What to consider when buying a property November 24, 2020
Errors to avoid when buying a property in Spain November 24, 2020
Investing in Spanish real estate November 24, 2020
Despite the Corona crisis, the Spanish economy is likely to grow. On the one hand, because there is a potential for recovery and because everyone (including the EU) is interested in promoting and ensuring an intact stable economic and political situation in the country. Thus, the increase in rents, the progressive increase in the value of properties and the rise of tourism, only temporarily interrupted by the pandemic, are promising indicators that predict an attractive and growing development of investments in residential properties.
- Investing in consolidated areas: It is best to look for properties in consolidated areas with a strong demand for rental homes, which are also well connected and offer a wide range of services. In Madrid, for example, the districts within the ring road of the M-30 are very interesting. Large business centers or college districts are also a good choice, as there will always be demand. The properties in the city center are always the best, although the initial investment will be much higher there.
- Properties in good condition: If a property is going to be rented, it is important that it is in good condition to make it attractive to tenants. If you want to renovate the apartment after purchase, the purchase price should be as low as possible and the property should not have a complicated room layout. The average price of a renewal is between 450 and 500 euros/m2. The condition of the residential building should also be inspected to avoid unpleasant surprises and additional costs later on.
- How is performance calculated? To calculate the initial investment, in addition to the purchase price, it is necessary to take into account taxes, the costs of buying accessories and the costs of furnishing and renovating the property (paintings, appliances, furniture, etc.). Once you have this information, you can calculate the return on your investment.
- Before making your decision, you should inform yourself in detail about the ancillary costs involved, if you have enough equity to buy the house or apartment or finance part of the purchase price. In general, you should allow 10-15% of your budget for the costs associated with the purchase.
- All property contracts in Spain must be signed with a notary public. Fees for this are fixed by law and range from 800 to 875 euros, depending on the purchase price. For registration in the registration of the property (similar to the registration of the property) another 400 to 675 euros must be allowed; fees are also set by law.
- An important part of the additional costs when buying a property are taxes. The type and amount of taxes payable depends on whether the property is newly built or formerly owned. In the case of new constructions, 10% value added tax (VAT) is paid, as well as 0.5% to 1.5% certification tax (AJD - Documented Legal Acts), depending on the autonomous region.
- 6 to 8 percent real estate transfer tax
- Property of former ownership is subject to the property transfer tax (ITP), to the extent that the buyer and seller are natural persons. The amount of the tax depends on the Autonomous Community in which the property is located and varies between 6% and 10%. If you have hired a Manager to handle the purchase transaction, you must also pay a fee, which is usually about 300 euros.
- If you finance part of the purchase price through a Spanish bank, you will also have to allow around 250 to 600 euros for the valuation of the property by a surveyor. The loan agreement also includes notary fees, registration in the property registry, and certification taxes, although these are usually paid by banks.