In today’s world, most people not only see a property as their main living residence or holiday home, but they also view it as an investment, and as such they expect it to offer financial growth.
So, what makes the perfect investment property?
There are several ways a property can offer an investment to the owner –
- Flipping the property shortly after buying it, usually after renovations
- Renting it to long term tenants or holidaymakers
- The capital growth of the property value over the long term
What is the buyer / investor is trying to achieve?
If making a quick buck is the objective then flipping a property will allow far more profit to be made quickly, especially if most of the work can be undertaken by the owner. If there are high building labour costs this will significantly reduce the amount of profit that can be made.
Another thing to consider here in Spain are the high buying costs, especially the transfer tax which is between 6% – 11%. If a new build IVA is levied at 10% of the property price. This makes flipping less attractive here in Spain than some other countries
Longer term investments can be made from buying the property to rent it out to tenants on a long-term basis, or if in the right location, to holidaymakers. With high inflation expected over the next few years rental incomes will increase significantly.
The long-term capital growth of any property is almost guaranteed however there could be capital gain tax implications when sold, especially if the property is not the owner’s main residence.
Who has invested well here in Spain?
The best investment we have seen in recent years is a gentleman who bought a large 6-bedroom house in Javea with a rent-to-buy option. The property already had a tourist licence, and it was rented weekly during the main 8 weeks of the year. The buyer of this property did works himself to update and improve the house, the outside dining area and the swimming pool were the main focus as he wanted to attract more tourists. These works cost him approximately 50,000€.
The property is now rented to tourists for most of the year due to the improvements that have been made to the house. The monthly rent-to-buy payment for the property is 4,000€ per month (48,000€ per annum) however the property is bringing in 85,000€ of rental income per year. In essence his tourist guests are buying his property for him and giving him a modest net income.
He secured the house for a good price; over the past 3 years the house price has increased by circa 150,000€ so he has made approximately 100,000€ gross from the capital growth.
This wise investor has created a great asset that is giving him an income now and potentially huge capital growth that can be turned into cash at any point in the future.
If you want to know more about investing in property here in Spain, please get in contact.
Rent To Buy Spain and Sunset Javea
Calle Burdeos 9,