Best option to take when investing in Spain
Simpsonville, SC · Member since 2017 · 8 posts · 2 votes
Hello, this is my first post I'm new to the forum and I'm a newbie to the real estate world.
Does anybody have any experience in investing in Spain?
I'm currently living here and it's where I plan on starting my venture!
However..... after reading up on the numerous amount of taxes there are here during the buying and selling process I'm struggling to choose what path to take,
If anybody has had or is currently having success here I would love to here from you,
Thanks
Dear all,
It's great to see interest in Spanish real estate picking up! I was born in Barcelona but lived in London during the worst years of the financial crisis. Ironically, during the worst months, I was flying to Madrid on a weekly basis to assist the Spanish Government and European authorities to sort out the mess the property market was back then. It was extremely interesting and a huge personal experience.
Where to buy in Spain? As @Erwin Groenendijk mentioned, there are opportunities everywhere, so I guess it is only a matter of personal goals and preferences. As I believe it's been already said, the largest hedge funds bought thousands of heavily discounted properties in 2011-2013, unloading their investments as early as 2014-2016.
That being said, I think international investors should stick to big capital cities unless accompanied by very knowleadgeable experts. Alternatively, when investing in vacation areas, they should be able to bear a higher risk or at least be happy spending some time in their property if the market turns sour, hopefully enjoying some sunshine.
Although properties in Barcelona have strongly appreciated when compared to the worst times, there's still room for higher appreciation. Making offers 50% below the asking price (as @Adrià Creixell suggests) today may work only with desperate sellers. I'm not saying there aren't anymore, but finding them in today's market environment is surely more challenging than in it was in 2011, when I remeber buying with up to 60% discounts.
With regards to rents in Barcelona, I do believe they are high compared to the average disposable income, but I am afraid we are running towards a city model such as London and Paris. Would rents in Barcelona increase? Definitely. For how long? Who knows...because while salaries in Paris and London may sustain high rents, the average salary in Barcelona is relatively low vs. the rents.
I think @Aydin Ozturk knows what he does. Nearby cities with universities and good transportation to/from Barcelona will offer higher ROIs in the short term.
@Andrew Stephens Spanish law is very tenant-oriented, however, the length of the rental agreement is usually 1-3 years. Tenants have the right to stay if they wish up to 3 years (provided the pay the rent!). After 3 years, a new contract should be negotiated and signed in case they want to stay. Cities such as Barcelona have a high turnover and tenants move quite often (every 2-3 years).
Beware though that back in the old days (pre 1985), tenants could have right to a rent for life with very limited increases. So if you buy any property with an existing tenant, make sure they don't have one of those agreements or you'll regret buying a "cheap" deal.
To international investors, I definitely recommend hiring a local property expert who will guide and accompany you through the legal process. I wouldn't hire just a broker, but an expert who could help you finding the right property for you as well as any legal and tax matters. Ideally, they should coordinate with your home tax advisor.
Hope my experience is of use to some of you guys. Will be great to share more insights with you. What are you up at the moment? Any live deals?
Hi @Ben Fisher, I have extensive experience investing in Spain. The most important question you need to ask yourself first is: what are your goals? Depending on what your goals are and where in Spain do you want to invest, you can find some attractive options.
As you mention, taxes when buying are no joke there as well as tenant favorable laws; however, there are some advantages of the Spanish market vs. the US market such as low cost of financing (~2% fix for a 30 year loan), operating expenses (insurance, property taxes, etc) are lower, tenants take better care of the units, among others.
Thanks for your reply @David Fernandez
I do have short term as well as long term goals, my original plan was house flipping here but after researching taxes etc here I don't think it's the best option as they can take most of your profit!
My plan to start off is direct mail making cash offers on home and apartments, I'm looking for the clients who are looking for a quick sale.
Then from there I'm looking at either doing a private lease to buy with 5% down (none refundable)
What are your thoughts? And what options would you say suits best for Spain?
Also I'm currently living in Marbella so this is the area I would be looking to invest in.
Ben,
Flipping is not my primary investing strategy, but I remember asking this question to my accountant there in case that would be the best exit strategy for a specific project. I am not an accountant nor I ended doing a flip there, only buy and holds.
I believe that it is state specific (Andalucía, Catalonia, Madrid, etc.) not national, but he told me that if you form a business whose intention is buying and selling real estate, you only have to pay 3% tax when purchasing vs. the 10% we have to pay in barcelona, where I invest. Then, the profit is taxed as ordinary business profit. As long as you sell within 5 years, you only have to pay that 3%, if you hold it for over 5 years, then you have to pay the difference, and probably some sort of penalty (I added the penalty part, but knowing how things work in Catalonia/Barcelona, it isn't very likely that is the case).
