Reply To: sorry, mortgages again


Hi Chilly

you cant officially get a 100% mortgage – especially as a non resident. What happens is the bank values a property and will give you 80% of the valuation. So in order to get a 100% mortgage you need to find something that is at least 20% below value – and how easy do you think that is going to be to find.

Also be very careful. There are companies out there who offer “Guaranteed” 100% mortgages. It is nothing short of a scam. What they do is charge you a fee of around 1500 euros which supposedly includes the valuation. You sign a contract with them but the small print (written of course in Spanish) says that the mortgage is subject to usual approvals.

In order to get a mortgage in Spain the banks will now only lend you 40% of your provable monthly income. So if you earn 2000 euros per month you can pay back 800 euros which amounts to about 170,000.

I don’t know many freehold places available that will go for that. So if you loo at the reality of the situation you will need to pay around 500,000 for a half decent place (maybe even more) which is valued at 600,000, which will cost you 2500 per month which means you need to be able to show an income of 6,250 per month.

There’s your reality – now try paying for it with a bar that is competing with probably hundreds of others for the same customers.

Add to this the cost of rates etc and other costs and you can probably add 25% at least to that figure – before you buy a single barrel of beer. So now you have a monthly outgoing of around 3125 Euros per month.

Operating at a 50% margin this means you need to turnover 6250 per month to break even – before you take a wage. At an average 1.50 a beer that means you need to sell 4167 beers per month. Assuming that each customer drinks 4 beers per time that is 1,000 visits per month.

Now you have to go out and find that many people – which will take advertising and marketing – add some more cost to your business and now you need to find an extra 300 people per month to cover this cost.

You will probably have to work 18+ hours per day, have little or no holidays and if you are married it will put a great strain on your marriage.

Being a bar owner is the same as any business – If you don’t have a plan don’t even consider doing it. You should have an idea of what your total outgoings are going to be, what your fixed and variable costs are, how many customers you need to attract to make it worthwhile and then – and only then should you consider the premises and whether this will be able to support your plans.

Bear in mind also that none of the above assumes you will be taking an income out of the business.
People don’t plan to fail – they merely fail to plan.