Investing in real estate on the Spanish Coast is a safe way to invest.
House prices continue to rise every year. So if you decide to sell your property later, you’re definitely doing a good job. This also has a positive effect on the long-term return on your investment.
Not only does the value of your property increase, your monthly rental income also increases as every year.
If you want to enjoy maximum rental income, it is best to invest in a new or renovated home in a good location. If you also ask for a competitive rental price, you will probably get the most return from your real estate investment.
It is important to take into account when calculating your return :
one-off purchase costs
– registration fees / VAT
– fee / fee notary
– fees / lawyer fees / gestoria
– deed costs
– any costs for renovation or embellishment
– furniture and furnishings
220,000 = purchase price
22,000 = 10% ITP (transfer tax) or VAT
2,200 = 1% Fee / fee Notary
2,200 = 1% Lawyer fee / fee
2,200 = 1% Act costs / registration
28,600 = Total Purchase Cost (+/- 13% of purchase amount)
248,600 = Total Purchase Cost
0 = renovation / aesthetic costs (not applicable for new construction)
15,000 = furniture and furnishings
15,000 = Total Extra Costs
annual / monthly recurring costs
– property tax
– rental costs
– maintenance costs
As a standard, we take into account 2 months of rental income per year to cover the annual / monthly recurring costs. Depending on the property and rental market purchased, this may be lower or higher. There are 2 possibilities to offer your property on the rental market:
Long Term Rentals
– Smaller Investment to start renting out( can also be rented unfurnished, we rent out your investment property for FREE and you only pay management costs when you engage us to act as an intermediary)
– Normal rental income
– Less Risk
– Less Work (administration / management)
Holiday / Short Term Rentals
– Bigger Investment to start renting out (the success of your holiday home rental depends on several factors: location / view, attractive furniture / furnishing, commercialization of the holiday home through various websites, management, cleaning, etc.)
– Higher rental income possible (ask in high season per week what you would ask per month in the long term)
– More Risk (not rented all year)
– More Work (you can manage this yourself in collaboration with a key manager or have it carried out by a company for rental and management services specialized in holiday homes)
How do you calculate the return and annual added value of your investment property? (*)
Total cost to make your home ready for long-term rental: 248,600 €
Gross Rental Income: 800 € / month x 12 months or 9,600 € per year
Net Rental Income: 800 € / month x 10 months or 8,000 € per year
Gross Return = (800 x 12) / 248,600 = 3.86%
Net Return = (800 x 10) / 248,600 = 3.32%
The annual added value of a property is calculated on the purchase price excluding costs.
Purchase price (without costs): 220,000 €
Annual Added Value of Real Estate: 2 to 5% (depending on location)
Added value at an A location = 220,000 x 0.05 = 11,000 €
Added value at a B, C location = 220,000 x 0.02 = 4,400 €
Interest rates on mortgages are still historically low. It is therefore interesting to use a mortgage loan for your real estate investment. If there is a mortgage on the main house, you can reactivate the amount already paid to invest in the purchase of a second house in Spain. A mortgage can also be applied for in Spain.
Consult your Immoservice advisor to invest in the property that best suits your needs and expectations.
(*) The examples are purely informative. Percentages, fees, deed and registration costs may fluctuate depending on the province, resale / new construction, executive notary and lawyer / gestoria.