- This topic has 74 replies, 19 voices, and was last updated 11 years, 6 months ago by
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The general consensus here will probably be …DON’T BUY OFF PLAN ANYWHERE!
There is an absolute glut of properties in Southern Spain In what is currently a buyers market ,why wait AT LEAST two years(If you are VERY lucky) before you get your property?( if you ever do!). Short term investments are a thing of the past now. Long term..who knows?? Buying off -plan is like walking through a minefield, blindfolded. I speak from experience! -
Dont know what your game plan is for buying off plan, but the advice I would allways give whatever market conditions, and wherever you were considering, never buy of plan unless you can comfortably afford to complete and carry on paying bills, mortgage etc. etc. As for all the other off plan issues, there will be plenty of sound advice from other forum members.
Jim
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We have got equity in our UK property, want to buy a property as investment. We had been told we could use the equity for the deposit on the Spanish Off Plan property, and when it was due for completion we could apply for a Spanish Interest Only mortgage based on the value of the completed property and not what the original off plan cost was, this would enable us to pay off the deposit we used from the equity on our UK property, and then have a separate mortgage on the Spanish Property. The company have told us that they have a guaranteed 2 year rental scheme which would fund the Spanish Mortgage monthly payments. We would have 4 weeks use of it ourselves not including July, August, Xmas and New Year. We are not too bothered about using the apartment ourselves, as we are doing it purely for investment and hopefully in about 5 years time it would have increased in value. We would like to know if anybody else has done this, or if we would be better investing in a resale property with the equity in our property, and not an off plan investment.
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hi GK
all depends on the price of the property in question – if it´s cheap and in a good location it more than likely will go up in price, and yes there is a glut of properties in spain, but murcia less so at this moment- not sayong it wont be in the future but then again its all location location. On the costa del sol, theres a huge glut, but the good locations are still selling – albeit more slowly.
ignore everyone telling you not to buy off plan, some bad experiences for some people have made them tell everyone not to bother, when in fact there are probably thousands of people who don´t experience problems…my parents for one.
some questions yo uneed to consider
is the rental needed to cover your payments? if so onlu buy what you can afford yourself.
beware of rental guarantees, mostly are built into price of property.
if you aren´t going to use it much then you could reasonably buy anywhere for investment over a 5 year period as there aren´t many places that won´t increase somewhat in 5 years, all depends on how much you want it to increase – the emerging markets will return more but equally carry more risk.e.g. no bank guarantees etc(although some people will say these don´t do much anyway)i cant think of anything else at the moment but im sure someone else will – good luck
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We have approx £90,000 equity to use from our property, and don’t really want to take another Spanish Mortgage on top of that, so the property we had been looking at for £134,000 off plan is looking more and more not likely to be the one we are going for. Even though the agent insists we would have no problem getting a spanish mortgage (based on our incomes but he did not ask us for proof of income) and the guaranteed rental would pay the mortgage payments. But I have got worrying feeling about it!
We may even consider Bulgaria, as prices are more in our budget. We could just afford the £90,000, and wouldn’t need to apply for another mortgage on top, but would really want to rent it out to fund most of it. We wouldn’t necessarily want an offplan, although we did think that this was a good way of investing.
Anyone bought in Bulgaria?
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We had put a deposit on an off-plan but pulled out when we found it overpriced and given it is buyers market felt it would be more difficult to sell. We went Bucharest and are currently purchasing an apt in Unrii Bld, -as an investment. Bulgaria if you read the threads in other forums and in other articles is not a good investment now as the market supply exceeds demand. Had you bought 2/3 years ago it would have been a good investment.
Stay away from off-plan in Bucarhest – being sold by a lot of med sharks from Spain and the UK – and in some cases the building licenses under Romanian Law are not in place.
This time I did my homework.
If you read all the threads you’ll see that properties in Costa del Sol can be bought at up to 30% less that what they were valued at 2/3 years ago.
Good Luck
Hope that helps.
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for 90k sterling you could probably do Turkey, Bulgaria, even Brasil and a load of other places I bet as well!!
Off plan is a good way in new markets as prices are cheaper, but for example on the Costa del sol, where I am, resale is actually better as you can get more for your money and they are cheaper, plus you know what the build is like and what you are looking at views wise etc etc.
for 90k sterling you could still do Almeria if you really fancy Spain, but my bet would be Turkey, it has a good climate similar to Spain, and as for end users they are looking to introduce mortgages there for Nationals which means lots of people with money looking to buy, plus more capital growth.
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Don’t buy in a country just because its cheap. Its still location location (how many people do you know who goes to these former eastern block ****holes)
Don’t buy off-plan.
Rental agreements aren’t worth the paper they are written on. (the first 2 years is usually added on to the price you pay)
There are problems on every spanish coast with new build.
Don’t believe anything the agents say without checking it out.
Its a buyers market.
Spain is still the best investment long term and also for enjoyment from you investment. Your 90,000 equity as deposit would buy you a decent apartment on the CDS and mortgage interest rates are low. You could be holidaying/renting it before Xmas.Just my opinion but anyone not sure which country they would like to buy into should stay out of the market for a while. 🙂
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Hi GK,
Got to agree with “Spain” that there are still some good buys in off plans. I dont think any advice that says “never buy an offplan” is wrong. However, buying off plan to make a big profit has now passed. If its a property for your own use to appreciate in value over several years, I dont see any problems. The best thing to do is to make sure that when the guaranteed rental period has expired, check you can still afford it. Be careful with “guaranteed rentals” as sometimes this rental is paid to you by the builder/agent even though it wasnt rented, so this cannot be seen as the rental potential of the property for the future. Dont forget that on these big golf developments in Murcia, once they are completed there will be a lot of people trying to rent out their property.
Got to agree with Seana and avoid Romania. My wife is Romanian so I have good knowledge of the market there……. and if this forum thinks Spain is corrupt………………….. 😯
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katy wrote
There are problems on every spanish coast with new build.
but that doesnt mean every development that is new build, which an important point to make….as the old saying goes dont tar everything with the same brush…or something like that.
as you also said you didnt want to spend more than your 90k sterling so using that as a deposit to buy something in spain and taking a mortgage takes you back to your original situation which you didnt want to do.