If I were you, I will find a good accountant, explain him what you want to do, and ask him how can you do it legally minimizing your tax implications.
Spain is not that big on creative financing as the US is, but you can find people that like your proposal or that are willing to owner finance. i don't know the Marbella market, but I'm sure there are opportunities there or in cities nearby. I primarily focused on apartment buildings and apartments that needed renovations. I bought them cheap, rehabbed them, and now I hold them as rentals. I think in Spain is hard to cash flow as much as you can get in the US due to the low rent vs. high acquisition prices and costs; however, my play is long term there, and I'm able to CF due to buying low while I hold the assets for the long term. They are in great locations in Barcelona. Appreciation can't be guaranteed, but it will be very strange is they don't go up in value with time (they've already don't 30%+ in the last couple of years due to market improvement and forced appreciation).
Hi David
It is true that unfortunately Spain market is low cash flow vs high acquisition cost. I am investing in 30-40km away of Barcelona, small cities like Sabadell, Terrassa , where you can have higher cap/ cash on cash returns compared to Barcelona city center.
Which areas in Barcelona do you invest ?
Regards
Aydin
Hi guys,
I am totally following this post.
We are looking to invest in Spain too this year.
We thought about Barcelona at first because we like it and are planning to move there this year. But we realised we'd better rent the place we live in (in Barcelona) and invest our capital in a few units further away from Barcelona where the acquisition costs are way lower. This way, the rents (from our tenants) will create higher cash flows that will allow us to either rent a nice big place to live in or re-invest in real estate.
Would love to know where do you guys invest in Barcelona? @David Fernandez
Thanks
Pauline
Hi Everyone
I live on the Costa del Sol in the south of Spain which of course includes Marbella, Malaga, Nerja, etc. I have over 30 years+ direct real estate experience in Spain. Please contact me if I can be of any assistance.
Kind regards
Robert Edwards
@Aydin Ozturk, @Pauline Hanuise I actually invested in Barcelona city, but I did so a couple of years ago and I had access to bank properties that were deeply discounted. These properties were either single apartments or apartment buildings and in any case, assets that needed some work (some times a lot).
Although they have positive CF, my play here wasn't primarily for CF, which is my main goal when investing in the US. In Spain, I wanted assets in good locations. If you are looking purely for CF, then yes, I think that secondary and tertiary markets outside of Barcelona (there are some neighborhoods in Barcelona too) pr in another region in Spain may be a better fit.
hi @Robert Edwards I have recived your message but I can't reply due to my membership, I would love to meet and go through some real estate questions I have here in Spain
@David Fernandez thanks for your reply David i have been moving things foreword, i have more of a plan and an idea now, I'm going to start off wholesaling using direct mail and social media for marketing, do you have any advice for direct mail in Spain? The best approach to take etc?
Thanks
Hi Ben
You can contact me via email which is available in my profile. Look forward to hearing from you.
Kind regards
Robert Edwards
Hello everyone !!! Grateful to find this forum. My first post.
@Pauline Hanuise similarly like you i m looking for property to invest in Spain. How Is your success in this topic ?
The region i m looking for is Basque Country . I had a pleasure to live in Bilbao , that s why it s my first location preference. However, i am open for advices .
It s my first deal, experience and positive cash flow are buggest priorities.
@David Fernandez and @Robert Edwards i wasn't able to contact you vis BP. What do u think about the region of Basque Country ( apart from food )? Is that perspective for buy and hold strategy ? Which challengues i can face ? And maybe you have some properties to offer.
P.S. Sorry for my newbies question. I need to start from somewhere.
I live and work in Dubai ( not in real estate) , bit if there is anything i can do just let me know .
Hi @Elena Verbytska & welcome :)
I visited the Basque Country last year but I finally decided to invest in Valencia - not because the Basque Country wasn't a good option but because we will relocate to Barcelona. Valencia was an interesting option not very from there.
I am planning to be there in 2 weeks for some visits and hopefully a great deal too.
I think Costa Del Sol & Costa Blanca are both very interesting places to invest at the moment too.
Let me know how it goes!
@Pauline Hanuise Thank you Pauline for respond.
Costa blanca you mean area of Alicante ??
in the morning i was sure that everything gonna be just great, but now checking prices i just got crumbles in my stomach.
So i live and work in Dubai, however i travel a loooot but rarely to the same place and for very short period of time. Do u have any experience with property management in Spain?
