Yes, it is possible. But be realistic and willing to compromise. Spain offers huge opportunities, but there is no such thing as a ‘free lunch’, even in Spain.
Investments in Spanish property are particularly interesting because of the potential to generate rental income all year round in short-term holiday rentals. Then there is the potentially substantial increase in the value of the property itself. With good reason, this form of investing in Spanish real estate is very popular. Here are a few a considerations for ´the realistic investor in Spain´.
Are you fluent in Spanish? Are you around to manage a rental property yourself? If no: no problem at all, but keep in mind that a substantial part of the rental income (25-35% on average) goes to a professional property manager. Can you find a property manager who will handle the management for a bargain? Be alert in that case, because it is simply not possible for a professional property manager to adhere to all legal rental regulations and provide quality service in all languages for a penny.
Are you willing to step in early on new builds so you can buy at a sharp price, but then have to wait a while for the property to be finished? Or just the opposite: are you willing to buy a new-build property that is already finished and can provide quick returns, but in that case will not have the sharpest purchase price? Both approaches have pros and cons: one leads to higher returns, albeit after a long wait and uncertainty about delivery time and quality, the other leads to faster cash flow.
Are you willing to make a choice for a property that does not meet your personal taste? If no: no problem, because a property that is ideal for personal use is of course great. But then face up to the fact that the rental yield is unlikely to be optimal. If so: if you can let go of your personal choice, you will open up investment opportunities. Ideal for returns, but for you personally, maybe just not the location or property to your taste.
Do you choose to buy a ´refurbishment house´ and have it renovated? Super, because older properties often have the best locations, which are most in demand for holiday rentals. Do you want everything to be arranged according to the regulations and with a Northern building standards? That is possible, but then accept that the costs are often higher than Spanish rates. Also accept that older spanish buildings are often more complex to manage. As the owner of a rental property, you have an interest in ensuring that the building is well maintained and presentable for the tenant. The Spanish owners who live there themselves often have less interest in this and are reluctant to contribute to what they see as unnecessary maintenance and/or renovations.
Do you choose to go down a safe path? If so, be content with lower returns. For example: think of a prime location with guaranteed year-round rental income, new construction at a competitive price, possibility to buy as an investor, which means the 10% VAT on purchase is exempt, the rental and administration are fully coordinated by a professional company, the same company that also realised the construction. Those options can be found from time to time and are also in high demand as safe investments. Moreover, these types of companies actually take a conservative stance and give you cautious forecasts based on past experience. If this type of highly professional company shows you a proven return of 4% (pre-tax), that is quite fair.
In short, the ´free lunch´ does not exist, but a delicious ´comida´ at a good price certainly does!
