Reply To: Anyone looking for a bargain in this market?

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#87082
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Anonymous
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Let’s get down to basics and reality.

Based on the past 4 years of renting my 2 bedroom place I know i can achieve an annual rental income of £6,000. (To be fair this has fluctuated between £5,500 and £7,000.)

I pay expenses of £1,800.

I get a net income of £4,200.

I pay Spanish tax of £1,500 (25% of gross income with no allowances as a non resident)

Income after tax: £2,700. In other words a fully furnished 2 bed property would have to cost about £40,000 to £50,000 (6% post tax return?) to make sense if one complied with Spanish tax law, AND the property was bought only as a commercial proposition and had no value for personal holiday use.

Even if you decided to be illegal and only pay UK tax, and deduct allowances before tax at 20%, your income after tax would only be £3,360. Even this implies a maximum price for a 2 bed unit of £50,000 to £60,000.

Now these financials (if you play legal) mean there will be a disaster in the Spanish property market, unless the government gives favourable tax treatment to non resident landlords.

This is completely different to the UK where, at a certain price point, BTL investors start buying because they can make a decent return on the property, due to being able to off-set mortgage interest and annual costs against rental income.