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?
Generally speaking, making investment choices based on taxation lead to poor decisions. This is because the higher the gross revenue, the higher the taxes but the higher the net revenue too. Also, your circumstances and tax rules change over time so that could be problematic if you invest in the long term based on short-term tax rules.
Nevertheless, the 1031 exchange rule works for overseas properties as well. You just can't use it between domestic and overseas properties but you can use it between overseas properties.
The taxes for Americans when it comes to overseas real estate aren't that complex and filing taxes is probably the easiest part of investing. There has never been so much information available online for free if you want to do it alone or you can just hire tax advisors.
Very simply put you'd have to file in both Spain and the US. The taxes paid in Spain would get credited against your US taxes according to the US - Spain taxation treaty for the avoidance of double taxation. Also, Americans investing abroad have a tax exemption in the US. I believe it's for the first $100,000 of income. Don't take my word for it and do your own tax due-diligence. And it might be a good idea to consult with tax professionals, at least for the first time.
Hey @Erwin Groenendijk, I'm new to real estate investment and I live not far from Barcelona. I really like the idea of being part of a like-minded group in the area. Are there any requirements to join, how can I find this group?
Hello everyone!
Just found this forum on Spanish real estate. I'm fairly new to biggerpockets but I have been interested in real estate investing for a while now and I've finally decided to take some actions. I am from the USA but have lived in Spain now for 5 years. I'm currently in Malaga. I'd love to invest here but as previously mentioned in this forum high costs and low rents can make it a little more difficult. My goals are cash flow and long-term holds. I'd love to get this forum going again and get up-to-date on the current market. Does anyone have any tips or advice when investing in the Costa del Sol? I love to have a chat and learn more. Thanks!
Taylor
@Taylor Cameron couldn't you look into vacation rental properties to get the yield up?
If you are in Marbella, reach the guys from Vacation Rental Marbella. The founder is a friend of mine. They mostly work with really high-end properties. Also, I know nothing about Marbella, but I'm sure there must be closer areas with a lower entry barrier and decent yields.
In Malaga, the name of the game is short-term rentals.
@Erwin Groenendijk Yes, I think that's a good idea. My thought was to start with something a little less risky (longer-term rental) because with short-term rentals you obviously have a risk of vacancy every once in a while but on the flip side of the coin, it can be a great source of cash flow. Especially not with travel starting to come back. Probably not as risky as I'm making it seem in my head.
@Javier De la Rosa Thanks for the recommendation. Do you know the link to their website? I type in Vacation Rental Marbella and about a million different things come up.
@Mike Lambert Do you have any short-term rentals in Malaga? Also, I saw your post about taxes. Are there any extra fees when purchasing property as a nonresident?
Thanks for the replys. I do tend to agree with you guys. Short-term rentals are probably the way to go. The price you can charge for rent bumps up significantly, therefore improving yield. Still high price for entry in places like Malaga Centro or Marbella. Need to find the right deals or possibly search in the villages close by such as Mijas or Torremolinos. Any advice for finding good deals in Spain? Probably important to network and meet local investors. Right now I'm only searching on MLS websites and facebook groups.
Following. I am based in Southern California and looking to invest in Marbella/Malaga (family live there, will move there eventually).
I don't own short-term rentals in Malaga. Although it's a good place for that, it's not my favorite. While Malaga is Costa del Sol's main city, most visitors go to the Costa del Sol for the beaches and/or the golf, not for the cities. Yet, I made a positive comment on short-term rentals there because 1) Once a bit of a backwater city, Malaga has transformed into a little Barcelona and has therefore become much more popular. I imagine the average STR stay is much shorter than in the beach towns though and 2) I think it's generally makes little sense to invest in long-term rentals in other countries, especially when you can invest in short-term rentals instead.
I'm not sure there its demand for STRs in Mijas. It's a beautiful little town but once you've seen it, there's hardly anything to do there and it's far from the beach. Torremolinos is not a village. It's the original main beach town of the Costa del Sol along the coast with Marbella. I prefer places West from Marbella towards Gibraltar. In any case, it all depends on your objectives.
There are no particular fees for foreigners.
I'm not sure what you mean by finding a deal but the problem is that there is no MLS and, moreover, very few real estate agents cover the whole Costa del Sol. Typically, they cover a city or part of a city and they can't care less about what's for sale a few miles away. Therefore, you should talk to as many of them as possible and, unless you have the right connections, you should expect to pay market prices. If you stumble on a deal, that should be icing on the cake.
