# Help buying first property in Spain



## audi321 (Sep 1, 2013)

Hi all. I'm buying my first ever property in Spain and need a bit of advice please.

I've been bombarded with information from the estate agent but I don't know how much I can trust him with the info as he wants to introduce me to various people (Bank, lawyer, etc) and I know it's probably so he gets a cut (which I don't mind) but wouldn't mind a second opinion.

Firstly. The property is in Fuengirola and is a studio in a large hotel complex (PYR if anyone knows it).

I have a reasonable sized deposit, but will need a mortgage to complete the finances.

I have been told that Life insurance is mandatory? Is this right? Would anyone know which is the best Bank to go to? Do I 'need' an introduction from him, or can I walk in on Monday morning and see someone?

Secondly, I obviously will need a lawyer. He wants me to go to one he is recommending on Monday morning. Is this wise? Should I check these people out with any formal qualifications or association membership (Like the law society in the UK?)

Finally the fees. I understand that I will have a 8% tax, a 1% mortgage set up fee, a 1% Lawyer fee and around a €200 valuation fee. But what other fees should I expect?

Thanks all. I'm sorry with all the questions, but I feel a bit vulnerable having never done this sort of thing before.

Ta


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## zenkarma (Feb 15, 2013)

audi321 said:


> Finally the fees. I understand that I will have a 8% tax, a 1% mortgage set up fee, a 1% Lawyer fee and around a €200 valuation fee. But what other fees should I expect?


I don't even know where to start with this.

I wouldn't be advising anyone to buy in Spain at the moment, particularly if you need a mortgage on the property.

Have you really thought all this through? Have you considered and factored in the running costs of the flat? The electricity, gas (if you have it) telephone, internet, water, IBI (rates), insurance, comunidad (common parts maintenance) non-resident taxes, if you're not living there full time? For a 1 bed flat you're looking at running costs of around €2,000 a year and that's rising. So add about €170 a year to your monthly mortgage payment.

10% transaction cost seems about right but it depends on area, it can be as high as 15%. 

The one thing I would advise you to do is confirm/clarify with your solicitor precisely what figure you will be paying the 8% IPT Transfer Tax on. Usually it's based on the cadastral value (the rateable value) and not the purchase price but local authorities seem to have a habit of coming up with a different figure for this after you've paid it and then claiming back tax for it. 

So get it in writing from your solicitor precisely what value you are paying the 8% IPT Transfer Tax on. Preferably get him/her to get that figure from the local authority in writing.

I would advise you to think this one through very carefully indeed.


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## audi321 (Sep 1, 2013)

Thanks for the advice, I have thought this through and I appreciate your concerns. 

The maintenance fees are high but include electricity and water and use of the pool/hotel facilities etc (€120/month) but this will be easily covered by the rental it will generate. The current owner has shown me the rental book from last 12 months.

The IBI is around €400/year. The mortgage is 3.5% over Euribor (currently 0.5%) so around €250/mth.

I've done my homework on the finances, but it's the buying procedure I need help with please. In particular the lawyer and mortgage situation.

Thanks again.


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## xabiaxica (Jun 23, 2009)

audi321 said:


> Hi all. I'm buying my first ever property in Spain and need a bit of advice please.
> 
> I've been bombarded with information from the estate agent but I don't know how much I can trust him with the info as he wants to introduce me to various people (Bank, lawyer, etc) and I know it's probably so he gets a cut (which I don't mind) but wouldn't mind a second opinion.
> 
> ...


:welcome:

I can't help with specifics - but the usual advice is to NOT use a lawyer, bank, or anyone else recommended by the estate agent....


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## zenkarma (Feb 15, 2013)

audi321 said:


> ...but this will be easily covered by the rental it will generate.


Where have I heard this one before!

You don't need any of my advice, good luck with your endeavour.

PS Don't forget the Spanish Hacienda will want to tax 50% of your rental income and will want you to register with them and obtain a certificate for rentals.


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## audi321 (Sep 1, 2013)

zenkarma said:


> Where have I heard this one before!
> 
> You don't need any of my advice, good luck with your endeavour.


Do you know this area/property? You say I don't need your advice, but I do please.


