays outside the presentation: taxes and the costs that come with them.
The price of the property is only the first figure
When buying property abroad, costs beyond the price of the property itself may arise: purchase tax or duty, registration and notary fees, legal support, banking costs, furniture and fit-out, maintenance and property management.
Which of these costs apply depends on the country and on the project itself.
So two apartments both priced at €150,000, in different countries, may require different amounts of capital on entry. Comparing them by the price list alone is wrong.
What I need to know is how much money the investor will actually put in before the property starts working.
Taxes do not arise only at the purchase
Property has its own life cycle:
Buy → own → rent out → sell.
And each stage can bring its own tax obligations. Depending on the country these may be purchase taxes and duties, annual charges on owning the property, tax on rental income and capital gains tax on sale.
So the question “What is the purchase tax?” is too narrow for an investor. I would ask it differently:
What is the tax and cost burden across the whole period of owning the property?
That is what shapes the final result.
Yield before tax and after tax are not the same thing
Imagine a property with an attractive rental model. We have calculated occupancy, management, maintenance and other costs, and arrived at the owner’s expected income. But if the investor has to pay tax on rental income, that belongs in the calculation too.
Only then does it become clear what is really left to the owner.
So a property advertised at 10% can sometimes turn out to be less interesting than one advertised at 8%. The second may simply have healthier economics once all costs and mandatory payments are taken out.
What matters to me is not the prettiest figure in the presentation, but the investor’s real result.
Where the property is located is only half the question
Cross-border investing adds another layer — the owner’s tax residency. The property sits in one country, while the investor may be a tax resident of another.
Income from property is usually taxed under the rules of the country where the property is located. At the same time, the owner’s country of tax residency may treat foreign income under its own rules. Here it matters to look at national law and at whether a double taxation treaty exists between the two specific countries.
So the question:
“What is the property tax in this country?”
I always follow with a second one:
“And where is the owner a tax resident?”
Without that, the picture can be incomplete.
Do not forget the sale
I like to think about the exit from an investment before entering it.
If in five or ten years the property has gone up in price and the owner decides to sell, capital gains tax may apply. The rules depend on the country, the holding period, the status of the property and of the owner.
So a 30% rise in price does not yet mean the investor made a 30% profit. Selling costs, commissions and taxes can come out of the result.
What interests me is what remains after the transaction, not just the difference between the purchase and the sale price.
I do not choose a country by its low tax alone
A zero or low rate looks attractive. But on its own it does not make an investment a good one.
You can save on tax and buy in a weak market with low demand and poor liquidity. Or you can pay more tax and get a strong location, steady rental demand and a clear resale market.
The same applies to the choice of asset. Real estate, physical gold and other precious metals do not have to compete with each other — each instrument can have its own job within the capital structure. Why I look at gold, silver, platinum and palladium from exactly this angle, I described in the article “Physical precious metals: why they belong in a capital preservation strategy”.
So I do not begin the search for investment property with the question:
“Where are taxes lowest?”
Something else matters more to me:
What will be left to the investor after all costs and taxes — and does that result match the risk they are taking?
What I want to know before the purchase
Before the deal I need clear answers to several questions:
- What is the full cost of entry?
- What costs arise during ownership?
- How is rental income taxed?
- Does the owner’s tax residency matter?
- What happens with taxes on sale?
- And how much will be left to the investor in the end?
The specific rates need to be checked for the chosen country and the individual investor together with a specialist tax adviser.
My job in the investment analysis is to see these costs in advance and not to build a model on figures that will not exist in reality.
In the end I am calculating the result, not the property
For me a good investment choice does not start with the question:
“What should I buy right now?”
It starts with another one:
What job does this capital have to do — and which asset will do it more sensibly?
If this way of thinking about investment choices resonates with you, I think we will have plenty to talk about at a consultation. With no need to choose a country or a specific property in advance. Sometimes it is more useful to work calmly through the job of the capital first.
Strategy first. The asset second.
