Investing in Spanish Property
Investing in Spanish property has been an excellent investment in recent years. The country ranks fourth among the countries with the biggest capital growth, according to the AFIRE association (Association of Foreign Investors in Real Estate), which deals with international real estate investment. Only the United States, Brazil, and China came in first, second, and third, respectively.
Future property investors, on the other hand, must evaluate a variety of additional factors that may influence their decision. The upside is that Spain has a lot to offer for a mid-to-long-term investment, and with careful planning, research, and due diligence, investors can find a well-priced investment with great income-producing potential.
What is Your Purpose for Investing in Spanish Property?
Not everyone buys an apartment or villa in Spain just for the purpose of living there. Several individuals desire to profit from it, but it’s crucial to keep in mind that international real estate investment can take many forms. Investing can mainly be divided into four categories:
- Capital investment: Bank deposit interest rates have dropped dramatically, and real estate investment can be a much better strategy to enhance funds.
- Holiday, long-term, or buy-to-let. The benefit of this approach is that you will have a consistent weekly or monthly rental income. In the off-season, if it’s a conventional tourist rental, you can have the entire property to yourself.
- House flipping entails purchasing real estate at a low price, remodeling it, and swiftly reselling it. If you’re lucky and stay watchful, you can make a lot of money.
- Golden Visa: Also known as residency by investment, is a program that grants foreign citizens and their family’s immediate residency in Spain when they purchase a property to the value of 500,000€ or more.
The type of property you seek and the areas you explore are determined by your investment objectives. If you’re looking for holiday rentals in Spain, check out tourist hotspots like the Costa del Sol, Costa Blanca, and Costa Brava. If you want to sell an apartment quickly for a profit, however, an investment in Barcelona, Valencia or Madrid where the market is usually livelier, would be a better choice.
Download our checklist to guide you through the investment journey. Analysing and articulating your thoughts and ideas can help motivate and direct you in the buying process to ensure you are buying property in line with your ultimate investment objective.
Financial Considerations When Investing in Spanish Property
A variety of additional factors may influence your investments decisions and as such you need to know exactly how much you can spend and the costs involved in buying a property in Spain. Here we discuss some additional factors you need to keep in mind:
Spanish Bank Account
If you want to take out a mortgage from a Spanish lender, as well as pay water and energy bills, community fees, and council tax, you’ll need to open a Spanish bank account. This can be done at any bank, but make sure you do your homework because fees and services vary widely.
Tax Considerations
When it comes to financial matters, living in another country might be perplexing. You may be eligible to tax-free allowances, so check to see whether you’re paying more than you should. Notify the appropriate government department in your home country that you are relocating to another country. You’ll need to know where you stand in terms of pension and other income taxation requirements. While you may be required to declare tax in both Spain and your home country, due to Double Taxation Treaties, you should not be taxed twice.
Currency Exchange
Fluctuating foreign exchange rates might have an immediate impact on the price you’ll pay for a property. We recommend that you get guidance from a currency exchange specialist. They will be able to assist you in locking down an exchange rate for a future date, ensuring that you know precisely how much your purchase will cost.
Deposit
You may be required to pay a small deposit – usually approximately €5,000 – once you’ve discovered the property of your desires. A ‘Reservation Contract’ will be signed. Before you sign, however, make sure your lawyer looks it over. At this point, you are simply removing the property from the market, not committing to buy it.
You will be responsible for roughly 10% of the cost as a deposit after a full purchase contract has been arranged and signed, indicating your commitment to purchase.
Additional Costs
On completion of your property acquisition, you will be responsible for a number of taxes and fees, many of which vary depending on location. Fees and taxes should be factored into your budget at least 10%-15% of the property’s value. Some of these additional costs can include:
- Notary Fees
- ITP/Transfer Tax
- Stamp Duty & VAT
- Municipal Tax
- Legal fees
Obtaining a Mortgage
You have the option of obtaining an overseas mortgage through a lender in your home country or directly through a Spanish bank. If you are a non-resident who pays taxes outside of the country, you can only borrow a maximum of 60%-70% of the purchase price. The most typical contracts offered by banks are variable or fixed term contracts with a maximum period of 20-25 years.
A mortgage’s setup cost will be roughly 4%-5% of the loan amount. It is also feasible to take out a mortgage on a property in your home country to help finance a purchase in Spain.
Community Charges
You will be responsible for community fees if the property you buy is part of a development with communal amenities. Before you make your purchase, double-check that these have been paid in full.
Cost of Living
In recent years, the cost of living in Spain has risen. Common costs will vary substantially based on factors such as where you plan to reside in the country, whether you have school-aged children, and whether you prefer to shop in supermarkets or tiny local stores.
Calculating your budget
When you’re looking to buy a new property, the first thing you should do is figure out how much money you have available. Once you know how much you can spend, you may rule out any properties that are out of your price range to avoid the heartbreak of falling in love with a property that is out of your reach.
Consider the overall amount you have at your disposal, then subtract an estimated 10% -15% for taxes and fees as explained above.
If you decide to take out a mortgage, be sure you have enough money to cover monthly payments as well as the other continuing expenditures of owning a home in Spain.
The Spanish Golden Visa
Spain is an excellent choice for a second residency country, with warm weather, diverse and magnificent scenery, excellent local cuisine, and a culture that is well suited to outdoor-oriented countries. It’s also known for its technology and public transport sectors, making it a great site for people wishing to do business in Europe or set up a second base there. You can live, work, and study in Spain, as well as travel to 26 other European Union countries without a visa. The Spanish Golden Visa offers various benefits to foreign investors.
Investing in Off-Shore Property with Safcom Investments
Getting the help of an independent property consultancy is crucial to navigating complex foreign property laws, processes, and language barriers. At Safcom Investments we offer an end-to-end Property Investment Service that is focused on serving international clients with exciting investment opportunities.
With our unparalleled specialist knowledge of the international property market and an extensive network of professional contacts, we are uniquely equipped to help investors reach international property investment objectives. If you have any questions about investing in property in Spain, don’t hesitate to book a complimentary consultation with us
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