December 4, 2015 at 1:49 pm #188592
With interest rates being so poor is it a good idea to purchase property in spain to let out? What are the risks? Is it good if a property for sale already has a tenant? Given the option is it best to buy in Spain or the UK?
December 5, 2015 at 9:44 am #188606
It’s true that Eurozone interest rates are extraordinarily low, and depending on your credit score, you can now get fantastic fixed-rate deals around 2.5% for 10 or more years. It’s worth going for a fixed rate as you remove the risk of rising rates, which must happen eventually, and 2.5% is amazingly cheap for a fixed rate.
It’s also true that Spanish property prices have bombed since the bubble burst, on average down more than 40%, and as much as 70% in some places. Factor in the strong pound and it all looks rather interesting for a British investor.
If you are looking for a second-home to rent out part time, and can afford to buy what you want, then the idea has merit.
However, if it’s pure investment, I’m not a big fan of cross-border buy-to-let. Too complicated. I think you are better off buying something local to where you live. Much easier to understand and keep an eye on.
Also, Spanish transaction costs are a big hurdle for investment returns. With the possible exception of the Canaries, they are much higher than the UK.
That said, I would think twice about buying in London today, though who can afford it anyway? UBS just published a report saying London and Hong Kong are in bubble land.
The rest of the UK might be okay though. There are just too many people and too few homes, the laws of supply and demand suggest rising rents and prices. That’s not the case in Spain.
Have found a property with a good yield and a reliable long-term tenant? If so where in Spain?
December 5, 2015 at 10:31 am #188607
Thanks Mark. Haven’t gone into too much detail yet as only just started looking, but a couple of the properties iv’e inquired about have tenants. My idea of purchasing a second home (it will be a cash purchase no mortgage required) is purely for an income and a safety net so as not to let my savings eventually disappear. I’m looking at properties close to (or on) the coast around Vera, Garrucha, Villaricos, Mojacar Pueblo as I can drive to these areas in less than an hour. Do you think it would be best to look at properties in larger cities closer to airports?
December 5, 2015 at 11:24 am #188609
I am in the process of buying a property to let out in Barcelona (completion next week). I plan to let it on medium term contracts (less than 1 year) mostly to foreigners (a lot of people come here for less than a year, I meet them in my language groups), so there is some rental premium and no touristic licence required if more than 31 days. The great GBPEUR exchange rate has helped with this purchase. If it works out I want to purchase another 1 or 2. But I live here now in Barcelona and some locals are helping me, could be more difficult remotely. I am also paying cash and restricting purchases to low 100s in areas attractive to foreigners (not easy, but I found one).
December 6, 2015 at 5:44 pm #188613
I am a lawyer, let me just remind you the taxes to be paid as no residente tax, when you rent your property.
The non-resident property tax (Impuesto Sobre la Renta de no Residentes) is a tax based on property in Spain for non-Spanish residents.
The Spanish tax authority assigns an income, or imputed income, or notional letting value to the property. A tax return has to be filed regardless of whether or not the property has been rented and whether or not the owner has actually received an income from the property.
As there have been problems in the past and still today that many people are simply unaware of their financial responsibilities, <u>the tax office is checking all taxes to be paid</u>, and if the owners are late paying, they are charging an interest rate, and it will keep increasing until paid, interest and penalties will be depending on the severity of the case, between 50-150% of the tax amount.
Furthermore, actually if the owner is not resident in Spain, tax may also be due in the country where they are resident, subject to any Double Taxation Treaty Relief.
In order to avoid unpleasant surprises, the owners of a property in Spain have to be updated in all taxes. They have to avoid to wait the Taxman to knock on their doors with a penalty proceeding against them.
If you have any require do not hesitate to contact me.
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