90k sterling in Spain, will not buy you a lot, and will definately not be a place where LOCATION LOCATION applies – more than likely inland about an hour which for rentals will not be great – no offense to inalnd owners – you will still get capital growth with these and inland seems to be taking off more now as the coasts get more and more crowded.
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I won’t say don’t buy off plan anywhere in Spain or other countries but what I would say is be very very careful.
Although many people do buy successfully equally many have been the subject of major frauds which the media and various Governments turn a blind eye to.
Also because of massive overbuilding many are illegal….and not just in Spain.
To release equity from your property is going to cost and may not justify buying elsewhere at the moment. Particularly if you need to rent it out to cover expenditure. Don’t forget it is taxable income and second homes are assumed ,rightly or wrongly ,to be rented out most of the time.
Guaranteed rentals are always costed into the price because rentals have reached rock bottom due to the massive expansion of developments.Mistrust anyone who gives you the impression that in a few years you will see a good return on your outlay. No-one can ever guarantee that and a property is only worth what another is prepared to pay for it. and at the moment there are many good offers from people,sucked in by unscrupulous agents, desperate to sell
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If you are looking to INVEST £90k for FINANCIAL RETURN, then in my humble opinion do not put all your eggs in one basket, and certainly not a foreign property basket (any foreign basket).
Also, how do you intend to make the financial return? If it is from rentals, then there is no guarantee your will break even, let alone make a profit. You would probably get a better return from the building society, with zero hassle. If it is from capital growth, then you have to consider your exit strategy. Will you be able to sell the place at a profit in future and cover the running costs in the meantime. When all costs and taxes are considered, once again the building society would be a better bet.
It really annoys me when people bang on about how much money they have made from foreign property investments. They have made diddly squat until they sell the thing.
If you want to spend £90k on a holiday property for your own use and enjoyment then that is totally different game, and the normal financial investment guidelines are less relevant.
Regards
Kevin -
what are the interest rates in a building society out of interest?
i know someone who bought for 165k and sold in the same week for 225k, even taking out taxes and capital gains and all the rest of it, which building society would do that? pray tell , i will be getting a flight next week to put my money there.
i know that is a rare case, but thats what investment NORMALLy is…a risk to make lots of money fast.
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Hi GK
Firstly I cannot believe that you cannot find a decent resale property in Murcia for 90,000 sterling – unless of curse you want frontline. I did a quick search and 114 of those returned were less than your budget of 125,000 euros or 90,000 pounds. Therefore why on earth would you want to buy off plan at more than this when you can get something cheaper that is already there. Murcia is not the Costa Del Sol nor the Costa Blanca and is not that expensive.
As for rentals – do not rely on rentals to cover your mortgage – think of it as a bonus. If you paid 90,000 pounds you would have a reasonable property that you could maybe rent out for 8 weeks of the year.
A Much better bet for what you want, is to buy in the UK. Why?
1. You arent considering a holiday home – therefore why buy abroad
2. The UK rental market is much safer than here in SPain
3. Because in the UK you can buy repossessed properties at auction for half of what you are looking to pay and rent them out fairly easily providing you do your homework on the location
4. You will be able to rent out at more than the cost of the mortgage
5. There are companies that specialise in finding distressed properties in excellent locations that give returns of at least 135% of the mortgage payments and at generally 20-30% below market value.
6. UK property taxes for purchase and sale are much less than here in Spain – therefore you dont need to wait 3 years to recover your moneyTherefore you would have ticked all your boxes and would not need to wait for future equity (one bit of advice when buying for investment – what happens if you need to sell quickly – you will have to drop the price to generate a sale – would you lose money by doing so in the development you are thinking of)
So forget buying an off plan in Spain and go look for something in the UK – it wont cost you anywhere near as much to visit it, you wont have to worry about completion dates, and you will already be able to see what you are buying and the law is much better for landlords on assured tnancy agreements
Unless you get a great location in Spain (and you will pay a lot of money for that) then your rental income will be negligible and you will compete with many people. It is possible to get good rentals – but in two years time once you are established and have done a lot of work promoting your property – YOU WILL NOT just buy a place and rent it out for 11 months of the year.
However if you are going to use it as a holiday home then different story – climate, food lifestyle – everything that makes Spain a fab place is then applicable and rentals are a bonus.
Good luck and best wishes
Vince
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Hmmm good post Spain
The current rates in a UK Building Society are about 5% if you shop around. Take 20% tax off that then it comes down to 4%, take off inflation then you are looking at around a 1% return on your investment. But at least it is rock solid as an investment with virtually zero risk with zero hassle.
Investment is all about balance and a an absolute 100% focus on facts and not emotion. Balance in terms of if you have a sum to invest, then spread the risk. Put some in the Building Society, put some in shares and put some in property (including all the devious derivatives such as pensions, hedge funds etc.). All I am really saying is spread the risk.
Also, I have to agree with Vince. If you want to make money from property, then the only place to do it is the in the UK with low risk. Yes you can make a bundle with a long shot punt on foreign property, but you can lose a bundle as well. The UK has a lot going for it in terms of property investment including a balanced legal system, a well established competitive mortgage market that understands and encourages leverage and a well established long term rental market that places certain obligations on the tennant to at least keep the place clean and tidy at their expense.
There will always be exceptions that prove the rule. But if I had a £1,000,000 to invest, then some speculative punt with £90,000 would be ok, but if all I had was £90,000, then to gamble it all on a speculative foreign off plan development is sheer folly if all you are looking for is a financial return.
Kevin
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@spain wrote:
hi GK
ignore everyone telling you not to buy off plan, some bad experiences for some people have made them tell everyone not to bother, when in fact there are probably thousands of people who don´t experience problems…my parents for one.
How arrogant is that!!!!!!!!! 👿
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@spain wrote:
i know someone who bought for 165k and sold in the same week for 225k
Sounds to me either the seller got screwed or the buyer got conned…..or both?
