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BUY TO LET PROPERTIES IN SPAIN...Is it Still a Good Investment? | Pellicer & Heredia
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Oct 29, 2024
Buying a property to rent out in Spain has always been considered an excellent investment opportunity but a number of changes in the law + Brexit may mean it's not as straightforward - or tax efficient - as it once was. Just ahead of the August break, and as a preview to that day's webinar, Ignacio and Pedro from @Pellicerheredia Abogados discussed some of what you need to know. You can see more at www.alicantelawyers.es, where you can also watch back some of the previous webinars. Be sure to Like 👍 this and Subscribe to our channel if you found it useful. Website: http://www.bayradio.fm/ Mobile App: https://app.appinstitute.com/yddcc Facebook: https://www.facebook.com/BayRadioInSpain Twitter: https://twitter.com/bayradioinspain Instagram: https://www.instagram.com/bayradiospain/
View Video Transcript
0:00
please to welcome back Pedro and ignio from p and hered the alakan lawyers are
0:06
with us today a little bit demob happy because of course uh in Spain generally there are holidays in August aren't
0:13
there chaps yeah good afternoon good afternoon Carl how's it going all right very good
0:19
looking forward holidays yeah so uh final uh seminar webinar rather is is
0:24
coming up a little bit later on on your website this afternoon at half 5 mlight
0:30
Spain people can sign up for that now but we're going to have a look at some of the things that you're going to be discussing uh on buying to let uh
0:37
property investment in Spain and I said to you when I just okay the phrase says
0:43
to me there are two maybe three main things to look at here first of all the buying of property then the letting of
0:49
it and then the taxes obviously but of course well as we were discussing that
0:54
we realized there's a whole other can of worms I think is the way you put it ignio uh about about um letting and
1:02
Licensing approval and limits on what you may and may not be able to do we're talking about the Airbnb type uh
1:08
properties uh that has obviously been raising its head we've had lots of new stories across Spain on this this year
1:15
and um so uh a number of towns a number of principalities a number of cities uh
1:20
deciding on different rules it's kind of difficult to keep up on which one said what and which one's going to do what um
1:27
so perhaps we should start right at the beginning though and that's buying to let in Spain it's something that seems
1:34
to have taken a bit of a a downfall in the UK it used to be quite quite a big thing but now the uh apparently it's
1:40
just not as lucrative as it as it was due to various reasons but it's it's still something that's really happening
1:46
quite a lot in Spain isn't it well yes actually uh at the moment I think is a
1:51
hot space here for buying to let especially on these communities but I
1:57
think Madrid as well is very hot and very attractive place to to invest um
2:03
commun Valen cost Sol um all of them are very attractive I think I think it was
2:10
because after covid people found out but this is just me guessing uh that they could work work
2:17
remotely and they discover a new a new place to be certainly made a big
2:22
difference I think you know be to work abroad let me put some numbers on the table uh some years ago one of us um
2:29
Council mayor in alante he told me that it was uh needed around 11,000 new rooms
2:36
or rooms for hotels in Al City per year so it was a big demand and it was not
2:41
enough hotels and this was not just in Al in all the cities in Spain but obviously alante in costablanca has a
2:48
big attraction and a big demand it couldn't actually then accommodate all did it that it wanted to bring in that's
2:55
right so it was a lot of flexibility now on the rules in order to open to invest to let in this case of digital platforms
3:03
like Airbnb in order to attract obviously more tourists in order to obviously come to this to this area
3:10
obviously right now the the demand is big and uh and also the investors are being a lot also so right now the the
3:18
demand and the offer has been quite good but it will finish sometimes I yeah there's got to be ceiling at some point
3:25
you got to hit the hit the ceiling haven't you actually Co I will say here the situation where we are is the way I
3:32
find it is locals every time it is the forers are bringing up the price yeah so
3:38
it's more and more difficult to afford to buy a property why because people from abroad let's call it elsewhere all
3:46
countries they find it very attractive very cheap and very good for them so
3:52
there is big demand because there is a lot of people out there that willing to come over here and locals because I was
3:57
noticing the other day is hard to to to find a cheap property it's a difference
4:03
in wages isn't it northern Europe America all the Americas for instance you know the wages are a lot different
4:09
there especially so people are you know becoming digital Nomads um that it's
4:15
very difficult for people locally to keep up because wages are just not the same and this is a this is a real