How went the paper work and renting out your new treasure in Valencia, if you dont mind to respond?
Hi all!
I am Spanish myself, living in Dublin at the moment. Also looking to invest in Spain. Initially considered Barcelona, but visited Valencia in May and this seems like a more attractive option in terms of pricing.
@Elena Verbytska, I actually come from San Sebastian in the Basque Country but would never consider buying there due to the high property prices and low rents. Bilbao might be slightly better due to the size of the city and employment opportunities, but this is just my gut feeling.
Good luck!
Hi @Idoia I.
Great to read your post. I am actually in Valencia right now to visit some properties.
What are you thinking about it?
@Elena Verbytska I am actually visiting Valencia and Alicante - I think both can be good options so far due to low prices but the rents for local people are still very low too - even though they are currently increasing.
I am actually looking at short-term / holiday rental strategies but that depends on what you'd like to do, of course. Some say this is too unstable, which I agree with, but this also gets you a much higher ROI if you do it well.
I think Valencia offers tourism all year round while Alicante strongly depends on the seasons. But I am still researching both markets at the moment...
I am currently busy relocating to Barcelona (not for investing but living) and I'd be interested to know what you both think or even having a coffee at one stage when you're in Spain ;)
@Pauline Hanuise I am visiting Valencia in September to look at properties there. I have the same idea to buy an apartment and lease it as a short term rental. Is there anyone you recommend working with in Valencia? Realtors or Property Managers?
Hi @Jim Robertson ! That's so great!
Sure, I have a few contacts that I would definitely recommend. You can PM me if you'd like.
However, at the end of our trip, we met with a RE lawyer and learned heaps about RE in Valencia...
You have to know that short term rentals such as holiday lets, Airbnb, etc... are currently being reviewed for more control by the government. Not only you will need the touristic license, which is harder and harder to get BUT the city is also currently defining some residential and touristic areas in the city.
That means that even if you buy a property with the touristic license, if in a few months, the government decides that you are located in a residential area, you won't be able to rent your place short term anymore!!!
Something you need to be aware of! Not many people know that and we still don't know which areas will be defined as residential or touristic yet... So lots of changes to come in Valencia and in general in big Spanish and European cities!
You have to know that short term rentals such as holiday lets, Airbnb, etc... are currently being reviewed for more control by the government. Not only you will need the touristic license, which is harder and harder to get BUT the city is also currently defining some residential and touristic areas in the city.
That means that even if you buy a property with the touristic license, if in a few months, the government decides that you are located in a residential area, you won't be able to rent your place short term anymore!!!
Something you need to be aware of! Not many people know that and we still don't know which areas will be defined as residential or touristic yet... So lots of changes to come in Valencia and in general in big Spanish and European cities!
Hi, does anyone know if there are risks related to long-term rentals in Spain? My wife and I own a house in Italy and my understanding that it can be risky to enter into a long term rental in Italy because the laws are so pro-tenant that it may not be possible to raise the rent or even to get the tenant out during the tenant's lifetime. That's extreme, but I'm wondering how pro-tenant the laws are in Spain.
Hi Andrew
The Spanish courts have beefed up legislation recently to counter bad or non-paying tenants. The laws are very clear for both the landlord and the tenant. However, you can only evict a tenant for whatever reason with a court order. This means going through the legal system which can take weeks or months to achieve. You can also take out insurance in Spain to protect yourselg against those who fall behind wih their rent.
If you go to my profile, you'll see a web link to my site and I have published varios articles on the subject on our blog.
Regards
Robert
Hey,
We are also looking to invest in Spain. Specifically in or around Valencia (Alicante..). We're looking into properties for long term rentals mostly. We're interested in reliable property management companies, but any advice about this subject would be appreciated!
Visiting Valencia now and wondering if folks who planned to buy here did. If so, how have things been for you? If you didn't invest here, what caused you to pass?
@Pauline Hanuise, @Jim Robertson, @Elena Verbytska, @Polina Lyu, @Ben Fisher
@Jim Robertson let me know when it's time to buy in Spain!
Hi @Tim G.,
@Erwin Groenendijk and @Adrià Creixell are active investors in Valencia. We contacted via BP and met personally in Barcelona a little over a year ago when I was visiting my family there.
They were looking at deals in Barcelona, but decided to invest in Valencia since the both the returns and the political situation are better.
I never invested with them as I was focused on increasing my portfolio in the US rather than in Spain where I still have a few properties. But if you are interested in learning more about Valencia, they are the guys to talk to.
Good luck! Spain is awesome.