Interest rates for mortgage loans are at a low right now, and it’s possible to can earn more than 7% each year if you invest in a property in Spain. But where to invest, and what are the basic things you must consider?
Location
Choose the city very carefully because there are great differences between the prices, and their future possibilities. Larger cities like Madrid, Valencia, Seville, A Coruña, Santander, Bilbao and Zaragoza make for good investments thanks to their size and being ever-attractive places to live.
That said, it always makes a lot of sense to buy where you live. Finding tenants and solving any of their problems is much easier the nearer you are.
Some neighbourhoods within the city centre may be more popular than others, although depending on the type of tenants you’re looking for and your budget, there may be more profits to be made in other areas. It’s also worth looking into what the up-and-coming local areas are, to be able to plan for the future.
Basic considerations
- It may sound obvious, but try to buy flats below the average market price. Do a full market study of all the areas you’re thinking about buying to make sure you don’t pay too much.
- What are the maintenance costs? In older buildings, it’s quite common for expensive repair works to be needed, while newer buildings will have several years’ worth of guarantee for any damage there may be. Also, how many neighbours are there in the building? Depending on this, you will have to split common repair costs between more or less people.
- Similarly, the apartment itself may need renovation work. Research carefully how much this will cost you before jumping in and buying because it could set you back a long time and endanger the profitability of the investment.
- In Spain, IVA (the Spanish version of VAT) must be paid when buying a new property, and ITP (a Tax on Capital Transfers) is applied to all purchases of used properties. Bear in mind, then, that these extra costs, between 6% and 11% of the buying price, will take time to earn back.
- Buying on the coast is always a sure bet. Spanish beaches will always be a pull for both national and international tourists, and so buying a property there can be a great long-term investment, especially if it’s well communicated with plenty of services nearby.
Happy investing!