4:20
problem I'm fac I'm I'm seeing uh is very good for everybody who's coming is very good for the business it's very
4:26
good for restaurants for everyone but locals uh they will be facing problems unless
4:32
we want to go Inland yeah there's a bigest stream point is in IA example you read the new and yeah we hear like even
4:39
police offic waiters nurses exactly something like wow that's a lot that's a
4:44
very extreme point but obviously there are some other areas that is is it's not happening the same but because it's not but obviously something that is but the
4:52
C yor also has a major problem um and it's difficult to know
4:57
because we've seen a lot of demonstration and people well even in Barcelona squirting water tourists and
5:04
there are some areas where they're trying to say to tourist look it's it's not you it's the model tourism model I
5:11
mean how soon are we going to perhaps see something change there for instance is it more of a one side of the house or
5:18
the other are the Socialist so we more likely to do something about it they've been in power for a while um or are the
5:24
pp if they get back in we don't know the enthusiasm industry will will go ahead because at the end this area
5:31
Spain is a has a big touristic industry they will have to guide and conduct and put some limits obviously the demand is
5:38
higher and higher and higher they going to they're going to increase their airport they going to increase the
5:43
hospitality new runs going to to attract T but obviously about the property because obviously
5:49
about investing a property and let it is going to be always a a good business but always will be some rules in order to
5:56
identify what kind of property identified in to do that or not yeah it's very hard to to put limits to the
6:01
whole the high demand well we also have the issue where regions can make their own decisions outside of what overall
6:08
government control is as well and I think generally housing tends to become is part of that isn't it it's not part
6:14
of central government now the the the local uh Town Halls have the power to
6:19
control these license so it comes down even further yeah yeah and uh but as you
6:24
said the airport is big and Al can't I don't know how many millions we are having well we know the transport min was just talking the other day about an
6:31
extra one where both of the main airports North Valencia and Al so that will bring more people and unfortunately
6:39
or or fortunately uh it will be more demand which is good for x amount of
6:44
business but for another we'll have we'll be phasing uh people where do I
6:50
buy now I mean let's say just mle class that there are locals um I think they
6:57
will be ending to buy a proper Inland because Inland you don't have any issues
7:02
or well central government is trying to get people to move back in land maybe it's part of a big plan I
7:10
don't know um but of course the thing that happens there is though if you can't support the amount of visitors uh
7:16
that the coastal areas have or the big cities have because you can't people can't afford to live there support those
7:22
restaurants for instance and those bars and those and and those businesses then you've got a big issue is a big issue I
7:28
agree is a big issue but yes there is a plan I mean there is some Town Halls Inland that They are promoting come here
7:35
for free you don't pay e you don't pay these you don't pay the other and I think everything at the end of the day
7:41
gets stable and it regulates but I don't think it will stop I I I really think
7:46
the growth is there people are willing to come to costablanca and I don't I don't see going backwards
7:54
I I think it's pretty much impossible the demand is increasing and will be increasing um year by year Pedro you did
8:00
talk about a potential ceiling but where and when might that be it's nobody can know I don't know they have to make like
8:08
better filters you know to attract better clients like better touristes in this case I mean better they talk about
8:13
tourist how much do they spend every day for example on aage our the end will have to be attracted some kind of what
8:20
you say the model what kind of model we want to yeah I mean for a long for a long time the islands certainly the Bic Islands have been wanting to trct to
8:27
better class of tour let's face it some of the uh uh places in the on the
8:33
islands you really wouldn't want to go on a holiday because of the the way that the tourist sack there but this is this
8:39
is actually changing that now anyway ex um but there are other things that are happening aren't there we've seen
8:44
Barcelona we've seen Valencia City talking about limiting um the amount of properties available for the likes of uh
8:51
BNB and from what we understand most properties that have the ability to let
8:58
the contract last for five years is that pretty much right across well licenses licenses for tourist is uh tourist um
9:05
license well well let me explain a rental contract could be long-term which is nothing nothing to do with a license
9:11
of tourist license you don't need a license tourist license to rent your property in a long-term contract you