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arrogance Claire?? Why would that be? because there are 2 sides to the coin and I point it out? That´s not arrogance surely? You tell everyone not to buy off plan, I say just consider it that´s all.
Hi Kevin, I wasn´t being facetious and I´m glad you didn´t take it as such 😀
Charlie, you´re right, someone probably did get screwed, but that is the law of investment in property right? You get it for the cheapest orice and sell it for as much as you can…I´m sure most poeple would swop places with him for a profit like that, not everyone would, but most I think would.
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Hi Spain
I agree with you about Law of property. In the UK it is perfectly acceptable for a person or company to take an option on a property – be it a house plot of land etc, and knock the owner down to a low price then resell this option onto someone else at a higher price without doing anything – they call it “flipping”. Yet it appears to be morally unjust in Spain.
I am aware that a lot of agents operate like this and it is morally wrong for one simple reason – they take absolutely no risk and do it behind the buyers and sellers back – it is normally a ruse to hide the amount of commission they are charging. However, the practise itself is perfectly legal and perfectly acceptable in the whole of the modernised first world – USA, UK, etc etc.
Professional developers will see a property’s potential, offer the owner a price with conditions and if accepted will then ask for outline planning permission to develop into a block of flats. If they get this permission they then sell it onto a builder. The owner gets a sale, the developer makes a profit without actually investing his money and the builder gets a plot of land he wouldn’t otherwise know about.
Is buying off plan so heinous. No I don’t believe it is. But it depends on your reasons for doing so and obviously whether you have the correct guarantees in place etc. However a lot of young Spanish couples buy off plan because they are planning to marry (it normally takes a few years planning) so by the time they are married their house will be ready (in principle)
If you are buying off plan for investment – is it possible to make money – Yes providing you buy correctly and think of an exit plan. ALWAYS if you are investing in property whether off plan or not one thought should be in your head – what happens if I need to sell tomorrow? Can you do so without losing any money (and forget agents hype – do your own homework)
Professional investors buy off plan all the time – but they research their purchases well beforehand. They figure how much they will pay, how much the potential sale value – AT TODAY’S Value, is, and how much they could sell it for if they needed to sell quickly. If their number stack up they buy – if they don’t – they walk away.
If you use this philosophy when investing in property (whether that is in Spain UK, USA or anywhere else, and whether off plan, buy to let, refurbish etc) then you wont go far wrong.
The problem we are seeing now with a glut of resale new builds is that many amateur investors bought – believing the hype – but without doing their homework. If the agent over hyped the “Deal of the Century” then obviously the agent has a responsibility to his/her client. However the client also has the responsibility to do their own homework. When you make a purchase you are parting with your money and you are responsible ultimately for what happens to that money.
So why put your blind faith in someone you have probably just met.
It still happens. I had a client this week who wants a house built. I introduced him to a builder who I know will do a very good job as I use him for doing my own reforms and for client reforms.
Later that evening he said he was very comfortable with the days proceedings. However I advised him to get a solicitor to draw up contracts. I know the builder in question and I know he will not rip the guy off., However he doesn’t know me nor does he know the builder. We have spoken on the phone many times and exchanged emails many times over a period of a year – but he still doesn’t know me. But he was willing to trust someone he had only just met with the best part of 120,000 euros. That is worrying, (as it happens He took my suggestion of taking on a solicitor and only paying in stages, and only when proof of work has been done etc)
So there are a number of points and sorry for rambling.
1. That “Fliiping” and buying for investment is perfectly legitimate providing all parties know what is going on
2. That investing in property (off plan or otherwise) is a sound investment providing you do your home work
3. That you should never trust anyone with YOUR money – no matter how well you think you know them
4. Documentation beats conversation – get everything written down.If you follow some simple advice when buying for investment then you will at least cover your bases and hopefully things will go smoothly. But if not you at least should have a planned exit route.
Two final points –
1. The art of selling a property is in the buying – every Euro or every pound that you pay now is one less that you will have when you come to sell the property.
2. Have an exit strategy – something a lot of investors do seem to forget is what happens if they need to sell quickly – ie before completion for example – will I be able to sell quickly and still make a profit. If the answer is no – don’t go into it. And I am talking about at today’s market – don’t bet on tomorrows market because we don’t know what will happen then.Best wishes
Vince
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Article in Times re investing overseas
http://www.timesonline.co.uk/article/0,,14052-2354978,00.html
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@gk wrote:
We have got equity in our UK property, want to buy a property as investment. We had been told we could use the equity for the deposit on the Spanish Off Plan property, and when it was due for completion we could apply for a Spanish Interest Only mortgage based on the value of the completed property and not what the original off plan cost was, this would enable us to pay off the deposit we used from the equity on our UK property, and then have a separate mortgage on the Spanish Property.
And what happens if the valuation comes out low?
The company have told us that they have a guaranteed 2 year rental scheme which would fund the Spanish Mortgage monthly payments. We would have 4 weeks use of it ourselves not including July, August, Xmas and New Year.
DANGER WILL ROBINSON, DANGER!!!!
We are not too bothered about using the apartment ourselves, as we are doing it purely for investment and hopefully in about 5 years time it would have increased in value. We would like to know if anybody else has done this, or if we would be better investing in a resale property with the equity in our property, and not an off plan investment.
Find where you want to buy and buy there. Chances are the popular spots have been built on already, so it will be a resale. From what i’ve seen on the net most off-plans in murcia appear to be in the middle of nowhere (polaris world springs to mind). So i don’t see them increasing much in value….
