# Creative Finance in Spain



## jimmyd (Oct 25, 2012)

I am new to Valencia city and I am wondering are their property investors buying using creative strategies here in Spain. I want to build a rental portfolio in Valencia city but the problem is the banks don't seem to allow remortgages making it difficult to recycle money. 

I know the banks are offering 100% finance but a lot of their stock is in pretty poor areas. Is anyone actually managing to build a portfolio of properties here. If so how are you financing them. Lease options I guess are on way but you will still need to excercise the option at which point will the bank provide a mortgage based on valuation. Interested to hear comments from people or would be great to meet anyone involved in property in Valencia City.


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## mrypg9 (Apr 26, 2008)

jimmyd said:


> I am new to Valencia city and I am wondering are their property investors buying using creative strategies here in Spain. I want to build a rental portfolio in Valencia city but the problem is the banks don't seem to allow remortgages making it difficult to recycle money.
> 
> I know the banks are offering 100% finance but a lot of their stock is in pretty poor areas. Is anyone actually managing to build a portfolio of properties here. If so how are you financing them. Lease options I guess are on way but you will still need to excercise the option at which point will the bank provide a mortgage based on valuation. Interested to hear comments from people or would be great to meet anyone involved in property in Valencia City.



Oh yes...there has been a history of 'creative finance' in Spain.
That goes a long way to explaining the current financial mess the country is in...


I've owned rental properties in the UK and overseas and there is no way I would even give a second's consideration to buying to rent at this time in Spain.


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## NickZ (Jun 26, 2009)

With the property market the way it is I can't imagine most investor/speculators aren't paying mostly/all cash.


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## snikpoh (Nov 19, 2007)

jimmyd said:


> I am new to Valencia city and I am wondering are their property investors buying using creative strategies here in Spain. I want to build a rental portfolio in Valencia city but the problem is the banks don't seem to allow remortgages making it difficult to recycle money.
> 
> I know the banks are offering 100% finance but a lot of their stock is in pretty poor areas. Is anyone actually managing to build a portfolio of properties here. If so how are you financing them. Lease options I guess are on way but you will still need to excercise the option at which point will the bank provide a mortgage based on valuation. Interested to hear comments from people or would be great to meet anyone involved in property in Valencia City.



Unfortunately, when we moved to Spain, the idea was to buy, reform and then let out a number of properties to generate an income.

We bought a number, reformed some but now are unable to rent many out! One would image that the rental market was fairly buoyant but that doesn't seem to be the case where we are!

I think our problem was that we bought just before the crisis hit. Many people now don't seem to be able to afford to rent and so are staying at home with their families.


We have stopped reforming the properties that we have until something changes - either we are able to rent the ones that are finished or we are able to sell some of them. In the mean time, we have properties that are costing us money (or at least that are not earning) and we don't really know which way to turn next.


I would say that now is NOT the time to speculate but to batten down the hatches and wait it out.


[ However, there are some REAL bargains held by some banks - I've just seen loads. For example, a 4-bed apartment for 31k fully modernised! - hmmmm, I think I'd be divorced if I suggested buying any more ]


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## jimmyd (Oct 25, 2012)

*Spanish Property*

Hi Guys, 


First of all, thanks to you all for taking the time to reply. I appreciate it. Snik I'm sorry to hear you are having trouble renting your properties. Where are you based?

I think that now is definately not the time to speculate. I dont think there is ever a time to speculate. However, is it the time to invest? Will there ever be as many buyers looking to sell quick who are willing to take big discounts on the market values of the properties? I am a full time property investor and my mantra has always been to buy at a genuine discount to market value from a distressed seller. Granted there are issues here in defining the market value due to the illiquidity of the market. However, there is always a price that a good property will sell and there are a lot of desperate sellers willing to entertain creative solutions to their problems which they would not consider in a good market. 

I am in the fortunate position that i have rental properties in the UK and I live off the rents. However, it would appear that now is the time of maximum pessimism in Spain. There are some areas, on the costas where there is a huge over supply but this is not the case in some of the city centres. I just viewed a property where the rental yield would be about 7%. While not fantastic, thats not bad, especially if I could negotiate a lower price. In this case I cannot because the vendor owes what she is asking for the property. 

I am still torn between buying here and buying more in the UK. I would be encouraging to hear from anyone who is actually making money from it......if such a person actually exists 

Thanks again for replying.


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## NickZ (Jun 26, 2009)

jimmyd said:


> However, it would appear that now is the time of maximum pessimism in Spain. .


I think you'll find most people still believe prices are going down for a few years.


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## jimmyd (Oct 25, 2012)

*prices going down*

Hi Nick, 


You know prices do look as though they could fall further but if you buy now at say a 30% genuine discount then you are protected to some extent from further falls. And im not talking about a notional discount that some new build developer offers. I am talking about the resale market where you have strong comparables (sold prices) that give you confidence in what the property is worth and then you buy 30% below that. Obviously, you need to have a ready rental market as cashflow is key in any case. 

But if these conditions exist? Nobody really knows when the bottom will be.....i guess thats my point.