9:16
don't even need it to like a temporary contract a temporary could be also for I say also for holidays really for two
9:22
weeks 3 week one month one month and a half it's a temporary contract you do not do it in a digital platform do you
9:28
you just not advert in a digital platform do you just not do the services like if it were a hotel for example and
9:35
then we have a the rentals for touristic license which is an adet in digital
9:40
platforms and you do some kind of services like cleaning like a guest like
9:46
attracting the guest giving the kids leaving the kids and be able to to give service to them while they are in
9:52
holidays that is different there are also big cities for example Barcelona you have also mentioned people is
9:59
properties and letting rooms M which is also is going to be I mean a night for
10:06
some buildings that people live like families for example for that but it's happening right now in big cities in
10:12
madri and Barcelona so um those regions that obviously in Valencia Community
10:18
Valen is five years okay I mean if there's some limits obviously that authorization will end until this 5
10:24
years in case it's a limit in case it's it's rejected for after that but I don't think will happen that I mean we'll be
10:30
some uh guidance in order to limit new ones even though we be increasing anyway
10:36
but we put some limits maybe the properties will say Okay properties will have to have these requirements and then
10:41
we be lower properties to be updated to them oh I see so if you change the requirements that means a number of
10:47
properties might not actually fit the a straightforward way of dealing
10:52
with that how would we know what sort of things that they might use because I mean at the beginning as I said example
10:57
put the example of alante they said okay we need 11,000 more rooms wow that's a
11:02
lot for a small City okay let's put the the ground floor which is like shops
11:09
commercials to be able to have a touristic license for
11:14
tourist without Windows without that I mean it's like a little bit um and then
11:20
obviously they need to push on limit so that kind of properties probably will be limited or all the kind of properties in
11:25
different um neighborhoods for example is a really residential neighborhood you don't you will not be allowed to do that
11:31
I mean in some regions some neighborhoods they will allow it some ones not maybe the property is is too
11:36
small maybe the property is I don't know too big I don't know but they will have to put some limits in in order to to to
11:43
reduce the number of new license the amount yeah I mean there are obviously there are some ways which this can this
11:50
can happen but the long term is still there so people still that I mean let's
11:56
put it this way people who bought properties in Spain and and now are saying oh my goodness I'm going to lose
12:02
all these income n's income but are they though we don't want to worry anybody here that if you've got an existing tourist license for your the way the way
12:10
could come if it comes this is like golden Visa we don't know do we uh but by the way it could come is that we were
12:17
discussing about having 3 fifth of the community asking now to uh increase the
12:25
community fees because you are so you're and say a complex in a
12:31
comp build only that that sort of community that's s of community they are
12:36
entitled to do an AGM and if 35th agree of the owners to of the owners agree to
12:43
increase I I finally sometimes unfair because if you use the flat you use it
12:50
anyway but if you do a business then they could increase your 20% if you living on ground floor I don't use a
12:55
lift so what more expensive so I could but anyway just trying to to understand why but they are entitled to increase
13:02
that so far they cannot prohibit the activity andless is written down on the
13:09
bylaws and the statutes and or if they change the statut it's 100% agre so the
13:15
all the people allowed to vote are able to do it okay but we don't know if they
13:21
I think sumar is trying to change the law so the community of owners have more
13:26
power and could prohibit had a new story about that recently and I think that one was um Valencia but although like I said
13:34
we keep hearing lots of different stories from lots of different areas but the idea really was um that people
13:39
within say an apartment complex um the owners could decide whether or whether not even to allow uh the sort of uh that
13:47
sort of activity no that that's I mean this the the rules are made by the municipalities by the region Valen or
13:53
different regions but the rules cannot be changed by the community of owners like that I mean as as said if you want
13:59
to change that you need the 100% owners agreement on eliminate that kind of um
14:06
business activity in the community of owners or 3 fth in case that you want to increase 20 maximum 20% of a fees of
14:12
that specific special specific owner there is two issues here I will caller
14:17
is one you being entitled to have the license if you're going to do touristic if not you do shortterm as ped said or
