Invest In Spain - Property Buyers Guide
By: Jonathan Stanton | Posted: 10th January 2007
Invest In Spain – A Property Buyers Guide
With Spain now officially the number one tourist destination for UK residents, the demand for accommodation remains healthy. The Costa Blanca and Costa Calida both offer a wide choice of properties, from fabulous beach-front complexes to prestigious golfing developments, making the region of Spain an ideal location for investing in property.
Getting started
Before you make an offer on any property in Spain you need to make sure you are in a position to buy. Whether you need to free up money from an existing property or arrange a new mortgage. The golden rule is to be prepared to move quickly when you have found the right property so ideally you need to open a Spanish bank account to lodge your deposit money when you first start your property search.
What is an off-plan investment?
UK and Spanish developers like to sell properties on a new development before they have started building. This helps to provide cash flow and reduce their risk. It is called buying off-plan and presents an excellent investment opportunity. You should expect to place a deposit of between 15% and 50% of the purchase price with the developer. The remainder of the price is due upon completion. You can sell the property any time after the deposit has been paid, although I would recommend a period of about a year to allow for capital appreciation before you sell. The alternative is to complete on the property and sell at a later date. It is important to remember that once you have paid the deposit, it is your responsibility to pay the builder the remainder of the purchase price upon completion. All new properties in Spain are sold freehold and carry a minimum 10 years structural guarantee.
What are the advantages of buying to let?
Each year Rental Investors can expect to gain around 10% to 12% of the value of their investment, plus the long term annual property value growth. Property prices rose approximately 25% last year in the area and low mortgage rates in the EU make it easy to cover the yearly mortgage repayments. If you are not planning to live in Spain it is advisable to instruct an experienced letting company who could provide you with all the support needed in achieving a return from your property.
Rental income will always depend on the size, condition and location of your property, and how effectively the property is marketed to prospective clients. Net returns (after all costs have been deducted) can be as high as 8% per annum which compares very favorably with the UK buy to let market (currently gaining net returns of about 3%). This does not take into account capital appreciation. Visit our website for a detailed example.
In order to calculate the basic cost of ownership, you must take into account rates, utilities and maintenance costs (wear and tear on furniture, pool and garden upkeep are some of the costs you can incur). Tax and community fees will also be payable.
What types of mortgages are available?
You can finance the purchase of your property using a UK or Spanish mortgage. Many buyers have significant equity in their UK home and choose to fund their purchase by increasing their UK mortgage. Alternatively, Spanish banks will lend non-residents up to 70% of the value of their property subject to satisfactory proof of income. The mortgage is secured on your Spanish property, and interest rates are based on the European Inter-Bank lending rate, and all payments are in Euros. Arrangement fees are typically 1.5% of the amount borrowed. All Spanish mortgages are traditional repayment mortgages. No interest only or endowment options are available.
Legal Matters
What happens when I have chosen my property?
Once you have found your property you will need to be in a position to place a holding deposit in order to reserve the property and remove it from the market. While the amount can vary from purchase to purchase it is normally within the region of €3,000. This holding deposit is paid to the vendor of the property on signing a reservation/holding contract. The remainder of the purchase price together with all fees has to be paid on completion. When putting a deposit on a property you need to sign a reservation / holding agreement to reserve the property. This agreement will also act as a receipt for monies paid.
What is an Abogado and how do I find one?
An abogado is a Spanish solicitor who carries out all the necessary searches and handles all payments on your behalf. A Home in Spain works in partnership with a team of experienced bi-lingual solicitors. They will ensure the property has no debts attached and is properly registered.
What happens on the completion date?
This is the date in which the balance of the purchase price must be paid together with all fees, and the title deeds are signed over to the new owners. This date is normally set when signing the reservation / holding agreement. On a new property 40% or 50% of the purchase price must be paid four weeks after signing the reservation contract, and the balance upon completion.
Signing of the Escritura (The title deed)
This is done on completion in front of a Notary in Spain. Either yourself, or someone to whom you have given power of attorney will sign the escritura. It is at this point that the full payment plus fees (less the deposit) are required to be paid to the existing owner before the title deed can be transferred into the names of the new owner. The Notary is a lawyer appointed by the Spanish Government to ensure the title deed is properly executed. It is the Notary’s job to ensure the seller is legally entitled to sell and the taxes are paid. The Notary will register the change of ownership with the Land Registry Office.
Land Registry Office
This is where all Escritura (Title Deeds) relating to property transfers are registered after taxes have been paid and where the title deeds of any property can be checked.
What Fees do I pay?
All fees are due on completion and are as follows:
• 7% of the value of the property for IVA (Spanish equivalent of VAT).