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## xabiaxica (Jun 23, 2009)

audi321 said:


> Do you know this area/property? You say I don't need your advice, but I do please.


if you need rental income to cover the mortgage DON'T DO IT!!

it's that simple - no-one can guarantee rental income in this financial climate

it couldn't even be guaranteed in the 'boom times' 10 years ago


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## snikpoh (Nov 19, 2007)

audi321 said:


> Do you know this area/property? You say I don't need your advice, but I do please.


... as someone who rents out properties (holiday and long-term), my advice would be DON'T DO IT. With all the associated costs and taxes, we barely break even on our holiday lets.

Th legislation is growing all the time. The latest is that you are not allowed to rent out a property for less than 1 month at a time! You will also have to register with the local town hall and they have very high requirements (most town halls will not allow you to rent out a property which is why so many people do it 'on the black').

By-the-way, rental books can be 'fudged'.


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## audi321 (Sep 1, 2013)

Look I don't want to get into the nitty gritty of whether I should buy it or not. At the end of the day, it's a relatively small cost in (what I believe) to be the best location in one of the most popular resorts in Spain. The purchase price reflects the market situation at the moment......I remember 5 years ago these things were almost double what I'm paying for it. I've stayed here numerous times, and it's extremely popular. For those that don't know it, hotelpyr.es is the website. It's prime location and rental WILL NOT BE AN ISSUE - I'm not buying in some complex 10 miles away from anything with the promise of guaranteed returns etc. like people were doing 5 years ago!

I do appreciate the advice, but I'm after advice on how best to go about the purchase please, specifically with regards to the lawyer and bank mortgage.


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## zenkarma (Feb 15, 2013)

audi321 said:


> You say I don't need your advice, but I do please.


I've given you my advice—think it all through very carefully indeed. 

You have to do a lot of research about exactly what you're getting yourself into, what all the tax implications are and if you're planning on renting out your flat to help pay for it what the cost implications of that will be. Then crunch all the figures and see if it's still doable.

Who is going to handle the advetising/marketing of the flat and cleaning/changeover of the tenants for example? Most management companies doing this kind of thing will charge about 20% of the monthly rental. Hacienda will want to tax 50% of your monthly rental and so on.

Renting properties in Spain is now no longer anything like as easy and straight forward as it once was. Perhaps that's why the flat is now being sold? Look into it and fully understand what's involved. Crunch the figures again, is it still doable? What about tenancy rights in Spain? Who's handling the legal side of things and how much will that cost?

Costs are rising in Spain all the time, particularly taxes. What might be doable now might not be doable in the future. What if interest rates rise?

I have a 1 bed flat in Spain I could rent out. When I looked at how much it would all cost against the income I'd gain I didn't think it was worth all the hassle so didn't bother.

All I'm trying to say is, think it all through.


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## zenkarma (Feb 15, 2013)

snikpoh said:


> Th legislation is growing all the time. The latest is that you are not allowed to rent out a property for less than 1 month at a time! You will also have to register with the local town hall and they have very high requirements (most town halls will not allow you to rent out a property which is why so many people do it 'on the black').
> 
> By-the-way, rental books can be 'fudged'.


^

This is precisely what I mean about understanding what you're getting yourself into. This is the kind of thing you must understand. Spain is not like the UK.

Finding a lawyer and bank/mortgage is the easy part, navigating your way through the labyrinth of Spanish rules, regulations, laws and taxation is the tough part.


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## snikpoh (Nov 19, 2007)

audi321 said:


> Look I don't want to get into the nitty gritty of whether I should buy it or not. At the end of the day, it's a relatively small cost in (what I believe) to be the best location in one of the most popular resorts in Spain. The purchase price reflects the market situation at the moment......I remember 5 years ago these things were almost double what I'm paying for it. I've stayed here numerous times, and it's extremely popular. For those that don't know it, hotelpyr.es is the website. It's prime location and rental WILL NOT BE AN ISSUE - I'm not buying in some complex 10 miles away from anything with the promise of guaranteed returns etc. like people were doing 5 years ago!
> 
> I do appreciate the advice, but I'm after advice on how best to go about the purchase please, specifically with regards to the lawyer and bank mortgage.




Just to recap; you want to rent it for holidays as well as have it for you to use - who will rent it as a holiday base for over 4 weeks at a time? This is the new proposed law!!!!!!!! You can ignore the law if you wish but many people in your situation are simply not aware of the current changes.


Mortgage - very few places in Spain are offering mortgages any more! We have one with Halifax who then became Lloyds International who have now become Sabadell. We pay 1.1% over the MONTHLY Eurobor.