14:24
longterm which is legal as you don't have an issue shortterm you contract
14:29
agent they contact with their clients that's right and they don't need a BNB they don't make like a service like a
14:35
hotel and that's all yeah that's one issue that you need to face a shortterm l you can do for six months or maybe
14:41
even what's the shortest period you you could do it for two weeks okay and holidays it's a holiday we've always
14:47
done that in the summer time two weeks very common is been very common I mean
14:52
all and then you need to phase the license and now this is bringing a new issue the community this is something to
15:00
look into so if you're doing an investment now trying to buy a property there is two things that under due
15:05
diligence your lawyer will do right one will be checking that you're able or
15:10
entitled to apply for a license two whether you are able or not to get the
15:16
agreement from the community talking to Pedro and igno from alakan lawyers. and uh we talking about the
15:24
balet situation we know that as we mentioned a few little issues in the pipeline at the moment but if you do
15:31
your due diligence and get your lawyer to address those things at the outset then you shouldn't be worried at all about buying property to let in Spain
15:39
let's get that clear yeah yeah let's get it that clear I mean buying a property in Spain is safe and the only thing you
15:45
need to do to due diligence and know what you're doing if you are buying a property to let just make sure that you
15:52
know the bylaws of the community if you have a community or the regulations of the town hall and the limits to that
15:59
model but there are more models which is short-term rentals and long-term rentals
16:04
right exactly you see it is like when you make a Dy someone wants to buy a property and there is no swimming pool
16:10
but they they have a dream to build a swimming pool they have a project to build a swimming pool obviously the D
16:15
need to be said okay let's check if you can build a swi if it's allowed actually because maybe it's not so it is like
16:21
they me know that to check what this is your intention this is your project your investment to let and this kind of
16:26
letting so let's check before you buy before you pay we normally the process of buying a property you start paying a
16:32
small deposit and you pay 10% and then you pay the rest no before pay the 10%
16:37
before paying the big amount then that diligence needs to be made okay it's
16:43
still a great Investment Housing anywhere in the world but certainly along Spain's Mediterranean Coast right
16:48
now um you know there are there are good percentages to be made in fact probably better than in a number of other areas
16:54
where you might invest absolutely I mean we are talking I mean the ABNB for example or the legend
17:01
touristic license are getting a fortune at the end I mean that's a big business really big business which is good well I
17:07
mean you're charging for a week what you might charge a month certain prop exactly a good business is I mean people
17:12
is obviously investing on that which is good I mean it's he's fine it's good it's really good okay the other question on this we we brought this up while well
17:19
in the break was um you know the issues about the golden Visa but again whatever happens with that there are still ways
17:26
so that's also not something to worry about too much depends what which way which way do you go down the road yeah
17:33
actually at the moment it's still legal and it's it's still happening and we are processing a lot of golden visas still
17:40
uh but there is always an option you've got the non-lucrative Visa the only requirement is that you need to be more
17:45
than six months with that kind of Visa but for for someone who's going to stay here more than six months is not an
17:51
issue so say American exper retiring you know from the US to uh Spain that's
17:57
ideal really exactly that's it wouldn't it wouldn't really affect it couldn't really Chang it changes to to those ones
18:03
who wants to get back and forwards into Spain and shenen area without being
18:08
resident and without being dent on those one we have the rule of 90 180 yeah okay
18:16
right well so it's not a bad thing then and we're working out that you found the property that you want you get the due
18:21
diligence done by recommend you know respectable lawyer and um when you when what happens next when it comes to
18:27
letting uh how you have to find the body I guess the person or the the agency
18:34
that you want to work with well and before you if if you're really aiming to buy the property to let my
18:41
recommendation is to instruct the lawyer from the very beginning because if that's your intention that intention
18:47
before you even commit yourself to any to any contract because why will you buy something if you're not going to get a
18:53
license right but uh but again that license will last x amount of time and
19:00
then you need to make sure that the license will be granted and that the community will allow you to do so once
19:06
