This is probably one of the best cases of 2013 in The Spanish Brick recent times about a Madrid Property Investment, proving the quality of the bespoke service.
This is about a family investment project in one of the prime areas in Madrid. They were looking for an apartment in Recoletos, to enjoy during the summer holidays, that was suitable to be rented out for short lets for the rest of the year.
The whole process took three months and it all went perfectly.
Here is our description of the process step by step:
1-First contact from the client: The Initial Consultation
The client contacted us via email in late August 2013 looking for a consultation about the options for buying an apartment in the prime areas of Madrid.
After emailing back and forth we established contact on the phone.
They had an exterior apartment (possibly with balconies) in mind, in the Salamanca district in Madrid, and had an initial €350k budget. They wanted an apartment in the Salamanca district in Madrid that ideally did not need much renovation and also that had potential for short lets during the holidays. We thought this would be a quite difficult the task!
Let us keep in mind that in Recoletos, an exterior apartment (with balconies) cannot be found for less than €600k. What a challenge!!!
The client profile: A white-collar executive in his early forties working in the Commodities industry, married to a European lady with two kids. All of them resided in Singapore. They were a lovely family, hard-working, and really keen on buying an apartment in Madrid, a city that they know well and travel to every year. They met in London, got married there, and have a small portfolio of properties in London and also in Singapore. We were eager to help them as we understood how important this purchase was for their portfolio… and how much this property would mean in their lifestyle.
They were knocking on the right door to get full support, along with skills, knowledge, contacts, and heart: The Spanish Brick’s door.
Two weeks later the client contacted us back in order to confirm that he was happy with the property finder agreement and that we could start working. At the same time he sent us a list of 15 properties that he had gotten from his own online research back in August: various properties mostly from online agencies. I guessed he probably realized how time-consuming and difficult the task of finding a property without knowing the market and its pitfalls was.
3-The Initial Search
3.1) The first thing to do was to go through the list that the client had in mind. After reviewing all 15 properties we realized that they were all quite attractive opportunities, but at the same time were properties of various profiles: from immense ground floor properties to sixth floor penthouses well out of his price range: He might got confused by the many diverse opportunities on the market. Therefore, we spoke with the client in order to come to terms and narrow the specifications as a starting point.
3.2) Then, the second thing to do was to start the search, which we did on October 4th, 2013. On one hand, we made and researched the final shortlist of the client’s choices. On the other hand, we told our local cooperators that we were looking for a property with the following characteristics:
• Apartment in the Salamanca district, preferably in the prime Recoletos district.
• Minimum two bedroom apartment with balcony and lift.
• On the highest floor possible.
• Rental capabilities for short lets to those on holiday.
• No need for much refurbishment.
• Budget of up to 350k.
3.3) The third thing to do was to contact our cooperator who only deals with bank repossessions in case there was something of interest in their portfolio. This option did not deliver any good results during the process since it is not only difficult to find bank repossessions in prime areas, but also the only two options were really expensive.
4-First feedback and readjustment
It was the last week of October when Daniel Talavera (head of The Spanish Brick) went to Madrid to supervise the findings, meet the local cooperators and do the viewings by himself to report on to the client. Also, it was a good opportunity to explore the prime area a bit in a determined attempt to find the bargain that the clients would like. Sometimes you need a bit of luck and it shines down on you, as was the case this time.
Talavera was back in Madrid in November to meet vendors and finders for more viewings and searching. That was the time when the final property, the bargain that the client would purchase, would pop up. We will explain how later.
We sent a full report of seven hand-picked properties for the client to review. The report was of our high quality standards, including easy ways to assess the quality of the properties. The client seemed happy with the process and the services received and immediately chose three interesting properties to put on the final shortlist.
The client was planning to come to Madrid for 10 days in late December, so we needed to increase the portfolio by a few more properties.
The bad news was that within a week, two of the short-listed options got sold to another buyer, and two more flats, which we had left aside since the client did not like them, got sold in the same week. Good properties definitely go quickly, and overseas investors need to be ready to bite the bullet when opportunities arise.
After one more search, given that the options were reduced dramatically with the bad news, the client decided to increase his budget to €450k. In the beginning, the client had mentioned to us that his maximum budget was €500k… €250k cash to leverage the deal and, if needed, an additional 250k.
5-We got a deal from the portfolio!
What we did not know, until the client did the viewing in December, was that we already had the deal in the portfolio and the buyer did not need to stretch himself to €500k… not even to the current available budget of €450k!!! We had a property in the portfolio with an asking price of €400k, and the final selling price ended up being 382,500 euros!!!
6-How did we get the final deal?
We got the right property in the portfolio on November 5th, 2013. Nevertheless, we carried on searching and viewing until December 29th.
As sometimes happens, how the property looks on the Internet and how it looks in real life can be completely different stories. And that is exactly what happened. The clients did not dislike the property when we informed them of it and they saw the pics and info, but it was only when they viewed it that they realized that this was the right one: an amazing location, good exterior balconies and lighting, just the right size, in prime condition, below market value and already tenanted.
We were convinced that this apartment, with all these characteristics and its location, was nearly impossible to find.
7- Dealing with the vendor
This property was not listed in any local agency nor internet, and we found it by scouting the area, thanks to a local contact working in a commercial shop. The seller wanted a discreet promotion (just with local close people), since the apartment was rented to a family and the owner did not want that many viewings annoying the tenants. He was currently getting a monthly rent of €1250 euros per month.
When we called him, he sounded very glad to hear from us, since he had not gotten many leads until then. His cooperation was very important… providing all the documents, being flexible with negotiation and with timing.
Our target price for this property was 380k (down from the 400k asking price), so we considered €382,500 as a successful deal.
I was personally impressed by how well this deal went and how great the timing was.
The viewings with the clients in general were good and, being honest, we did a good job selecting the short-list. The only small hang-up during the process was when we met with a local agent with a hangover.
9-The right deal comes after an early failure
During the viewings with the client, we thought we’d be in luck from the first day on, since the clients put in an offer on one of the apartments during the first round of viewings. This was a 100 sq. m exterior apartment on Lope de Rueda Street.
It was in good condition but needed some refurbishment to improve the layout in order to make the most of the available space. It was an exterior flat, with two balconies, and in a very good location also (but not in the heart of the prime district like the one purchased in the end). The asking price was €380k.
The property was on the very first short list back in September and it was already listed by a few Madrid agents. It seemed a bit odd that such a property could stay on the market for that long. But even after the viewings, the opportunity was so good that our client was happy to match the asking price with his offer: just €380k.
But there was a problem, and this was the reason that such a “jewel” stayed so long on the market: when we contacted the owner back, she wanted some money in cash in order to reduce taxes. Oh dear!!! That is unacceptable.
The seller is key –especially in a distressed market!
10-Closing the deal
Closing the deal went fine. We completed all the conveyancing and due diligence within two days and the “contrato de arras” was signed on December 31st –not a bad way to close 2013 at all!!! The down payment was 10% and we accepted that to bind the deal.
There was a bit of disagreement about the payment method, but it all went fine in the end, and now our clients have a great investment, already rented until June 2014. Then, they will come to Madrid to spend the summer holidays. The plan is to run the property for short holiday lets, and we will manage this also.
1. It is very important to narrow the search and to avoid confusing properties and getting tired of the process.
2. It is not all about the property but also about the seller… A great property in the hands of a troublesome seller can become a real thorn in your side.
3. It is one thing to see the properties online and another thing to see them in real life.
4. Good communication, patience, and contacts are key factors.