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Hi GK
In all honesty I think you would be better off holding off buying a property in Spain. The main reasons you would buy a property abroad would be
1. To get a holiday home – you already stated that you are not going to use it
2. For buy to let. See below
3. Off plan as an investment – see below
4. As a permanent living home. I get the impression this is also not the caseBuy to let
I dont know Murcia very well but I did a quick search on a few rental sites – the average price for Mar Menor ( a popular area with tourists I believe) and Polaris world – is about 250-400 Pounds per week. These are beach front apartments 2 bed 2 bath or villas on the golf course at Polaris world. Having checked a few of them out – the most any had booked was four weeks for next year – granted the holiday boooking season isnt upon us yet but it is indicative.So lets look at some figures. Assume you buy a property close to beach front for 140,000 Euros. (probably not possible but lets hypothesise) Lets assume you got a mortgage of 100,000
Total costs of purchase 140,000
Taxes 16,000 inc mortgage commission
Furniture – 4,000
Total costs 160,000Mortgage costs – 500 per month – 6000 per year.
Opportunity cost on 60,000 (ie the amount you would not get from the bank in interest) @5% per annum – 3,000
Community charges – 600 per year
Electricity/Water/Rates etc 600 per year
Advertising 1000 per yearTotal annual costs 12,200 per year.
Total costs over 3 year period 36,600
Now assume you are lucky and get 20 weeks rental per year for 3 years at an average of 350 per week (and you would be very lucky to get 20 weeks without aggresive advertising)
Annual income 7,000 x 3 years – 21,000
Assume that the property has risen 25% in 3 years (in todays market that may be optimistic but you never know)
Selling price of 175,000
Less 3% agents selling commission – 6,090 (inc IVA)
Less retention of 3% (assuming you arent going to pay CGT) 5,750Net money to you – 163160
So a breakdown of profit and loss
Total sales costs – 160,000
Net sales price – 163,160
Balance of profit on sale 3,160Total costs of ownership over 3 years 36,600
Total income over 3 years 21,000Net loss 15,600
Total profit/loss – 3,160 – 15,600 = 12,440
So in short unless you are willing to wait for a long time – you will lose money – five years would be about break even if you are prepared to be aggresive. That is a lot of assumptions – many being on the positive side. My advice – stick to the UK market for buy to let. It is more mature, easier to find tenants and less taxing than Spain and easier to get repossessions as there are lots of auctions, repossessions available and cheaper property in good areas (liek University towns) that can be easily rented.
Unless you can find a property for less than 80,000 that you can rent out for these rates (unlikely) dont bother – it is not worth yur while and the numbers do not stack up.
What about buying off plan.
Unless you have a ot of time to spend searching for the ideal off plan and ensuring it is real value for money then forget it. You will not find it. Most off plans in Spain are probably about 20-30% over priced, are sold to “Investors” and when the time comes to sell there is a glut of them on the market. You will most likely lose money onit. UNLESS youhave the time to spend over here full time and can do the necessary research. Or unless you want the place for a holiday home and will hold onto it for at least five years then dont waste your timeor money.
The UK market is a much better bet for what you want to achieve. Your money is safer, you are more local to the property, and you pay less taxes (surprisingly enough). Dont dabble with investments off plan – and Murcia is being touted as “The in place to be” What that means is they will build more and more concrete jungles miles from anywhere that no-one wants.
Sorry to pour water on your ardour but I dont like to see people make investment choices basedon few facts and lots of hearsay. Please do yourself a favour and only buy here if you want a holiday home or a potential permanent home – then it is a wise decision because Spain is the place to be.
Good luck and best wishes
Vince
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vbtudor, perhaps your comments may tint the rose colour glasses which many seem to wear when thinking of buying abrod, and if it was looked into further, many additional expenses could be incurred, which would drastically affect the “investment.
“20 weeks rental per year for 3 years at an average of 350 per week”
Don’t think that many properties of such value would return 350 per week for 20 weeks (sliding scale should apply)“Furniture – 4,000”
Surely, if a property were to be rented out 20 weeks each year for 3 years, the furniture could be written off, therefore, a cost of 4,000 + inflation should be added to costs.
The same can be said for decoration, with possibly a touch and repair project for decoration each year.Cost of TV (many people want the Brit channels)?
Insurance?
General wear and tear repair works?
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@vbtudor wrote:
In all honesty I think you would be better off holding off buying a property in Spain…..
Unless you are willing to wait for a long time – you will lose money – five years would be about break even if you are prepared to be aggresive….
My advice – stick to the UK market for buy to let…..
The UK market is a much better bet for what you want to achieve…..
Dont dabble with investments off plan…..
Please do yourself a favour and only buy here if you want a holiday home or a potential permanent home….
Vince
For someone wanting purely an investment, absolutely agree Vince – for all the very throrough reasons you gave in your post.
The Spanish market is very different from years ago and at the moment is not the ‘sure thing’ it used to be.
Would just like to add that if you are using your home as collateral for this investment, be careful not to overstretch yourself financially. -
Hi MG
as I said in my post – I was making assumptions in a positive sense. when I said 20 weeks per year I also said it is unlikely – but lets take the best case scenario – even with the best case scenario you wont make money so if you cant make in the best case scenario then the actualy real life case is worse.
I also stated you would have to be agressive marketing your property. In all likelihood most poeple do not agressibely market their property so again 20 weeks is unlikely.
My point was to illustrate that even if you took some basic facts and ys looked through rose coloured spectacles, and use them as a basis buying to let in Spain does not work well. It was not (so I thought) to give people false hope of being millionaires through property rentals.
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vbtudor, unfortunately whatever good advice, facts, statistics you can come up with, there are always the fools who ignore and believe what they are told by the agents and developers, then when it ends in tears, expect people to feel sorry for them.
A a feasibilty on the buy to let possibility in the Canaries, where although prices are higher than on much of mainland, they have the advantage of a much better year round climate, therefore, are more than likely to have a higher occupancy rate.
The bottom line was than for a property costing £185,000
Taking into consideration Insurance, Maintenance, Utilities, TV, Decoration, etc., etc., it woul result in the need to rent 36 weeks per year at a weekly rent of £400 to compensate for the loss of return on the capital sum invested.
If people were to borrow to fund. Impossible to get a return and must rely purely on capital growth, which at the current rate, you will be signing your life and future luxuries away.Using the prepared figures and the £160,000 price and rental of £300 per week, this adjusts to 42 weeks letting required, and that is when it is funded by yourself.
