The Spanish Brick is celebrating its 4th Anniversary in September 2014. This pocket guide is a compliment to the property investors and buyers in Madrid and Valencia who have been working with us and also to our followers.

Whereas the last year we launched the 25 TIPS WHEN BUYING A PROPERTY BARGAIN IN SPAIN, this year, this complimentary pocket guide is a more specific topic given the increase of small and medium size investors in Madrid Property and Valencia Property since 2012

Madrid property

Madrid property price evolution since the boom to the crash

INTRODUCTION

This mini guide is about property investment in Madrid and Valencia in 2014. The market will never be as it used, but now and in the future there is and there will be a market to invest whatever is the framework and economic climates.

I represent and coordinate a group of diligent professionals delivering an honest and bespoke service to property investors and finders. This pocket guide discloses some tips that many overseas investors and buyers do not know, but it is still a small fraction of what we know and can do for you.

Working with investors, property finders, accountants, lawyers and financial advisers give us the chance to find the best opportunities and make them work.

Ask to our Spanish Property Investment Consultant for advice and the first Steps When Buying in Madrid and Valencia.

 

THE ELEVEN TIPS

1- THE TRADITIONAL BUY TO LET… recurring income

Buy To Let is probably the best way to step into the market in order to generate recurring income in Spain given that the rental market is rising. Not many Spanish people afford buying so they rent. The problem: there may be a top for rental income and you need to reduce taxation. The advantage: for buy to let there are very suitable properties at the right price.

 

2- BUY TO REFURBISH AND FLIP… great opportunities

This is a very powerful method when the location and the price is right. Buy the cheapest in the best location, furnish and flip. It is working well in this climate. The trap: Buy the wrong one and you will not be able to sell but change your strategy and your plan. As lower prices, as less taxation.

 

3- HOLIDAY LETTINGS… Uncertain

Good option if you are the sort of investor looking for enjoying Spain in holiday breaks. But risky now. It could work but be aware of: 1- Each Spanish region (Comunidades autonomas) can ban holiday rentals in order to protect hotels industry. It is ban in Mallorca. Catalunya and Andalucia policy makers are seriously considering the ban. It may take just months this happen to the Region where you are planning to invest.

 

4- BUY THE CHEAPEST POSSIBLE… DO NOT BE PICKY IF YOU ARE REALLY INVESTING

Avoid buying costs and purchasing tax which are very expensive in Spain. Depending on the region, total buying costs vary from 10% to 12%. That is the reason why making money from property in Spain is a matter of reducing tax in the purchasing process. As lower prices, as less taxation.

 

5-  BUY TO LET… declare you income

Declare the Rental income and deduct as much as possible. Now many things have changed in the Spanish Property market even for renting. “Hiding” your rental income to the tax office is becoming very difficult specially because tenants get a tax back when declaring the rent. If they declare the rent and you do not, you will be cough and get a fine. Then, the best thing that you should do is to declare it also. The taxation on rental income is currently 24.75%. Very high. Nevertheless, in order to maximize your rental you can deduct a number of expenses that can be justified as landlord-property owner expenses to maintain the rentable standard of the property. Additionally, you can deduct the pro-rata mortgage interest rate, Council Tax, Land Registry tax as the most important.

 

6-  BUY TO LET… Bad news for Non-EU Tax Residents.

Non EU tax residents investors have a difficult task if they want to invest BUY TO LET. The problem is that they cannot deduct expenses from the rental income. Then, they must pay 24.75% from the gross rental income. There is a way for them to reduce this: To set  a Limited company that run the properties.

 

7-  LIMITED COMPANY that run property rentals. Currently there is a good option to reduce by 80% your tax from rental income. This is to create a limited company that exclusively rents properties. The minimum number of properties to do this is eight

 

8- BUY DIRECT FROM OWNERS… who become your tenants. Currently this is a quite valid option to buy below market value a property already tenanted. You need to know people and distressed sellers to find the right opportunity.

 

9-  GET A REPOSSESSION WITH A MORTGAGE…. and save mortgage arrangement costs.

 

10-  BUY TO LET OPPORTUNITIES “Threshold”. Any property located in a populated area and with a cost below €30K is potentially an excellent Buy To Let deal that can deliver a 15% Gross Rental Yield. Valencia is the ideal city where to find these opportunities.

 

11-  REDUCE TAX IN RENTAL PROFIT… To reduce tax on rental profit and reduce costs, negotiate with your tenant to pay the Council Tax (IBI) (which in Spain is at the owner expenses) reducing the rent. In that way, you will get let gross income but you will be tax less and also pay one less expense as it is the IBI

 

Disclaimer: This is an informative guide that should not be consider as professional legal or tax advice. If you invest or buy a property in Spain you strongly advice to hire a legitimate legal and financial adviser

 

Articles of interest related to Property Investment

When big investors move to a market.. small fish…

Rental Yields in Madrid and Barcelona are greater than in Rome

Property investors Challenge: Rental Yields above 4.7%

 

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