Managing luxury properties, whether it is in Cyprus or any other place is considerably harder than managing any other kind of property. The reason is that most luxury homes include all kinds of delicate factors such as pools, gardens, expensive floors, etc that will need special care.
That’s why if you’re planning on buying a property in Cyprus, you should take into consideration the pros and cons of doing it yourself or hiring a property management company.
Property management: DIY or hiring a management company?
This question is actually tricky as it all depends on whether you have the experience, time and disposition to do it yourself or not. It’s very common that people who buy property in Cyprus in a luxurious way don’t keep the property management themselves.
This response to three principal reasons:
⦁ They’re investing in Cyprus Real State for commercial purposes and need the property to be neat at every moment, even if they’re not there.
⦁ They own several properties and don’t have the time to take all the detail a luxury property management needs. Or simply don’t know how.
⦁ They have bought the property in Cyprus as a vacation home and won’t be there most of the time.
Even though there’re particular cases, most people who buy this kind of property for themselves are interested in a luxurious lifestyle or for commercial purposes which compel them to actually hire the service.
What to take into consideration when hiring luxury property Management Company?
Taxes and fees
Law and taxes in Cyprus Real State can be tricky. Most people end up with legal inconveniences when they try managing a luxury property by themselves, especially when they are not Cypriot.
Anyone who seeks for property investment in Cyprus must take care of two kinds of taxes and fees
When purchasing the property
⦁ Stamp Duty: calculated on the base of the purchasing agreement, for luxury properties this fee is capped at a maximum of €20.000
⦁ VAT: for commercial purposes this tax has a standard rate of 19%. If you’re planning on living in the property this may be reduced rate of 5% according to VAT office’s approval.
⦁ Land registry deposit: regular €50 fee must be paid for registering the land.
Annual fees and taxes to pay as a property owner in Cyprus
⦁ Local authority or communal services fees: for covering street lightning, and all communal services offered in the property complex. For a luxury property, this sum can raise up to €500
⦁ Municipality tax: it’s calculated on the market value of the property according to 1st of January 1980. The rates go to 1% to 2%
⦁ Sewage tax: same as municipality tax, but the rates vary from 3% to 7%
⦁ Water, electricity, telephone, and cable tv services are paid according to the consumption and Service Company.
The good news is that hiring a property management company will help take care of those annual fees or at least do the errands.
Tenant managing with a management company
Generally, luxury management companies offer a complete package for those who use the property as a rental. Among the services included are:
⦁ Locating and researching suitable tenants and backgrounds.
⦁ Formalizing rent contracts
⦁ Collecting payment and monthly rents
⦁ Depositing rents on your account (owner’s account)
⦁ Record keeping of every payment and tenant.
⦁ Repairing a maintenance work.
⦁ Taking care of all taxes and fees.
⦁ Constant communication with owners as well as available online financial reporting (depending on the company)
⦁ Luxury building common areas services:
⦁ General maintenance for common expenses such as elevators, common areas, etc.
⦁ Statement of monthly expenses
⦁ Collection of common charges
⦁ Monitoring tenants conduct and fulfillment of obligations.
⦁ Transparent bookkeeping.
⦁ Supervision of cleaning and maintenance in general.
Basically, a management company will take care of advertising, finding tenants, showing the property, maintenance, accounting, draft leases, handle complaints, evictions, move in/out and periodic inspections, pay the bills associated with the property and keep you legal and compliant.
What fees does a management company charge?
Even though they manage all the above-mentioned issues, they actually get paid for three specific aspects or charge three specific fees:
⦁ Leasing fee or placing tenants.
⦁ Monthly mgmt fee or the management of day to day operations.
⦁ The renewal fee for renewing leases.
Pros and cons of hiring a luxury property
⦁ They’re professionals so they would do all the job in a more efficient and sometimes cost/effective way.
⦁ If you want to rent your luxury property, these companies know the market and how to promote, advertise and select the right tenants.
⦁ They’ll manage all the uncomfortable discussions such as rent increases or evictions.
⦁ They already have a series of professionals they work with to keep property maintenance, even if your property is the most luxurious one.
⦁ You won’t have to take care of the managing yourself which means saving a lot of time and perhaps money (if you’re not experienced or aren’t from the island, chances are you won’t have the contacts a professional company would have.)
⦁ You won’t be the focus of angry tenants.
⦁ As they don’t own the property, they won’t treat it the way you do it. Most companies are really responsible for their work but as you’re the owner, you might never be satisfied.
⦁ Most companies add a 10% fee on any expense they have during their duties. This might not be a problem if you have no idea of how to manage with vendors and could get scammed. But if you’re good at this and have good vendor contacts, this 10% may be a significant unnecessary spend.
⦁ It may be difficult to find a good luxury property management company if you are not familiar with the options available. Asking for advice from other investors could be a good solution to this.
Investing in luxury property in Cyprus can be very profitable if you manage your services well.
If you’ve had experience doing this on the island, and only have one or two luxury properties, it may be better for you to DIY. Otherwise, we hardly recommend you hire a management company for your property investment opportunity or it may end up being work to waste.