For a property costing £160,000 with £120,000 loan and £20,000 cash deposite. Deduct all expenses as previously mentioned and using the same calculations, to break even at £300 per week, you will need to let 62.54 weeks per year.
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This is the example and opportunity we had been given, but we have now taken off our “rose tinted glasses!”
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Me thinks it a wise decision.
Others may not.
You say “£92,000 equity in our uk property with a mortgage of £111,000”, so you are not prepared to risk your own money, or don’t have the cash to pay the deposit.
Classic case. If things go wrong on the wonderful holiday prop., you could lose all, including your house in UK.
It is a good ploy the “2 years guaranteed rentsl”. If they were selling that well, why would they have to offer such an incentive.
Bet you would not have control of who rents. Nice, yeah? 6 building site workers renting for 2 years. No doubt the developer would put all back like new after the 2 years?
Also like the “(assuming 20%gorth) “.
These developers, agents, loan advisors are such a helpful and lot, surprised they aren’t all multi-millionaires and retired.
No, it is a case of you have the debt, to hell with if you can repay in future, just let me have my fees now. -
Strangely when you look at their rentals in Murcia – they dont have any.
Also some very interesting facts about their figures
Firstly the cost of the example mortgage for £50,000 is £300 per month. Yer the cost for an additional £65,000 is only £265 per month. These figures dont stack up. at 5% the interest only cost would be £208 per month, with capital repayment it would be closer to £375. £265 is about right for interest only payments on £63,000. THerefore on an interest only mortgage on 50,000 they are assuing an interest rate of 7.2% – is this the interest rate in UK at present?
Secondly. The purchase price is 195,000. You pay 40% deposit (which is 78,000) plus IVA of 7% on this amount (a further 5,460) making total of 83,460. This makes legal fees a whopping 8,000 euros or so – even on the whole amount that is 4%
195,000 for a 2 bed apartment in Murcia – is way over the top. They are stating 20% growth per annum (based on what when all indicators are showing a slow down to a 6-10% rise per annum and evn in some places a fall)
So they reckon that a property here would be worth 300,000 in 2 years at 20% per annum – hang 20% compnd growth on 195,000 equates to 280,000. Also the property price seems about 30% overpriced for the area as it is.
Based on this it would take you years to get to a point where you could sell the place for what you paid for it
They state you will be able to claim back your IVA – I woudl like to know how they have incovered this little loophole – unless they are setting this up as a business of course in which case you are straying into very dodgy waters. It costs money to run an SL company (accountants fees, tax returns, profit and loss accounts etc etc)
From what I can see they have loaded up the price to cover the rental guarantee – by at least 50,000 Euros. Personally I would rather pay less and take a chance.
The 4% rental guarantee will not cover your mortgae costs once the 2 years is over. Why?
Because it is not easy to get an interest only mortgage, so you will be paying capital also. Also Euribor is now 67% higher now than it was last year – and it seems to be destined to rise a little further before stabilising.
In 2 years time the property might not be worth even what you pay for it let alone cover the mortgage you have on it.
WHo willyou sell it to?
Golfers – no they dont part=iuclarly like to be on a golf course – nearby maybe but on it no
Beach bums – nope too far away
Brits – not at that price
Spanish – the only Spanish who would buy on a golf course are from the big cities – but they will generally only buy within 400M of the beach – not inland which this development effectively is.
Locals – doubt if they could afford it (if there are any towns nearby which I doubt)You are right to think twice about ths development – it offers you nothing. If you want to buy something in Span and your heart is really set on it then go look for something that is already built, something that even has rental income already established and you are building on something (dont underestimate the financial impact of returning visitors) and over all something that YOU yourself would spend a holiday there. If you wouldnt why would you expect anyone else to?
Good luck in your search and I hope you find what you are after. If you look hard enough you will find something within your budget but dont take on a UK mortgage and a Spanish mortgage – you will be stretching yourself too far. Life is for enjoying now – live a little and invest wisely, but in the Spanish market there is very little real bargain pportunities exist. Wait a while and you might just find some.
Vince
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I had strange feeling of a “ghost town” when looking on the development, even though the first phase of apartments had been finished, there were villas with unlandscaped gardens, when I pointed this out to the agent, he said that the owner was probably waiting for he builder to finish the whole complex before he did it!!
This was the point where alarm bells rang in my head! I remember thinking the finished phase wasn’t particularly attractive and didn’t get a good feel about the place.
They kept going on about how we wouldn’t get a better investment and we couldn’t lose. I even expressed my concerns about having to borrow the money when the time came to complete, and they said you will have no problem! Not once did they ask for proof of income to check if we could actually afford to do it. All the time a niggling voice in my head was saying this is far too much money to risk.
I am so glad I found this forum, as my husband was being swayed to doing it. The more this agent tried to convince my husband that this was a fantastic opportunity, the more I tried to convince my husband it wasn’t! At one point the agent said that he had another property to sell on another development which was a lot lot cheaper, but there were no bank guarantees with the payments, I actually said to him we would be absolutely mad to buy with no bank guarantees!
I then told him I had been doing some research on the internet and it wasn’t a good investment, he tried to say oh you shouldn’t take everything as gospel from the internet! I also said that we would never have used the lawyers recommended by the agent, and he tried to make me sound as though I was being petty, and told my husband he would rather let the agents legal team do all the sorting out as they know the area!!!!
We may consider buying a re-sale as we could afford the extra payments on the mortgage, but would not borrow more than our UK property is worth. It would have to be in a popular location though, so it may be hard for us to find one on our budget. But we have got all the time in the world and are in no hurry! We live in a house that is far too big for us, so if the worse came to the worst we could downsize as we have been thinking of doing it anyway!
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gk, good on you and I hope the advice which vince gave was of use. Pity more people don’t listen to what is basic commonsense and looking after your own money and interest, and not letting a dumbo agent do it for you. OK, maybe a slant on agents and accept that there are good and bad, but:
“he said that the owner was probably waiting for he builder to finish the whole complex before he did it!!” yes and he would know what all owners are thinking. Agents are clever people.