Do NOT use anyone recommended by the vendor or agent. Find your own abogado, this is a MUST.

You will have to pay transfer tax (ITP) at around 8% on the value determined by your local town hall. This must NOT be confused with what you actually pay. Many people are getting large tax bills up to 5 years after they purchased the house because they paid too little ITP.

You MAY have to pay the agent fees - it is not always the vendor who pays these in Spain.

You will have to pay the Notary.

You will have to pay to register the property.

All-in-all, plan on paying 15% on top of the purchase price plus agent fees.

Make sure that the IBI is up-to-date as are all utility bills - in Spain these go with the property. 

Make sure that it has a habitation licence. Some developments are known to be illegal or have never been registered by the builder/developer.

Best of luck.


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## gus-lopez (Jan 4, 2010)

" The current owner has shown me the rental book from last 12 months."

you need to see all 3 sets. 
The set shown to prospective buyers.
The set shown to the tax man & 
The real set.


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## mickbcn (Feb 4, 2013)

DON'T DO IT!! wait for a better times.


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## audi321 (Sep 1, 2013)

mickbcn said:


> DON'T DO IT!! wait for a better times.


Is the general consensus that the property market is going to fall even further?


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## 90199 (Mar 21, 2010)

audi321 said:


> Is the general consensus that the property market is going to fall even further?


I believe so, nothing is selling, no one has the funds to purchase. I have had one on the market for about three years, dropped the price, but still only had one enquiry. Plenty wanting to rent though.

I'm wanting to sell and upgrade to a house.


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## Chopera (Apr 22, 2013)

audi321 said:


> ...
> 
> I have been told that Life insurance is mandatory? Is this right? Would anyone know which is the best Bank to go to? Do I 'need' an introduction from him, or can I walk in on Monday morning and see someone?


I'm not sure if life insurance is mandatory but it probably is. There was one of the "scandals" a few years ago where Spanish banks were taken to the EU court for forcing people to take out life insurance with them in order to get a mortgage. The banks lost and these days they usually offer 2 mortgage rates: the cheaper one (which you only get if you take out life insurance with them) and the expensive one (if you don't). So it will probably end up being a case of you taking out insurance with the bank that gives you the mortgage. If you do want to look elsewhere then Mapfre is the biggest insurer in Spain.



audi321 said:


> Secondly, I obviously will need a lawyer. He wants me to go to one he is recommending on Monday morning. Is this wise? Should I check these people out with any formal qualifications or association membership (Like the law society in the UK?)


In fact you don't need a lawyer because the exchange is carried out in front of a notary in Spain. Many Spanish don't use lawyers and I have also bought and sold without using one. But it is a good idea to use one if you are not familiar with the process. Do not use one provided by the agent. They are not as well regulated as they are in the UK (like everything associated with property in Spain)



audi321 said:


> Finally the fees. I understand that I will have a 8% tax, a 1% mortgage set up fee, a 1% Lawyer fee and around a €200 valuation fee. But what other fees should I expect?
> 
> Ta


The 8% tax varies on location, but that sounds about right.


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## Swerve (Jun 29, 2011)

3.5 % above euribor seems a bit steep what may be affordable now will be much higher if the base rate starts rising. Also check with bank if the mortgage is in future payed off in full what final fee they will be charging ie 1% or more it's better to know these figures now. It may be an idea to see all costing as others have said regarding the so called rentals ie cleaning costs linen costs. Etc

We have stopped renting our house out now as it just wasn't worth the hassle there was always something either broken or stained or cost of electricity after air con being left on and people want the places for nearly nowt so better off leaving empty as we didn't need the rental return that badly.


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## zenkarma (Feb 15, 2013)

Swerve said:


> We have stopped renting our house out now as it just wasn't worth the hassle there was always something either broken or stained or cost of electricity after air con being left on and people want the places for nearly nowt so better off leaving empty as we didn't need the rental return that badly.


I think this sums up the short term rental situation in Spain right now. It's a lot of hassle for very little return when you factor all the expenses in. 

Longer term rentals, say 3-6 months or longer is slightly different and is probably still worth doing but short term holiday lets are fraught with problems. Not least of which is having a management company actually manage the process and that in itself isn't cheap.

I suppose if you sat down and crunched the figures, adhered to all the necessary local authority regulations, paid your taxes on the rental income, paid a good management company to manage it for you and had a nice modern apartment in a desirable location you could still _probably_ manage to produce enough income over the year to get it to pay for itself and still be able to use it for a few weeks in the year yourself.