@Ben Fisher
If a sqautter moves in to your house in Spain and live there for 2 days and nobody call the police.
(They have the right to stay there) The legal process could take 1.5 year to get them out.
This info did i get from my Spanish bank guy.
I have a Swedish friend that this happened to.
I tried Spain for 3 years and did not make anything.
Moved all my money to the US and will only invest in Landlord friendly states.
Stay out of countrys that has radical tenant friendly rules.
@Magnus Göransson, let's not only focus on the horror stories because if we do so there is a ton of reasons why maybe it is better to also not invest in the US. There are squatters in Spain (like in many other countries), however, with the right strategy, you can limit the probability of them entering or wanting to enter your home. Also there are other more creative ways (anti-squatters, for example) to get them out really fast might it still happen. We have been investing for many years and in many different projects and this has not happened so far.
@Mike Lambert, thank you for the insights. It seems like you always have interesting inputs for many different parts of the world, where even myself as a resident living in Spain and knowing the country quite well by now, it is still nice reading your thoughts.
@Taylor Cameron, we have bought and have been active in the vacation rental business here in Spain. No extra purchasing fees are applied for non-residents, the only thing is that a resident will typically be able to get a mortgage up to 80% whereas non-residents normally can go up to 70% (could be higher if you talk to some mortgage brokers, btw). So the only difference is that the amount of cash needed to be put in is higher. On normal rental incomes there are different tax implications for non-residents, however for vacation rentals, as it is seen as a business activity, normal profit taxes are applied which are the same for everyone.
Erwin this was in Torrevieja Costa Blanca, i can not speek for Barcelona.
I can compare it to Detroit which has a antisqaud team that get them out in 4 weeks. I had 3 Sqautters.
Thats better then 1.5 year. When it happenes.
@Taylor Cameron, sorry for the delay: Vacation Marbella is my friend's agency. When he started it was the only one, now they've got a lot more competition, buy they are the strongets.
@Mike Lambert Yes, I agree with you. Short-term rentals are the way to go. Why do you prefer the west of Marbella? Less competition? Lower barrier of entry? I have spent most of my time between Marbella, Malaga city, and the villages in between. I still think these are good places to invest. Not necessarily for the city but, as you mentioned for the beach and golf. In these places, it's just much more competitive and the prices are much higher.
What I was referring to as the MLS was each individual realtors' listings on their website but also on Idealista and fotocasa. Obviously here you're paying the market price. There are hundreds if not thousands of agents and agencies (at least it seems). So your advice would be to talk to as many as I can and just see what I can find?
@Erwin Groenendijk If you don't mind me asking, what is the yield you look for when buying a property? Seems in Spain anything 7-8% is good.
@Javier De la Rosa Thanks!
@Taylor Cameron Completely depends on the strategy, but overall for BTL starting from 8 to 12+% (depending on if it is traditional, room, or holiday rentals) and for flipping 30+%
I prefer that part because that's the direction the development goes and it's earlier along the path of progress. Plus, it has great golf clubs like Valderrama and Finca Cortesin and there's less competition from hotels. This doesn't mean that the area between Marbella and Malaga isn't good. You could do well there.
Aside from the listings, I meant talking to realtors until you find something that works of you. Hopefully it doesn't take hundreds of thousands of them.
Hello,
Interesting tread.
I'm looking to move with my family to either Malaga (Costa del Sol), Rojales or around Alfaz del Pi (Costa Blanca). The idea is to start with a single family, make some modificaitons for house hacking in short term rental. Just starting to research the possibilities.
@Erwin Groenendijk Is there any investor friendly bank/lender that you can recommend for non residents?
@Taylor Cameron I think that you can negotiate the purchase price. When i look at the web sites there are properties that have been there for quite a long time. I lived in Spain (Alicante) in 2011-12.. I noticed that sellers and some agents where more flexible to negotiate the price when the buyer was a local. This is because there are a lot of buyers from northern Europe that buy at listing price.
Hi @Daniel Baquero, in general not being a resident in Spain shouldn't really be a problem for getting financing. The only difference between being a resident and non-resident, is that residents theoretically can get mortgages up to 80% LTV and non-residents up to 70%. Besides that, the same background check is done and mortgages are given as easy to both if you qualify for their standards.
If your background is not that standard and if you need more creativity, we also have some contacts with whom we can help you if you send a pm.