“I didn’t want my bad feelings to be known to the agents as they were taking us back to the hotel in their car” yes, nice ploy isn’t it.
“we couldn’t lose.” yes, he probably owns 10 oor 20, as you cannot lose.
“I even expressed my concerns about having to borrow the money when the time came to complete, and they said you will have no problem! Not once did they ask for proof of income to check if we could actually afford to do it.” why should he, most of them would have difficulty counting and certainly wouldn’t know what a salary was.
“At one point the agent said that he had property to sell on another development which was a lot lot cheaper” possibly not as high a commission, so didn’t push it in the first place.
“oh you shouldn’t take everything as gospel from the internet!” so take his advice and look up the development and DON’T believe it, he told you not to.
Obviously, we will not be going back out there to look at off plan property!
“But we have got all the time in the world” that it something that many owners haven’t, with the market like it is, as can be said for some developers. You are the lucky ones. Wait a while for their mis-fortunes, then pounce.
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Hi GK
this may sound strange coming from me as I am an agent – but I am glad you didnt buy in this instance. Nothing seemed to stack up and this is typical pressure tactics you have gone through – thankfully you were able to resisit the agents constant badgering – but some people can’t. And it is for this reason I believe there should be a colling off period – even if you put a reservation down.
However in todays climate you shouldnt really need a reservation deposit because there are an abundance of properties available. They are genrally used to get committment from a prospective client – the thought being it is easy to make you part with 6,000 than 20,000 – because you can pay by credit card. And once you have paid it you are already committed so less likely to back out.
I play poker and there is aphrase which sums this up perfectly – it is called POT COMMITTED. Which means you bet an amount, someone over bets you (or raises you) and you are pot committed because the odds you get for going forward are better than pulling out. It is the same.
So some great points and using the poker analogy again you did what is called a brilliant lay down – ie you knew you were beaten so decided not to go ahead. Takes a lot of bottle surprisingly to do so so be proud. Now you know next time you can go into it with open eyes knowing what to look out for – and do your sums and your research.
Now you have tiome on your hands take the time. Have a look at alternatives in Spain, in the UK in other countries if you so desire – but make sure that whatever you bet your money on it is good for you – dont worry about other people – its your money you have a duty to protect it.
Good luck in your quest – seek and you will find
Vince
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spain wrote:hi GK
ignore everyone telling you not to buy off plan, some bad experiences for some people have made them tell everyone not to bother, when in fact there are probably thousands of people who don´t experience problems…my parents for one.
BIG SIGH SPAIN!!!!!!! 🙄
Just for the record Spain, I hardly think you are in a position to give advice about investments given your earlier postings! Or have you won the lottery since then?
http://spanishpropertyinsight.com/forums/viewtopic.php?p=4098&highlight=#4098
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ha ha ha
does that mean that if I cannot afford something that I cannot have an opinion on it, come on please, how pathetic is that. – that has to be the most absurd thing I have ever heard.
and by the way , I still don´t see how what I wrote there
“ignore everyone telling you not to buy off plan, some bad experiences for some people have made them tell everyone not to bother, when in fact there are probably thousands of people who don´t experience problems…my parents for one. “in anyway says don´t buy a resale or that off plan is better.
if you are going to quote people, please do it correctly and back up your statements.
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It is correct & I HAVE backed it up!! You wrote you had no money, wanted to buy a VPO with 100% mortgage!! I wouldn’t take financial advice from you or anyone else without the proper qualifications…and I think it is irresponsible for you to give it whilst rubbishing other peoples first hand experience of buying off plan.
I give advice ONLY on what my personal experiences are in buying off plan in Spain. I can assure you….I am well qualified in that!!! 🙂
End of story!
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thats twice in a row!!
where did I give financial advice, please do tell?
what you have quoted me saying has no bearing on your statement – so how does that back it up?
by the way do you have qualifications in financial or property sales? as you seem to give a lot of advice on here also – perssonal experience = qualified does it?
well as i already have a house, does that make me qualified also?
please wake up claire, and make some statements that don´t contradict each other. Is this forum not for people to talk to each other and give advice – it doesn´t have to be taken you know. And are you telling me that you have never once in your life given advice on something that you have never owned or done, cos if you have, you must be a saint.
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Guys – come on.
Not only are we straying off topic but its deteriorating into a flame war – one of the things that makes this forum so valuable is the fact that every ones opinions are listened to and we dont normally degenerate into flame wars and personal slants. And likewise we are all able to make reasoned decisions (I would hope) based on a full picture not just on one comment.
Can I suggest that we stop the flame war as it doesnt help anyone here
Best of luck to both of you
Vince
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I have been reading this strand with increasing concern, since we are considering buying in Spain off plan. We are about 5 years off retirement. We want a property for investment, and would need to rent it out in summer, but would also like to use it ourselves for a few weeks out of the main season when it is cooler. We would be quite happy to hold on to it for 5 years or more.
We have been told that if we reside in Spain for 6 months we would not have to pay capital gains tax on either that property or any future property we bought. We have also been told that inheritance tax is less there (we have yet to check out these aspects since we are trying to research property prices)., which would be an advantage since we have 2 adult “offspring”.
We are about to go on an inspection trip to look at an expensive 2 bed apartment on a marina, with a golf course behind, and a beach and nature reserve close by, and have put a reservation fee down on an apartment there. How do I go about checking out whether the property is overpriced? The build size seems small, but it has large terraces and a solarium. How do I factor this in when I look at other properties?
Does all the good advice I have been reading about being wary of off plan apply to people in our position who are prepared to hang on to the property? -
I wouldn’t buy off-plan even if all the developers were honest and excellent builders. I think 2 or 3 years is too long a time to wait for a dream, especially when they are holding 30% of your money. If you want new its possible to go to any development and buy a new unit off the shelf. Spain you sound as if you have started working as an agent 😉
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Hi there HPM
Firstly as I mentioned previously in this thread – buying off plan is not a sound investment if all you are looking for is to buy for investment, either to let or to make capital gains.