But that's an awful lot of hassle, aggravation, stress and huge risk to get yourself into. I personally wouldn't want that kind of stress and worry.


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## webcrest (Sep 10, 2013)

Prime challenge is to find out a trust worthy estate agent. I can not help you to hire a lawyer but I can suggest you some trustworthy companies. 

rightmoves and lupain are major players in UK, Spain market and you can trust on them. 

You can find top complexes and Property on both sites and do not forget to compare prices and level of services. I am not sure about rightmoves but Lupain people offer custom services. CEO and top level management involves in each deal.

rightmoves have huge data for properties on their store and lupain are famous because of their high level customer services. 
I strongly recommend to not make any decision on these two companies comparison. Go on blogs and read about best reputable companies. make a comparison between their prices and then contact them. You will be very much clear in final choice.


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## TSN.IMM (May 13, 2013)

Wow, it's a big surprise to me that tax on rental income is 50%. I thought I've seen somewhere 24%, isn't it?
@audi321: Did you eventually buy it? How does it go? How about rent out now?


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## snikpoh (Nov 19, 2007)

TSN.IMM said:


> Wow, it's a big surprise to me that tax on rental income is 50%. I thought I've seen somewhere 24%, isn't it?
> @audi321: Did you eventually buy it? How does it go? How about rent out now?


Where do you get that figure from?

It all depends if you are tax-resident in Spain or not.

For Tax-residents;

_If you have a property you rent out in Spain and live in Spain yourself you will have to declare the income on your Spanish tax return (declaracion de la renta de las personas fisicas) every year, in the May-June period following the year of the rental i.e. in arrears.

The tax treatment is generous:

- there are deducible expenses allowed (e.g. utilities, advertising and legal costs, rates, and even interest and amortisation of the property)
- there is a 50% deduction if the property is rented out as a dwelling (as opposed to a business)_

For non-residents;

_Typically deductible expenses might be community fees and rates. Tax is then charged at a flat rate of 24%. Forms must be in 15 days after the quarter end._

Taxation of rental properties in Spain


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## audi321 (Sep 1, 2013)

Hi. Yes I did buy it and I'm really pleased. The fees were quite high for purchasing it (ie notary and taxes etc) but the rental is going to be great I think. I'm already fully booked for February, March, July and August and there's booking all over Xmas and new year. 

Like I said its prime location in an excellent resort. This coupled with it being part of a large hotel means plenty of rental potential (all I've done is advertise on holiday Lettings and eBay). 

Only negative point is the management fees at €130/mth are high. But this includes unlimited electric and water and all uses of the heated outdoor pool (which I think is why there's so much interest for the winter months) so I guess isn't too bad. 

On top of all this, I get as many holidays as I like for free )))


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## Agapito (Dec 3, 2013)

audi321 said:


> On top of all this, I get as many holidays as I like for free )))


Congratulations on your new property. Enjoy!


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## Chopera (Apr 22, 2013)

audi321 said:


> Hi. Yes I did buy it and I'm really pleased. The fees were quite high for purchasing it (ie notary and taxes etc) but the rental is going to be great I think. I'm already fully booked for February, March, July and August and there's booking all over Xmas and new year.
> 
> Like I said its prime location in an excellent resort. This coupled with it being part of a large hotel means plenty of rental potential (all I've done is advertise on holiday Lettings and eBay).
> 
> ...


Congratulations! If you don't mind, please could you keep us updated with how the rentals go, etc, it'd be interesting to see if you have found a viable way to invest in property in Spain. An aparthotel could be the way to go, as it should already be licensed (although as an owner you might have to get a separate license I guess) and all the services are provided by the hotel as well.


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## Dunpleecin (Dec 20, 2012)

I'm really glad you went for it instead of just being put off by people on here. If I'd done that I wouldn't be happily living over here with my living costs being a lot less than the UK. 

Of course there are fees and taxes and expenses. Where aren't there these fees? 

Is the market still on the way down? Depends what you've got and where. I'm sure the Ferrari dealership in Marbella is doing ok. It's all relative.

Perhaps if you bought here a few years ago and you're in negative equity then you're bound to be a bit bitter. I'm sure the sellers of my house were when I bought it for half what they paid a few years ago. As long as the figures add up for you and you're happy then that's all that matters.