• 1% of the value of the property for legal fees
• 1% - 2% of the value of the property for the Notary Fee, Land Registry, changing the water and electricity, making a will and NIE numbers.
The handing over of the property and the keys will take place when the full purchase price and all fees have been paid on the completion date. Your solicitor takes care of the transfer of services, (for example electricity and water) into your name upon completion. Our Spanish Office will help with all other after sales services. It is also a legal requirement and your responsibility to take out building and contents insurance upon taking possession of your property. We can advise you on this matter.
Inspection Trips
We specialise in inspection trips to the Costa Blanca, Costa Calida and Murcia regions our goal is to enable you to enjoy the experience of buying your home in Spain. As well as arranging your flights, one of our professional advisors will call you a few days before your trip to discuss your needs and requirements.
We will start to research the very best properties the market has to offer to suit your requirements, before you arrive in Spain. A trip will typically last three days. One of our team will meet and greet you at the airport and drive you to one of the areas top hotels for the duration of your stay. You can view as many properties you want in a single day, but we recommend that you should try to see no more than five or six. That gives you time to reflect on what you have seen over dinner, without being too tired or overloaded with information.
We find that most people who come to Spain on a three or four day trip do not want to be constantly accompanied by a consultant for the duration of their trip, we aim to strike the right balance and enable you to get to know the area whilst enjoying the local culture. A Home In Spain will show you the best possible selection of properties and give you time to yourself to discuss your options and come to a decision that is right for you. If you find the right property and would like to reserve it, we can make the relevant arrangements to visit the lawyers to place a holding deposit to start the buying process.
‘A Home In Spain’, Overseas Property Consultants, provide expert advice to investors and families in all aspects of buying a property overseas.
‘A Home in Spain’ is a family run business and insists on giving a personal service with no pressure to buy. We are committed to finding the right property for our clients and guiding them step by step through the entire buying process.
We are able to give professional assistance on financial and legal matters when buying “off-plan”, re-sales or ‘buy to let’ properties. We can recommend trusted English speaking lawyers and mortgage providers.
Our inspection trips are personal and targeted to your specific requirements. We can show you high quality apartments, villas and traditional farmhouses; by the sea, in rural Spain or overlooking spectacular golf courses.
‘A Home In Spain’ will benefit anyone with an interest in purchasing a property overseas. Whether it is for a second family home or a financial investment we are able to provide, free of charge, accurate economic reviews and give honest impartial advice.
www.ahomeinspain.biz
Check our website:-
• Search from over 1,000 coastal and country properties
• Resale properties updated daily
• Latest Off-Plan Investments
• Mortgage Calculation Chart
• Professional Advice on Locations and Investments
• Step by Step Buying Guide
• Book your Inspection Trips on line or contact us direct-
Jonathan Stanton – General Manager UK Office
UK Office in Surrey: +44(0)1932 78474
Jonathan (mobile UK): +44 (0)777658361
Email UK: jonathan@aHomeInSpain.biz
Jennifer Lock – General Manager Spanish Office
Spain Offices in Pinoso: 0034 965 978167
Jennifer (mobile Spain): 0034 699 575169
Email Spain: jennifer@aHomeInSpain.biz
About the Author
Occupation: UK General Manager - A Home In Spain
‘A Home In Spain’, Overseas Property Consultants, provide expert advice to investors and families in all aspects of buying a property overseas.
‘A Home in Spain’ is a family run business and insists on giving a personal service with no pressure to buy. We are committed to finding the right property for our clients and guiding them step by step through the entire buying process.
We are able to give professional assistance on financial and legal matters when buying “off-plan”, re-sales or ‘buy to let’ properties. We can recommend trusted English speaking lawyers and mortgage providers.
Our inspection trips are personal and targeted to your specific requirements. We can show you high quality apartments, villas and traditional farmhouses; by the sea, in rural Spain or overlooking spectacular golf courses.
‘A Home In Spain’ will benefit anyone with an interest in purchasing a property overseas. Whether it is for a second family home or a financial investment we are able to provide, free of charge, accurate economic reviews and give honest impartial advice.
www.ahomeinspain.biz
Jonathan Stanton – General Manager UK
UK Office in Surrey: +44(0)1932 78474
Jonathan (mobile UK): +44 (0)777658361
Email UK: jonathan@aHomeInSpain.biz
Jennifer Lock – General Manager Spain
Spain Offices in Pinoso:
0034 965 978167
Jennifer (mobile Spain): 0034 699 575169
Email Spain: jennifer@aHomeInSpain.biz
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Tags: golden rule, cash flow, new mortgage, costa blanca, wide choice, deposit money, property in spain, investment opportunity, golfing, tourist destination, capital appreciation, buyers guide, investing in property, uk residents, properties in spain, property search, costa calida