you bought the property you complete it and then you able to rent it you could do the three models touristic short-term
19:14
rental contract through your lawyer as well or long-term rental contract the long-term rental contract the only
19:20
difference is that gives more um more rights to the tenants and the Tenant could stay there longer than with the
19:27
different models the number two model which is the short terms cannot and the touristic cannot so it is a different
19:36
model of renting property which which is being always here and I think that's not
19:41
an issue the shortterm and the longterm it will always be here and is legal and he you know the other one it really
19:48
requires the license and probably the communities um so yeah your lawyer your
19:54
lawyer will be able to to represent on that call I'm term rentals for instance
20:00
there are some issues like perhaps non-payments and things like that is there a way to deal with that illegally
20:06
and SP it is I mean obviously in a proceeding always in order to
20:11
um reject tenant out of the property and this is has happened a lot obviously
20:17
there are many many rumors on this about as
20:22
well we talked before about okupas yeah AAS and well well when someone obviously
20:29
is a tenant that is has um um started the property and the property is a
20:35
permanent home really the tenant and uh stops paying you the rent obviously
20:41
there is a rapid we collect Express um proceeding in in order to claim claim
20:46
eviction um the other situations is really when somewh property is empty the property is U someone ENT on the
20:53
property and and and says that is my property says this is I'm living here so I'm I'm I'm occup is like then just
21:01
having an alarm system there obviously system you got to have right we made a um we we've been informed about many
21:08
many times obviously you have the right to the know and the police should put them out rapidly and if it's not the
21:13
police will be the the the court it is like if you go to um to police station says oh has
21:21
someone has robbed my car and the police sees the car and is going to put the the the the the B people out or we put it in
21:30
jail and the car will give it back to you rapidly with the property is is it should be something like that and in
21:36
many many occasions it is like that but sometimes tenants they lie to the police they say I'm living here many many days
21:43
I'm Liv here many many professional they bring they bring the horror stories you hear about professional they bring like
21:49
like a like a contract they say oh this is a contract I signed obviously is lie and obviously you need to more put some
21:55
more effort on that okay all right what about mortgages to buy to let in Spain
22:01
you know we know that different banks offer different things um I guess it's it's really about the right fit for the
22:07
person who's buying yeah well normally banks will grant you if you have collateral but uh for nonr they might
22:14
Grant you uh 60% of the valuation but they want to see that
22:20
you're able and capable to pay off the mortgage so that's one one thing as a
22:26
model if you're going to buy a lot of them and then do it with a bank then they will need to see whether you're able to to pay um they don't really like
22:36
too much speculations and and be part of that and you run it away when you are a
22:42
non-resident that's why they give only 60% but I'm talking about if you're doing individual mortgages not as a
22:49
company as a company is always a bit more difficult yeah I think we're generally talking about individual individuals okay well individuals I
22:56
would say you're buying a property they if if you have enough money as collateral to support the mortgage they
23:03
will grant 60% you always need to budget for the other 40% and the
23:09
other 12% uh average so I always say you need to have budget that money for the
23:15
expenses transfer tax noty fees register fees and solicitors fees I normally
23:20
quote always to budget aside 12 to 13% depending on the expenses but but yes
23:27
banks will allow you to do it you don't really need to tell them that it's to rent because probably you will leave x
23:33
amount of time and you will rent it that's what people do when they're out this is the typical thing at the end of
23:40
the B you need to show them that you have a capability to pay back whatever is AG greator types of property came up
23:46
while we were talking in the break there um and there are advantages to buying a cheaper property and doing it up yeah
23:52
sure uh you could always you could always find a good deal and refurbish it
23:58
uh buy through an auction procedure buy a chip deal uh refurbish it and rent it
24:04
out or sell it on so that one is not going to stop that that type of model is that buy to let investment property or
24:12
just buy in buy refurbish and sell I think that there is not an issue all
24:19
doing that and probably you just don't deal with a tenants and you buy a good
24:24
deal refurbish it a little bit or whatever you think is best and sell it
24:30
on the only thing you need to be careful with is the tax planning with that right and this is where we were saving the the