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## mrypg9 (Apr 26, 2008)

Are you familiar with the rent laws in Spain?

They are currently heavily weighted in favour of the tenant.


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## jimmyd (Oct 25, 2012)

Hi Mrypg


Yes i am aware that the rent laws are pretty difficult for landlords in Spain but I heard they are changing so it makes it easier for landlords to evict tenants who are not paying rent. 

However, it is a consideration as are the tax implications of actually becoming a resident, which I am still considering.


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## NickZ (Jun 26, 2009)

jimmyd said:


> Hi Nick,
> 
> 
> You know prices do look as though they could fall further but if you buy now at say a 30% genuine discount then you are protected to some extent from further falls. And im not talking about a notional discount that some new build developer offers. I am talking about the resale market where you have strong comparables (sold prices) that give you confidence in what the property is worth and then you buy 30% below that. Obviously, you need to have a ready rental market as cashflow is key in any case.
> ...


The problem with this thinking is the belief that current prices are real values. Those cheap houses aren't going up any time soon. 

The hopeful claims I've seen are talking about five years for all the empty homes to be occupied. The problem is every year for the last few it's been five more years. 

The main thing IMHO keeping the market from being flooded with homes is the fact people can't walk away from mortgages. But if unemployment stays high then even that won't help.


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## javierch (Aug 2, 2012)

I would think the most effective way to make some money is student areas and big flats,3 or 4 bedroom flats .You need to do a good search regarding rental income possibilities and all that but kids go to university in Spain and that is not going to stop anytime soon crisis or not .
Buying big houses or beach apartments for holiday lets is a bit risky at the moment I suppose but If You have a letting agency in the UK you could capture the clients that way or even if you have contacts with other agencies letting or travel agencies ...so it depends of who you know and all that .Even if prices fall some more and everything ,eventually they will go up as well ...and as a long term thing property is suppose to be a good investment in spain as well but you need your finances right and think that if you need to sell straight away is not a good investement ,is a good investement in 10-15 years time,even 25 years time .Remember bad areas go up and down like crazy ,and they only go up if there is plenty of jobs ..as demand increases them and people go crazy upping prices and better areas fluctuate less .
Even Really cheap bargains can also be rented ,even the casaktua of 10.000 to 15.000 flats can be rented at 200 or so a month but you need to be in spain for that ,working with charities ,council housing departments and social services,etc and so on ..so you get decent people in them and also your payments guarantied if the people fail to pay..... so from the UK students flats is the ideal choice i think or holiday letting if contacts and not risking to much just in case .


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## gus-lopez (Jan 4, 2010)

NickZ said:


> The hopeful claims I've seen are talking about five years for all the empty homes to be occupied. The problem is every year for the last few it's been five more years.


That's not hope but rose-tinted super optimistic ! I'd like to see it but don't even live in hope. 
I think we are looking at nearer 20 years & a poster on another forum gave a very good precis that Spain won't recover until it has left the euro & the EU , & the youngsters who have /& are leaving & working abroad return in the 2nd half of this century & Spain returns , possibly,to the EU. 
His arguments made good sense , as long as those leaving & having made lives elsewhere, want to return & attempt to rejuvenate their country??

Until the corruption, bureaucratic inefficiency/jobs-for-life, black money culture is removed/reduced , then it is hard to have a great deal of hope.


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## NickZ (Jun 26, 2009)

Euro and EU are two different issues. The EU is a mess with it's neo-liberal at all costs mindset but the southern EU countries could fight this by just having a political class that thought about their voters . Problem is much of the politicians are fixed on the idea of being good Europeans. 

The idea of being a good European is great if everybody does that. The EU today has various large blocks that don't think that way. You've got the new eastern EU countries who put their own interests first. You've got people like the Finns that do the same. Even the Germans have gone this way.

When one team ties itself to fair play while the other is willing to do whatever it takes it's easy to guess who wins .


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## mrypg9 (Apr 26, 2008)

NickZ said:


> Euro and EU are two different issues. The EU is a mess with it's neo-liberal at all costs mindset but the southern EU countries could fight this by just having a political class that thought about their voters . Problem is much of the politicians are fixed on the idea of being good Europeans.
> 
> The idea of being a good European is great if everybody does that. The EU today has various large blocks that don't think that way. You've got the new eastern EU countries who put their own interests first. You've got people like the Finns that do the same. Even the Germans have gone this way.
> 
> When one team ties itself to fair play while the other is willing to do whatever it takes it's easy to guess who wins .


The main issue as I've said before is, given the fact that all EU governments are trapped by their previous adoption of neo-liberalism, how national governments can regain control of their own finances from the grip of global markets.
At the slightest hint of the use of public funds for growth projects, yields rise to unsustainable levels..

Not one single group or politician whether of right, left or centre has suggested how control can be regained. That is the central issue around which all others revolve.

As for buying properties to rent in Spain....one factor to bear in mind is that many UK landlords are effectively subsidised by the taxpayer via Housing Benefit. That simply doesn't exist in Spain. So low-value properties with low-income tenants are much more of a risk than in the UK.

