Advice on investment strategy in Spain. Buy 1 apt in cash or 2 with mortgage
hello. I'd be interested to hear feedback from some of the experts on this platform.
What would you recommend: buy 1 apartment in cash or buy 2 apartments with a mortgage. Country is Spain (where it's still possible to buy relatively cheap).
Thanks!
If you've never been a landlord before, I'd start out with one and pay cash and see how it goes. If you don't like it, or it doesn't go well, it's cheaper and better not to have a mortgage. You can probably get a better deal buying with cash and if it goes well, you can refinance and buy another.
Hi Louis,
I would highly recommend purchasing cash the 1 apartment.
Few reasons for that:
1. Properties without mortgage cash flow fabulously. If you stretch and things get a bit south, you will find yourself in a quite a pickle, versus having the stability and security with owning outright offers.
2.Less restriction - since you do not have a mortgage you would have more leeway in terms of what you do with the property - you can self-insure it, sell, rent as you please, bring partners in and can also borrow against it in the future if you would like to.
3.I am not sure if US institution will finance the purchase of property in Spain, so I assume that you will look for a lender overseas. Here is the thing to consider ( I am from Europe originally) - the ECB ( European Central bank - the equivalent of FED) has a different approach. In the US the mortgages are usually with a fix interest rate for the 30 year period. In Europe, mortgages are usually for 20 years and they are not fixed, but rather the rate is the Current Base rate as determined usually by ECB plus a margin ( example - the ECB rate is 3% and the margin is 2%, your mortgage will be 5%). However if the base rate changes, which it is right now and slowly, but surely it is going up, your mortgage payment goes up immediately - from next month. This is one of the reason why interest rates in EU have been lagging substantially behind the US.
To summarize, since it is your first time, I think you should go with the strategy - the best offence is a great defense. If you can do all you can not to loose, the chances of winning increase substantially.
I hope that helps...
Quote from @Michael Stoyanov:
Hi Louis,
I would highly recommend purchasing cash the 1 apartment.
Few reasons for that:
1. Properties without mortgage cash flow fabulously. If you stretch and things get a bit south, you will find yourself in a quite a pickle, versus having the stability and security with owning outright offers.
2.Less restriction - since you do not have a mortgage you would have more leeway in terms of what you do with the property - you can self-insure it, sell, rent as you please, bring partners in and can also borrow against it in the future if you would like to.
3.I am not sure if US institution will finance the purchase of property in Spain, so I assume that you will look for a lender overseas. Here is the thing to consider ( I am from Europe originally) - the ECB ( European Central bank - the equivalent of FED) has a different approach. In the US the mortgages are usually with a fix interest rate for the 30 year period. In Europe, mortgages are usually for 20 years and they are not fixed, but rather the rate is the Current Base rate as determined usually by ECB plus a margin ( example - the ECB rate is 3% and the margin is 2%, your mortgage will be 5%). However if the base rate changes, which it is right now and slowly, but surely it is going up, your mortgage payment goes up immediately - from next month. This is one of the reason why interest rates in EU have been lagging substantially behind the US.
To summarize, since it is your first time, I think you should go with the strategy - the best offence is a great defense. If you can do all you can not to loose, the chances of winning increase substantially.
I hope that helps...
Thats a great analyis. Im also leaning towards option 1 and possibly option 2 in the future. Thanks Michael and Bill!
Happy to help!
Hi @Louis Albers,
There is no right or wrong answer to your question. You can create wealth in both ways.
It would more depend on your strategy, where exactly you would like to buy, the amount of yield you would like to earn, your plan over the upcoming years.
Are you also based in Spain by any chance?
Hi @Louis Albers,
I concur with @Erwin Groenendijk. There's no right or wrong answer.
Real estate investing is about numbers so you should compare the returns and the risks for both options. While the mortgage option will be riskier (and likely more profitable), your choice will also depend on your risk tolerance.
It's hard for us top give any opinion without any info on the deal, your financial situation and your risk tolerance.
Thanks Mike and Erwin. Really appreciate the input.
@Erwin Groenendijk, yes based in Spain (en Nederlands). Heb een paar van je posts gelezen en erg interessant. Ik heb ook een paar vragen voor je, zal je apart een berichtje sturen.