However if you are looking at holding on to it then that is possibly another matter. But the advice given previously still stands that you should check (before nromally) the value of prices. as a very simple check have a look around at what is selling and at what price. Check also the Sq Metreage of the properties being sold and see how this compares with yours.
Developers in Spain tend to give a Higher Sq Metreage than the amount actually used for living in – I have seen 50M apartments stated as 70M. This is not the developer conning you but they allow a certain amount of the communal areas alocated to your property – so your 70M may include 10% of the passageways, 20% of the entrance and a percentage of the stairways.
So once you get a value per Sq M which is an average – then you can decide whether yours is way over price or not. Compare against resales in the area not just new builds and compare against sold prices not sales prices.
Also you will need to add or subtract for such things as elevators, views, proximity to beach/Marina, quality of developement.
However a lot of large developments are ghost towns so the chances of selling even after five years may be remote or at least difficult. If you are paying over the odds it is never a good idea no matter what the market is doing.
For rentals also see many threads including this one about the potential returns. If you are VERY lucky, in your first year you may get 8 weeks rentals. After perhaps 3 years you may get 20 weeks if you are really agressive with your marketing. But there will obviously be costs associated with this.
So take a long hard look and decide if what you are buying you can support both the mortgage and the community fees for the next five years – consider any rentals a bonus not a given and you will not go far wrong.
Best wishes
Vince
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Hi Vince,
couldnñt agree more, however I think Claire has a personal vendetta against me at the moment and is throwing up any oold thing to try slant me. I cant believe she has actually searched all my posts and had a go at me for coming onto this forum and asking a question re VPO in Spain, I mean is that just totally stupid????
As I have said before and am now going to repeat as it´s even more obvious, talk about off putters, having your own questions thrwon back at you, why would anyone use this forum, its claires way or the highway!
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Interpret “residing in Spain for 6 months” to actually mean tax resident =Your main country of domicile.
It is my understanding that one has a CGT advantage IF you have Spanish residency ,are over 65 . have the former and have lived in your property for 3 years. So believe this extends only to main residence.
If incorrect someone will correct me.Inheritance tax.
Some regions in Spain allow the spouse to inherit automatically ,as per UK, most don’t. So certainly No advantage there and as UK assets are added into the equation of tax to be paid by inheritors (certainly NOT in England) this is definitely a big minus if your adult offspring own property anywhere.Personally would be very very wary of any agent telling me these are facts.
We have all fallen foul of agents “speak”.
If they don’t put it in writing never believe them and if they do still check it out.
There is a book by David Searle, always a year out of date, but which will give you some idea of the tax implications etc which will then allow you to research more thoroughly.From what you have written have to agree that looking for a legal property/development already completed with “guaranteed ” landscaping etc in place would probably be more advantageous than buying off plan. Then you can check out rental potential. If there is one.
Reading some of the horror stories not only might you well be retired long before it’s completed but it might never happen.Developers and some other vendors are getting very greedy. It’s all about supply and demand. Well ,regardless of what the media state, Spain is oversupplied and demand is falling.
Correctly priced property is for sale but not off plan ones.
Out of interest may we know where and with whom you are considering purchasing. -
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I wouldn’t listen too carefully to tax advice from an estate agent; and I wouldn’t buy a house from a tax advisor.
On the question of buying off-plan, or not, I suggest you take a piece of paper and list on one side all the advantages of buying off-plan and on the other side all the risks and disadvantages.
I believe one column will end up much longer than the other.
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Hi Melosine,
We’re looking at Porto Fino. The development seems to tick lots of boxes in that it is virtually on the marina, the golf course is immediately behind and the beaches and nature reserve are a short walk away., and we should have good views. I’m having difficulty in finding similar developments with which to compare it in the locality. Resale properties in Benaldamena cost much more than this now – but is that a proper comparison?
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Hang on. I think we are all getting a bit carried away here.
Buying off-plan is an excellent investment opportunity if done at the right time. I’ve done it, my clients have done it and it works fine. One of the key factors is when you are buying. For all those who bought after 2003-2004 they will most likely make a loss. For all those who bought before then they have most likely made a very good investment.
I find it a dreadful idea buying off-plan now but only because for the next 4-5 years it will be a buyer’s market and it is a very bad investment.
I disagree with all those who recommend to buy off-plan now in Spain as well as with all those how recommend never to buy off-plan in Spain. In my humble opinion I think both are wrong. The former due to their vested interests (commissions) and the latter due to their own bad experience purchasing property.
It’s like everything in life, if done properly it works fine. I’ve posted other times that only 1 in 10 clients find some kind of problem. And only one in a 100 or so a more serious one (such as property being slightly smaller than agreed, the projected swimming pool has been eliminated etc…).
Obviously I reject beforehand any developments that I don’t like for legal reasons (i.e. no building license, the plot is not in the name of the developer, it’s rustic land, it’s a green area etc…).
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Well I’m sorry if I anger anyone. I like Claire and I know what she has been through but you just cannot generalise and say that all off-plan is wrong and flawed per se. I work everyday on behalf of my foreign clients and I can see how much money they have made buying and selling over the years. It is no secret prices of property in Spain have tripled or even more within these last ten years.
Obviously even if you bought in the year 1998 and happened to use a bad lawyer (i.e. not independant) you would have run into serious problems if the development had any planning issues. That is what happened to Claire, more or less. I have always defended the vast majority of lawyers are honest and hard working. We lawyers know very well which lawyers and law firms are in bed with developers.
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@Drakan wrote:
I find it a dreadful idea buying off-plan now but only because for the next 4-5 years it will be a buyer’s market and it is a very bad investment.
I disagree with all those who recommend to buy off-plan now in Spain as well as with all those how recommend never to buy off-plan in Spain.
Drakan – I think people like Claire, Goodstich and myself have never actually intimated never ever (including years down the line) buy off-plans in Spain.
We recommend not to buy off-plans to people coming on the forum seeking advice because they are thinking of buying now.I usually add my little end bit “….in today’s current market” just to make my posts clear.
