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Welcome to GilesWalker Properties in Javea and Benitachell
WHERE YOUR DREAMS BECOME REALITY
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A simple guide to Investment Purchase in Spain
Cost - Decide what investment level you feel comfortable with.
Type of property - A sensible suggestion would be to consider a two bedroom, two bathroom apartment with private community garden and pool.
Location - It should have close access to the beach, close proximity to golf courses, restaurants and night life. Ideally it should be within 45-60 minutes from the airport. A property of this description will appeal to the majority of renters. It will cost between 110-250,000 Euros
Decide new (off-plan) or resale - Both have their advantages
Resale is complete and ready to move into, completion will be within 4-6 weeks (assuming your finances are in place).
You will see what you are getting for your money.
Often resales are sold part or wholly furnished so can produce a rental return instantly for you or, of course, take a holiday yourself right away!
As with any resale purchased, you are at liberty to make the vendor an offer. However, many of these properties are multi-listed so the sellers may well ‘stick to their guns’ price-wise as well-located property sells very quickly in Spain.
New (off-plan) property appeals to the true investor as buying on a pre-release deal, i.e. where the full building licence is awaiting final approval ensures you pay the lowest possible price.
A typical development may be released in four phases, with phase 1 selling at the lowest price. By the time all phases are released the price will have risen to the level of the last to be constructed and sold, so that each apartment has the same market value.
Mortgage facilities - There are basically two ways to raise a mortgage in Spain:
release equity in your UK property. Generally you can borrow up to 75% of the equity in your UK property (subject to lender’s normal criteria). This method is a lot easier than you may imagine.
Spanish mortgage is the other option. Most developers in Spain offer ‘built-in’ mortgages usually of up to 70% of the purchase price (subject to status). This route assumes the buyer has access to the remaining 30% as a cash deposit payable in stages usually over the first 4-6 months after signing of contracts.
If buying off-plan the benefit of taking over builders mortgages is the fact that all the arrangement fees have been paid and rates are normally extremely competitive.
Timescale
Normal lead-in time is 1-2 years more typically 18 months dependent upon the progress of the property at the time of signing contracts.
Having made the decision to buy, paid your deposit and signed the purchase contract, the price agreed is then ‘set in stone’, the rest of the development will be subject to regular price increases until completion.
It is a documented fact that between signing and completion, values can have risen between 30% and 40%. Where can that be equalled in the UK in the same time frame?
Security
Make sure to view only properties where the developer offers a Bank Guarantee. Your deposit will never be at risk. You should expect to be introduced to a fully qualified English-speaking lawyer who will always be totally independent of the seller and a current member of the Spanish Law Society. Finally, but not least, every property must come with a full ten years of College of Architecture Guarantee.
Rental Return
Will the rental return pay the mortgage?
This will depend on:
The amount borrowed
The period of repayment
Actual ‘take-up’ weeks in a given period.
The 10 peak season weeks are very easy to rent out and they yield the maximum amount weekly. Currently circa £500-600 per week for 2 bed 2 bath apartments. The 12 high season weeks are also very easy to rent out and yield £300-450 per week currently. (Obviously this will depend on location and front line golf and/or front line beach reaping the most rewards.)
Of the remaining 30 weeks the prime rental return would be from golfers and retirees looking for long term, rental. If you use the services of a reputable agent who is well established in the area, they will achieve a good proportion of those weeks rented. The returns in these weeks should realistically be around £200-300.
Guaranteed Income
No one will actually guarantee how many weeks rental you will achieve. However, it is fair to say that in the prime weeks there are never enough properties available to rent in the popular areas of the Costa Blanca.
Most well-established agents will have a track record of similar properties in your chosen area that they are renting and will show you what level of rentals and how many weeks ‘take-up’ you can expect.
A good alternative to holiday rentals is short-hold rental where a tenant will sign a legal shorthand agreement for a period, renewable by mutual consent, normally paying in advance. This method has the advantage of your knowing exactly how much income you are going to receive, and of course, the maid and cleaning charges are not applicable. The long-term rentals will not of course pay the peak holiday rates and obviously, you will not be able to use the apartment yourself as it will be tenanted!
Most long-term investment buyers will, upon completion, instruct an agent to market their property as being available throughout the whole of the year and they will use it themselves only during unoccupied weeks, most likely to be in the low season.
Selling before completion
An increasing number of investment buyers are now purchasing multiple units of property ‘off-plan’. Many developers permit the owner to sell the property prior to completion by simply re-assigning the ‘contract’ and taking the profit. Some clients are reserving 2-6 properties, paying the relevant stage payments and then reselling most of them, retaining one or more for rental income purposes. For larger investors this producing a profit in perhaps, a 12-18 months’ time frame plus leaving ‘an iron or two in the fire’!
It is worth noting that well-built, well-located properties will, apart from generating the income described here, appreciate in value from the day of signing the contract. Spanish property in general has been doubling in value in under 5 years.
In conclusion, the past has proved purchasing property in Spain to be a safe, sensible and profitable investment with the added benefit of being usable by yourself and family at any time you choose.
We look forward to meeting you.