Incidentally, have just heard on BBC Radio 4 that unemployment in Spain is now above the 25% level.

I'd rather keep my money under the mattress than invest in Spain at this time.
If something is cheap, whether commodities, cars or property, there's usually a very good reason for it.


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## mrypg9 (Apr 26, 2008)

jimmyd said:


> Hi Mrypg
> 
> 
> Yes i am aware that the rent laws are pretty difficult for landlords in Spain but I heard they are changing so it makes it easier for landlords to evict tenants who are not paying rent.
> ...


Hi Jimmy....yes, it is now comparatively easy to evict tenants....but the reality is that regaining unpaid rent or electricity and water bills is virtually impossible. It is illegal for a landlord to cut off utilities if a tenant doesn't pay the bills....and I believe I'm correct in saying that these accounts must be in the landlord's name.

I know people who have lost thousands of euros because of unpaid rent and utilities bills.....two landlords I know of in the past three months, under the new 'speedy eviction' laws. In one of these cases, the landlord was arrested for cutting off electricity and water in the property of a tenant who had paid no rent or utility bills since moving in. The tenant moved out before eviction proceedings could be initiated. 
Recovering lost rent etc. is virtually impossible...


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## snikpoh (Nov 19, 2007)

mrypg9 said:


> Hi Jimmy....yes, it is now comparatively easy to evict tenants....but the reality is that regaining unpaid rent or electricity and water bills is virtually impossible. It is illegal for a landlord to cut off utilities if a tenant doesn't pay the bills....and I believe I'm correct in saying that these accounts must be in the landlord's name.
> 
> I know people who have lost thousands of euros because of unpaid rent and utilities bills.....two landlords I know of in the past three months, under the new 'speedy eviction' laws. In one of these cases, the landlord was arrested for cutting off electricity and water in the property of a tenant who had paid no rent or utility bills since moving in. The tenant moved out before eviction proceedings could be initiated.
> Recovering lost rent etc. is virtually impossible...


They can be in either name.

I agree though about never being able to reclaim any monies - we never have!


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## NickZ (Jun 26, 2009)

mrypg9 said:


> The main issue as I've said before is, given the fact that all EU governments are trapped by their previous adoption of neo-liberalism, how national governments can regain control of their own finances from the grip of global markets.
> At the slightest hint of the use of public funds for growth projects, yields rise to unsustainable levels..
> 
> 
> .


It's more then that. Think of the sanctions on Iran. The northern European countries wanted these. But they don't buy much if any oil from Iran. Spain,Italy and Greece are the countries that suffer for those sanctions. 

You can argue those sanctions are a good thing but if the EU wanted them they shouldn't have stuck the bill on just a portion of the EU. 

If it had been somebody like the Polish government being asked to suffer they would have stood up and refused.


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## Lolito (Aug 25, 2012)

Investing in Spain is a really crazy idea, but you are welcome to it. 

Prices WILL go down, for 2 or 3 years, and then, they will stabilise probably for EVER, but I doubt they will go up, because they shouldn´t have gone up in the first place 15 years ago. Now people realised the problem, no-one will dare to start playing with it again. 

I remember when you could buy things in Spain for very little money, and that´s where we are heading. But whoever thinks they will make money out of this crisis by investing on property, it just a bit far-fetched. 

This is not the UK, tenants are difficult to find as goverment won´t help them financially, so they live with their parents or have to go back to their parents. Tenants (these days), just look for properties, live there a few months rent free and move on to another one, as Goverment and/or landlords can´t really do anything about it. 

The whole thing is a big mess. You should try and invest your money in the UK, unless you want to lose it.

My next door neighbour is really pissed off, because he paid 250,000 for his house, when our costs 160,000 at the moment, and they are both exactly the same. He gets even madder when I tell him that it still has to go down to at least 130,000, this house is not worth that much money, I am not sure how someone would pay 250,000 for it. I wouldn´t buy it unless it is around the 100,000 mark, and it will come soon enough.


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## mrypg9 (Apr 26, 2008)

NickZ said:


> It's more then that. Think of the sanctions on Iran. The northern European countries wanted these. But they don't buy much if any oil from Iran. Spain,Italy and Greece are the countries that suffer for those sanctions.
> 
> You can argue those sanctions are a good thing but if the EU wanted them they shouldn't have stuck the bill on just a portion of the EU.
> 
> If it had been somebody like the Polish government being asked to suffer they would have stood up and refused.



That may be the case...but what is its relevance to my point?

If sanctions were lifted, the global financial markets would still control yields on national treasury bonds.

Are you sure that the bulk of Spanish oil is bought from Iran, btw? If that were indeed the case, wouldn't sanctions be justified if they prevented Iran from acquiring a nuclear missile capacity?

Just found this dated 12/02/12 from report in New York Times

But Britain and Germany get only about 1 percent of their oil from Iran, and France gets only about 3 percent from there. Other European countries, like Greece, Italy and Spain, are much more reliant on Iranian oil. Greece, for instance, gets about one-third of its oil from Iran, *while Italy and Spain each get about 13 percent*, according to European Union figures.


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