I certainly think the figures just don’t stack up any more at today’s prices on some of these developments, especially with Spain heading for a levelling off and possible/probable downturn.
And that view is aside from all the problems of legalities of building licences/ownership of land etc. going on.Your statistics of only having one problem out of a hundred are fantastic – just shows what a good lawyer who does the proper searches can achieve 😉
Spain – when you make posts like yours above, you are not showing yourself in a very good (or mature) light.
You seem more interested in trying to score points on this forum rather than to try and give informed, considered advice. -
@spain wrote:
Drakan
you don´t know how much you have just made me smile 😀
And which bit made you smile and so happy, Spain?
That Claire went through a 3 year nightmare because she had a corrupt lawyer and REA? -
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And by the way Barbara, I forgot to mention, I was trying to give advice, and have been told that I shouldn´t for not having sufficient experience – and that is exactly why this thread has turned into a slanging match.
Maybe Mark should post rules to that effect, no experience = no posts, Claire would be happy then.
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At the end of the day the decision is yours. And yours alone.
Just keep in mind that an artistic impression is just that. Reality is sometimes very different and the view you might be buying now cannot be guaranteed. It is not unknown for an extra couple of blocks to be built.
Seems to me most new builds exceed their contract by some considerable time,particularly if there is a lot of landscaping or golf course etc .and you could be living on a building site for many years .
But then this is why you are being “offered” a good deal !!As Drakan states they can be good investments. Heed his advice about an independent lawyer who will check out the legalities before proceeding further.
If everything is legal then apart from the time scale there is no reason to assume everything will not be okay.Call me old fashioned but an investment is not always financial, although no-one wants negative equity, it is about liking what you have bought , in a place you want to live and being happy.
If one day you can sell for a profit,or even rent it out meantime…that’s a bonus.My main concern is that, in order to make a sale, you appear to have been told fabricated stories re tax issues ,just wonder what else they are saying, and so suggest you proceed with caution .
What is said verbally is impossible to prove in a court of law .From a personal experience everyone I know is happy having bought in Spain , none off plan, and admit that my knowledge is limited to the numerous postings on message boards and local news reports (re illegal builds) about those who are not.
It would be nice to read a success story .
Whatever you decide I wish you all the best. -
@Drakan wrote:
I find it a dreadful idea buying off-plan now but only because for the next 4-5 years it will be a buyer’s market and it is a very bad investment.
I disagree with all those who recommend to buy off-plan now in Spain
“then a well respected forum follower comes on here and writes what I have been saying” ❓ ❓ …..
Is there an opticians in Pueto Banus?
Drakan is not a ‘forum follower’, he is a lawyer who only comes on this forum to contribute sound legal advice to those who need it.
Not to just have a ‘lad’s laugh’. -
so is not coming on to contribute following what goes on first before posting?
anyway, don´t nitpick about what he might or might not bem he has essentially repeated what I have been saying, and you obviously don´t like it.
to quote
“Well I’m sorry if I anger anyone. I like Claire and I know what she has been through but you just cannot generalise and say that all off-plan is wrong and flawed per se”This is only what I said at the beginning, that you cannot totally discount it.
how come it is easier to swallow now that a lawyer says it?
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Hi All, it’s been a long time since I last posted. Just an update on this post. We never bought a property abroad. We decided to buy a flat here in the UK in our own town. It’s been rented out constantly for the last 5 years. Because of UK property slump the flat has gone down in value so if we sold now we wouldn’t make a profit, but don’t intend to sell yet anyway.
What brought me back here, is after hearing recent news this week about the off plan in Murcia we first looked at as an investment. Apparently a lot of the apartments were sold off plan, but surprise surprise, they were never finished off and a lot of people have lost their money. So glad I found this forum.
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Hi GK,
Good to hear from you again after so long 😀
It’s a very good think you didn’t invest at Mosa Trajectum when you were looking at it back in 2006, when the Spanish property boom was in its blow-out phase. Last thing I heard that place was falling apart.
And I’m happy to know that this forum helped you to avoid a massive headache 8)
It’s fascinating reading back over these old threads. The boom was in full swing back in 2006 but in this forum the talk was all about the impending crash. If only we had all shorted the shares of Spanish quoted developers like Astroc, Renta Corporación, Martinsa Fades, Realia & co. we would all be millionaires by now (just to give you an idea Renta Corporación went from something like €35 a share to €0.57 a share before it went bust and trading was suspended).
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@katy wrote:
Don’t buy in a country just because its cheap. Its still location location (how many people do you know who goes to these former eastern block ****holes)
Don’t buy off-plan.
Rental agreements aren’t worth the paper they are written on. (the first 2 years is usually added on to the price you pay)
There are problems on every spanish coast with new build.
Don’t believe anything the agents say without checking it out.
Its a buyers market.
Spain is still the best investment long term and also for enjoyment from you investment. Your 90,000 equity as deposit would buy you a decent apartment on the CDS and mortgage interest rates are low. You could be holidaying/renting it before Xmas.Just my opinion but anyone not sure which country they would like to buy into should stay out of the market for a while. 🙂
Katy has definitely changed her tune over the years 😮
The boom was in full swing back in 2006 but in this forum the talk was all about the impending crash
Always surprising how you still get people who try and encourage people to buy at the height of a boom/bubble. You are getting it now with the London bubble. The greatest property bubble ever seen in the UK, and yet people can’t see the potential risk. All bubbles burst – but hey, maybe London will be the exception?
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Mark, I happened to visit the Mosa complex near San Javier earlier this year because Spanish friends had bought there , at a ” rock bottom” price and was actually more than very impressed with it. So have to disagree with what you had heard about it.
Very well kept.Wide avenues lined with houses mixed in with beautiful landscaped areas . The property I saw was seemingly well built and judging by the number of people to-ing and fro-ing passed the security guarded entrance would think occupancy rate high.
However because of the demise of Mosa the golf course is just bare earth now and totally unplayable.
If there were still any unbuilt properties they certainly were not obvious. -
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