Curious if anyone here has experience with mixed-use investing overseas, specifically Italy.
I’ve been looking at opportunities in Naples where you can buy a small building with commercial on the ground floor (restaurant / café) and an apartment above. Purchase prices seem much lower than comparable mixed-use deals in the US, and tourism demand looks strong.
In theory it seems like you could combine long-term rental / short-term rental upstairs with a leased or owner-operated food concept downstairs and make the numbers work.
Has anyone here done international mixed-use deals or looked at Italy specifically?
Would love to hear pros / cons from people with experience.
I haven't done Italy specifically, but I manage mixed-use domestically — retail/restaurant on the ground floor with residential or office above — and the restaurant component is where deals like this live or die regardless of geography. A few things I'd think hard about: First, restaurant tenants are brutal on the physical space. Grease traps, hood venting, plumbing loads, HVAC requirements — the buildout and ongoing maintenance burden is way higher than any other commercial use. If the space isn't already built out for food service, that cost alone can blow your pro forma. Second, Italy's landlord-tenant framework is very different from US leases. You can't rely on US-style NNN lease logic where the tenant absorbs operating costs. Italian commercial leases often have much stronger tenant protections and rent controls, which affects your ability to recover CAM-type expenses or re-price on renewal. Third, the tourism demand angle is real but also means heavy seasonality — a restaurant doing great in summer can be dead in February, and your residential upstairs may face the same STR restrictions that are tightening across southern Europe. None of that means don't do it, but you'd want to model the downside scenario heavily on the commercial component. The residential cash flow alone probably won't cover your whole carry.
One thing I’d watch is the tax side - it’s not always as simple as it looks.
In Italy, rental income is often taxed around ~21%, and can be higher depending on how it’s set up, plus you’re still dealing with U.S. reporting on top of that. So even though purchase prices look lower, the net numbers don’t always come out the way people expect.
Good point from Jerry on taxes — that double-layer is real and catches a lot of US investors off guard. Italy does offer a "cedolare secca" flat tax option (around 21%) for residential rentals, which can help simplify things, but it only applies to the residential component. The commercial unit (restaurant) gets taxed differently under Italian IRPEF, which is progressive and can run higher. Plus on the US side, while the foreign tax credit offsets some of the Italy-side burden, you still have FBAR/FATCA reporting requirements and potentially Form 8858 or 5471 depending on how you hold the property — and compliance costs for those aren't trivial. The combined friction of a bi-lingual lease structure, Italian notary system for conveyance, property taxes (IMU), and US reporting adds up fast. Not a dealbreaker but the due diligence budget alone needs to account for it. Anyone looking at this seriously should budget for both an Italian commercialista and a US CPA with international real estate experience from day one.