August 16, 2016 at 5:45 pm #192215
I have been told that the yearly running cost for a property is about 2% to 4% of the value of the property which includes property taxes, income tax on the rent, rubbish tax, insurance, standing charges for utilities (electricity, gas, water, telephone)…
So if you buy a house in Barcelona where the return on Investment with rental is less than 4% I am wondering how you people are making money, considering that your flat might remain not rented for a while if the renting is terminated.
I am thinking to buy a property as an investment and rent it but am not sure if I will still have to pay from my pocket for the running costs..
What is your opinion and how are you managing ?
August 20, 2016 at 10:19 am #192228
Darlin…You are spot on!
I do own property in Spain since 2012, and I do rent out as much as possible!
I would say, if you use an agency for letting and for all other services, it will be nothing left over for you!
I have tried that….
But if you do the rental business your self, it can be a small profit when ALL costs are payed. Clean, laundry, rentaltax, replace items etc..
We live today in a World of extremly low interest rates, so this situation reflects also this business.
So if you do a lot of work yourself, have a good rental all year round, it can be a NET profit of 2-4% of the value of the property! If you ALSO do the clean and laundry, it will increase even more.
PLUS…that we now will se that there is a increase of the value of Spanish properties, depending of the area and property. So if we include that when we have no inflation…it will be an add on…
But I think that most owners concider the rental as: Help me to cover some of the costs, which you from time to time can see in the rental price they want for a certain period (low = desperate).
I do not regret my purchase in Spain, but I did belive it would give a better profit that it actually does!
There are other valuse that profit in it also….
August 20, 2016 at 12:15 pm #192238
An honest answer and a serious offer:
Having lived in Spain over 30 years and experienced all kinds of property ownership and rental management and having noted that your enquiry appears to emphasise holiday renting rather than steady long term letting, I offer you the following thoughts and an offer.
You are probably aware that the Spanish authorities are trying hard by means of complicated regulations and by draconian fines to reduce the holiday rental market in favour of the hotels. The regulations vary enormously from region to region with some being much more restrictive than others.
As has been commented, holiday letting requires management, that is to say cleaning, key holding, maintenance etc and these services are not cheap. If you are a tax resident of Spain, you will not get tax relief on holiday letting income either. Often holiday rentals leave long voids in the less attractive months.
We have found that long term letting is far more favourable. The benefits are (i) steady income (ii) tax relief at 60% (currently) (iii) minimal management when you have a good tenant.
In 2006 we bought for rental a very large four bedroom townhouse close to Denia, the main regional hospital and the A7 motorway and just 4 km from the sea. The ground floor is a huge garage and the living accommodation is on the second and third floors. The house in in a small Spanish complex with pool and gardens and the community is very well run and runs a comfortable surplus. The quality of the build is extremely high with marble floors throughout.
As we grow older, we want to liquidate the property and enjoy some retirement on the proceeds. We paid around €280,000 including expenses and now offer it to you at €220,000 or close offer. The house is not on the market at present and we have been waiting for the Spanish market to recover before doing so.
There is a sound long term English tenant who pays €535 per month and currently we have part of the garage for our own use. When this is released (probably in 12 months time), the rent will rise to €585 per month.
The outgoings are: Comunidad €420 per annum and IBI tax €520.76 per annum. Insurance is just under €200. Maintenance is minimal as the tenant is legally liable for any boiler problems (gas water heater).
The tenant uses the house as a “lock-up-and-go” base in Spain for his whole family. I have not advised him of this offer and will only do so, if you show any serious interest.
The arithmetic is simple: outgoings €1140 per annum. Gross income €7020. Net income €5880.
Yield at offer price: 2.7% per annum. Undoubtedly as the property market improves, there would be some capital gain. We are now too old to wait!
If this is of interest, please do get in touch to discuss further.
August 22, 2016 at 9:05 pm #192291
No, its not worth it. You and get twice that, sugguesting the valuation of 220k should be 110k.
August 23, 2016 at 10:46 am #192294
I’m afraid, even in the current market, you cannot hope to get such a house at that price in these parts (Northern Costa Blanca). You might be lucky down in Almería or Murcia but then your rental income is likely to be much more precarious (and lower) and the improved yield would be subject to considerable risks. If you select a cheap area like that, you might well find that, because so much is on the market, you cannot get the capital gain you might hope for. Ours is a high quality build with no maintenance problems. These houses are on the market at a realistic €200,000 plus. I’d be very interested to know where you find your high yield in the end.
August 24, 2016 at 12:10 pm #192301
Yes, it can be worth it depending on the area. I bought a 1 br sobreatico in Barcelona last year and rent it out to “medium term” foreign visitors (2-11 months, tourists lets not possible now). It has been nearly 100% occupied with about 9% gross return, 6% after expenses and tax (I got a good deal, looking for another, they are out there but they go very quick, within days).
Pepsicola yes you are right there is no need to dump properties at ridiculously low offers if you don´t need to sell. The market is recovering, at least here in Barcelona and the Costa Brava where I own a townhouse also, and sales have recently been achieved at 250K. Coastal areas normally have much lower yields due to seasonal renting and/or regional locations so can´t be used reliably to estimate prices.
August 27, 2016 at 11:58 am #192330
My house is worth half of the total paid for it in 2006, with out all the extras
Heating, air-conditioning , under build , the never ending painting + cleaning each visit.
I would not buy now, Rent if you want to live in Spain, for a good while first, try it.
For investment “I do not think so” my buy to let in London, is doing fine.
Think very had first.
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