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## Swerve (Jun 29, 2011)

If it's the apartment I've just searched on eBay it's very keenly priced good luck and well done.


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## audi321 (Sep 1, 2013)

Yes the price on eBay isn't the real price. I just get people enquiring through eBay for official pricing when they tell me the week they want. 

The guy I bought it from paid €70,000 more than I did only 4 years ago!


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## zenkarma (Feb 15, 2013)

Chopera said:


> An aparthotel could be the way to go, as it should already be licensed (although as an owner you might have to get a separate license I guess) and all the services are provided by the hotel as well.


I'm also interested in how it pans out because as far as I'm concerned the figures don't add up. If he's not declaring the income for Spanish tax now, it's going to be interesting to see how he'll get a license for the rentals. Assuming as you rightly say, a license would be required—I can't see how it wouldn't be.

The outgoings (community costs, IBI/Basura, non-resident tax, actual rental income tax, mortgage, management company to manage the rental changeovers) would be more than the rentals bring in.

It's certainly a risk that may or may not come off in the medium to longer term.


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## audi321 (Sep 1, 2013)

Re the tax situation. If I rent it on eBay and they pay me in sterling over here do I declare it in the uk or spain?


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## TSN.IMM (May 13, 2013)

snikpoh said:


> Where do you get that figure from?
> 
> It all depends if you are tax-resident in Spain or not.
> 
> ...


Sorry, I miss understood. It was written "Hacienda will want to tax 50% of rental income", not the tax rate is 50%. 
So 24% of 50% of rental income is not too bad, is it?


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## CapnBilly (Jun 7, 2011)

audi321 said:


> Re the tax situation. If I rent it on eBay and they pay me in sterling over here do I declare it in the uk or spain?


 If you are a UK fiscal resident but have a property in Spain which you rent out, then you have to pay tax in both Spain and the UK. You can offset any tax tax paid in a Spain against the tax due in the UK, upto the amount if tax payable on that income. For the time when the rental property is not rented out, you have to pay deemed income tax, but this cannot be offset against any tax payable in the UK.


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## NickZ (Jun 26, 2009)

TSN.IMM said:


> Sorry, I miss understood. It was written "Hacienda will want to tax 50% of rental income", not the tax rate is 50%.
> So 24% of 50% of rental income is not too bad, is it?


No the 24% is the non resident flat rate. IIRC residents treat rental income like normal income so the tax rate will depend on your tax bracket. The 50% discount only applies to residents.


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## TSN.IMM (May 13, 2013)

NickZ said:


> No the 24% is the non resident flat rate. IIRC residents treat rental income like normal income so the tax rate will depend on your tax bracket. The 50% discount only applies to residents.


I google a bit and find that the discount now increase to 60%, so only 40% or rent income will be taxed. (Advoco.es)


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## snikpoh (Nov 19, 2007)

TSN.IMM said:


> I google a bit and find that the discount now increase to 60%, so only 40% or rent income will be taxed. (Advoco.es)


Can you please post the link as my previous link to advoco still shows only 50%.


Thanks


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## CapnBilly (Jun 7, 2011)

snikpoh said:


> Can you please post the link as my previous link to advoco still shows only 50%. Thanks


This is from the actual law (translated). It was increased from 50% on the 1st January 2011. I'm sure I have posted about this before.

" 1. ° In cases of leases of real property for housing, the net income calculated in accordance with the preceding paragraph shall be reduced by 60 percent. Case of positive net income, the reduction will be applicable only in respect of income declared by the taxpayer.
Two. º This reduction will be 100 percent when the lessee has an age between 18 and 30 years and net income from employment or economic activities in the above public income tax period multiple effects."


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## TSN.IMM (May 13, 2013)

snikpoh said:


> Can you please post the link as my previous link to advoco still shows only 50%.
> 
> 
> Thanks


It's here: Spanish income tax rates 2012 to 2014
Look at the "Changes" section


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## Taz66 (Jan 11, 2014)

hi,

the area im struggling on is where can i get a mortgage, the UK dont want to know can anyone help with an English speaking person at a Spanish bank who can help. i only want 50K


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## Taz66 (Jan 11, 2014)

*Mortgage*

hi, im looking for a small mortgage of 50K but here in the UK i cannot get anyone who will help. Conti have but want !k arrangement fees, can anyone help me as i would like to direct to a bank but how ???


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