Q. How do I choose the correct area of Spain in which to invest?

Spain is a country with plentiful choices for the property investor. The best location in which to invest will depend on a number of factors, the importance of which will vary from individual to individual.

ACCESS
If you are thinking of using the property yourself, ease of access will be critical to your decision. If you reside in mainland Europe, there will probably be a multitude of low-cost flight options into many of Spain´s regional airports serving the popular areas, such as Malaga, Alicante, Barcelona and Bilbao. However, if you live in the United States, you may be restricted in your choice of non-stop destination airport to Madrid and/or Barcelona. Most of the regional airports can be easily accessed from these two principal Spanish gateways through a very good and reliable internal flight system, a network which is attracting increasing levels of low-cost competition. You should check the airline timetables to ensure that your home in Spain can be reached relatively easily.

BUDGET
Of course, your choice of location will be determined by your budget. Again, research your areas in advance. Most of the developed coastal areas will attract a premium, while the cheaper-priced properties will be found in inland areas and regions that are yet to be developed, or those that are currently under development. The major Spanish cities of Madrid and Barcelona have seen massive price increases in recent years, so if city-living is your thing, you may need to head to some of the lesser-known provinces for a bargain.

In addition, don´t forget that anything on or near the beach will also attract a premium.
 

LOCATION
Once you have determined your budget, you can then start looking a little more closely at the different areas on offer. You will need to consider whether you are buying for investment or for lifestyle – i.e. do you need to take anyone else´s tastes into account in the purchasing decision. If you are buying purely for your own use, then you can focus on finding a property that satisfies only your needs. If buying to rent or to sell in the shorter-term, you will really need a more objective stance to try to appeal to as many potential clients as possible – this is where the advice of a good real estate agent can be priceless.

CLIMATE
Are you looking for bright sun-filled winters, or a more seasonal climate? Plenty of people think that Spain enjoys a warm, sunny climate on a year-round basis.

This is certainly true in most of the areas in the south of the country, but the same cannot be said for areas further north. Indeed, the north of the country tends to be very wet and cool during the winter months, while the capital Madrid actually freezes during some of the winter-time.

Even in the south, mountain villages such as Ronda, which can become searingly hot in the summer, with temperatures approaching 40 degrees C, can become wintry and snow-bound in the winter….and this in a town that lies just 45 minutes from the coastal resorts of Marbella on the Costa del Sol, an area that enjoys 320 days of sunshine per year and a temperature which rarely drops below 10 degrees C!

You should remember that Spain is the Number 1 holiday destination for Europeans, so if you are looking for the ´real´ Spain, but away from the busy Spanish cities, you may need to head off the beaten track a little. While this is a great way to appreciate the typical Spanish way of life, this will undoubtedly take you away from the facilities, such as shopping malls, golf courses, multi-plex cinemas, international restaurants etc, and into a totally Spanish-speaking environment that may be rather alien to your normal way of doing things.

To obtain this balance between having access to the ´real´ Spain while still being able to enjoy all of the benefits of a more developed area, you may need to opt for one of the coastal areas. Here you will probably find plenty of ex-pats and holidaymakers, but choose carefully, and you should still be able to enjoy the best of both worlds.

However, there are other target markets within this potential client group. Couples, adult groups and singles are not normally restricted to the summer months, and one of the attractions of Spain as a holiday destination is that these holidaymakers may even prefer to take their vacation outside of school holidays, when the weather is still superb, but flights and accommodation is cheaper, hence the months of June and September become popular for these sun-worshippers.

A third category of potential client comes from a surprising source. Golfing enthusiasts flock to the superb courses of Southern Spain every winter. Often travelling in groups, these golfers will normally play 5 or 6 courses during their stay, and will want to be close to the facilities, bars and restaurants. The golfing season normally runs from October to May.

And let´s not under-estimate the increasing numbers of tourists who are seeking to escape the harsh winter climates of northern Europe at every opportunity, whether it´s for the odd weekend or for a  more extended stay.

This all equates to Spain being the primary year-round vacation destination in Europe. To maximise your property´s letting potential, consider all of these potential client groups and try to identify locations that offer something to as many of them as possible.

The Buying Process

Q. I´ve identified where I want to buy and how much I want to spend. What should I do next?

Some people are wary of property agents. To find a reputable, professional real estate agent, you should look for memberships of regulatory professional bodies, and ask to see a list of client testimonials. Maybe ask to speak to former clients of the agency to get a true insight into their buying experience.

