Spending Wisely
After 38 years of corporate life Harry King retired to Spain. He now lives in Alicante in a house overlooking the Med, with the mountains at his back door. He is also author of Going to Live in Spain, How To Buy a Home in Spain and the forthcoming Knowing the Law in Spain.
SPENDING WISELY
Buy-to-let for fun and profit is an investment decision. Never pay an inflated price for a property. True value is hard to judge in a rising property market. However, checking comparable sales is the greatest assistance in property valuation.
Always offer below what the seller is asking. How far below? An offer that is 10% below asking price is not unreasonable. This technique definitely works in a cold market but is harder in peak demand. Persistence is also required because the seller will not accept an offer first time. Offers may get turned down time and time again creating some personal criticism.
Virgin land is not a good investment. Although profit has been made investing in vacant land, the chance of earning any profit is slim. The owner must pay Spanish land tax, loan interest from a bank as mortgage lenders regard land mortgages as risky, and estate agency commission upon purchase. Most importantly there is a risk of the investment being worthless or money being tied up for a long period.
Land ownership is so risky that even builders try to avoid buying land until just before they start construction of a new development. Instead, builders buy options to purchase land, a neat financing trick that gives the builder control of the land with only a minimal cash investment until construction is ready to begin.
SUMMARY
- Estate agents know what is happening in the marketplace and while they have commercial motives they can also be a valuable source of information. They do take high commissions.
- Always take legal advice when purchasing a property. Learn the procedures.
- There are no specific mortgages for buy-to-let in Spain. Mortgages can be in Sterling or in Euros, from British based companies in the UK, or with offices in Spain or Gibraltar, or from Spanish banks. A low interest rate Euro mortgage is considered to be the most appropriate unless seeking an 80%–100% loan based on the equity of an existing property.
- Allow 10% for legal costs when purchasing a Spanish property.
- As an investor, be unquestionably sharp when buying. Avoid land purchase.