The agents should be able to tell you in advance of your visit exactly what will take place, and details of any documentation that you will need in case you wish to make a purchase. They should also be able to recommend experts in the areas of law, accountancy and mortgages for you to consult before you take your trip to Spain.

Q. I´ve seen a property that I like – what should I do?

OFFER & RESERVATION
If you are sure that you have seen your dream property, and you would like to go ahead with the purchase, you will need to make an offer. With most new projects in Spain, the price is fixed by the developer, and the possibility of any price reductions will depend on the popularity of the project. If a developer feels he can sell the unit quickly to another potential customer, he will choose to wait for the list price. With resale property, it is common to make an offer below the asking price, but the success of this strategy can depend on several things, including the market conditions, demand for that particular property, and even the nationality of the vendor, as some buyers may regard an offer of a lower price as an insult!…so tread carefully and be guided by your agent.

If your offer is accepted, you will then be asked to pay a reservation deposit. This varies between 3.000 euros and 6.000 euros, and is normally only refundable if your offer for a resale property is rejected. If your offer is subject to anything such as mortgage approval, make sure your agent knows this well in advance, as he/she can then advise the vendor that this is a condition of sale, and your deposit can be refunded in case the condition isn´t met.

Normally at that point, your excitement will be cut short, as it will be time to return home! Normally, the flight home gives buyers plenty of time to think. Some of the more common thoughts are:

“How am I going to furnish my Spanish property from a distance?”
“Surely I will need to open a bank account and write a Spanish will?”
“How am I going to arrange for my utilities to be connected to my property?”
“Who is going to tend my garden and clean my pool?”

”What have I done!?”

A good agent will have addressed most of these points while you are still in Spain, and will have probably introduced you to a reputable furniture supplier and a Spanish lawyer, who will be able to arrange for the opening of bank accounts, the drawing up of Spanish wills, and the setting up of direct debits and connections to electricity and water supplies. You may also have had the chance to meet a rental and management agent who will be able to take care of any maintenance issues while you are away from the property.

Q. What happens next in the purchase process?

SIGNING CONTRACTS
Normally, within 30 days of reservation, you will be asked to sign contracts to confirm your intention to buy the property. This is something that can be done on your behalf by your lawyer by arranging a Power of Attorney.

At this stage, your lawyer will check that the vendor has legal title to the property for sale and that there is no debt attached to the property (unpaid fines, community charges). In addition, the lawyer will ensure that the plans are in accordance with the building approval granted by the planning authorities, as it has been known for people to build extensions to properties without the required permission.

Once your lawyer is happy that everything is in order, you will be asked to transfer the funds (normally 10% for resales) to the lawyer´s client account. Once the lawyer is entirely satisfied, these funds are transferred to the vendor.

In the case of new developments, or off-plan properties, you will need to pay for your property in staged payments during construction. Payment plans vary considerably, but normally an amount between 20% and 50% is required at contract.

COMPLETION
In the case of resales, completion normally takes place within 4 – 6 weeks of signing contracts. This is the stage when your lawyer performs the final checks and makes sure that any mortgage is in place with the lending bank. Completion takes place at the notary, where legal representatives of the buyer, seller and mortgage provider ensure that the funds are distributed in the right manner, and the notary assigns legal title to the new buyer.

For off-plan properties, completion can take place anything from 6-24 months after the contracts are signed. Sometimes, the developer´s payment plan will specify interim payments that need to be made during construction. At completion, the lawyer will check that the constructed property is exactly as specified in the sales contract, and that the constructors have built the property to the exact size and specification that was agreed.

Q. What do I need to set aside for fees and taxes?

Normally, it´s advised to allow an extra 10% - 11% on top of the purchase price for purchase costs. These comprise:

• 7% iva (in the case of new-build properties) OR 7% transfer tax (in the case of resales)
• 1% legal fees
• 1% stamp duty
• Land Registry Fees and Notary Fees – determined by a scale of fees

There are also costs associated with obtaining a mortgage. These include:

• Bank Valuation Fees, calculated as a percentage of valuation (normally 0.1%)
• Arrangement Fees, often 1% of loan amount
• Stamp Duty, usually around 1.8% of loan amount
• Land Registry Fees and Notary Fees – determined by a scale of fees

In a typical scenario of obtaining a 70% mortgage, it´s normally recommended to allow for between 13% and 14% of the purchase price to cover ALL purchase and mortgage costs.

Q. What do I need to set aside for running costs?

• IBI – local town hall charge, similar to a real estate tax
• Community Fees – if living within a community of owners, you will have to pay towards the upkeep of the grounds, gardens, pools, security etc.
• Basura – refuse collection
• Property Insurance