24:37
the dirty word till last taxes so Buy toet in Spain good idea you know there
24:43
are some pitfalls like there might be in in anywhere where you would buy toet but not insurmountable and if you have a
24:48
reputable lawyer to deal with your property then you're you're going to be all right but how much are you going to
24:55
pay on your investment okay well for an investment it depends when if you are
25:01
European or non European resident it means that if you are living for example in United States and Spanish which is
25:08
living example uned States has rting a property in Spain is treated like a nonresident out of European
25:14
Union um Union and therefore we pay 24% for the gross amount 24 call
25:20
non-resident Third Country correct which Britain has had to get used exactly Britain exactly the same you are
25:25
resident if you are any citizen but you are living and resident in the UK If you
25:31
are UK citizen that living in Spain that's change that will be a different issue obviously depending on on on and
25:40
depending if it's a long term or short term of will have some benefits or not
25:45
and also U there is one thing that we also inform to clients when they are buying new properties because when you
25:52
buy a new property you pay value at a tax in Spain is
25:57
10% but but if you wanted to say I want I want to buy the property and let it on
26:02
a touristic license but I want to leave it to some companies because I want to this is an activity and I'm not going to leave that I'm going to leave this
26:08
property to some company in order to use it permanently for a year everything
26:14
then you will be able to recover you will be able to recover value attack
26:19
okay sometimes can be a lot of money all also you have to um stay that kind of
26:25
business during 10 years because if you sell a property before you have to pay back to the to the tax office aate
26:31
amount of what you have received which is clients they do that they now they understand the business
26:37
they understand they can leave this property it's not well when live is just to to give the kids to some company they
26:43
they have a deal they rent it the company rent it get get a business and they get some fee and but the and they
26:49
also charge value tax to the company but they recover value tax of which is 10% imagin a property of €300,000 is
26:56
€30,000 and with with all the clients we made these calculations and in in longterm obviously is is benefit is
27:03
benefit a lot yeah I mean I think we could talk about different type of taxes uh Pedro
27:09
said the non-resident tax which is the 24% gross if you are a resident in Spain
27:14
does a matter about nationality then is a sliding scale and two models if we're talking about touristic then you have
27:21
not allowance so is income minus expenses the total is your marginal rate
27:27
so you will pay whatever is your sliding scale around the world okay so your growth in general if we talking about um
27:36
long-term rental properties we you have a big allowance and I always say it's very attractive in Spain so far we could
27:43
always say so far uh do long-term rentals because 60% of your net is
27:49
taxfree so you're only taxable and your 40% of your net so that means income
27:54
minus expenses all the expenses of the property that whats the total and the
28:00
40% is taxable so quite a lot more desirable than perhaps a different way of of renting is is is what what do you
28:07
mean having a longterm longterm is tax efficient tax effici lots of people are
28:13
looking for longterm rentals too yeah and it's tax efficient and and it's being always very good and at the moment
28:19
is good but um the thing with it uh renting property call is people
28:26
sometimes uh is a lot of like the magistrate in the high court in Madrid B
28:32
was saying is a mixture of things together the long-term rentals you don't
28:39
worry hopefully tax efficient but if you need to evict you need to deal with
28:44
something different which is the eviction which is another issue that sometimes you don't want um the short-term rental I I think
28:53
is always good because of the type of contract you could have more penalty clauses
28:58
to the tenants if they are in Bridge of contract more for the owner's Advantage perhaps more for the owner's Advantage
29:04
but it's not that profitable as the touristic apartment touristic apartment
29:11
you have to deal with no tax um allowances and now the problem with the
29:17
community if possible the community or the town hall so everything has an angle
29:22
you know all of them all the models are good but you need to face different issues yeah and uh lastly it's those who
29:31
are non- residents but live are residents in a European Union country then will be 19% of a net amount the net
29:38
which is net amount so non-resident living in a outside European Union 24%
29:45
grows and if you are resident in a European Union country as a non-resident in a European Union country is 19% of a
29:52
net amount now we do actually have quite a lot of northern European EU countries
29:57
people buying in this area at the moment was you know a major increase so it's
30:02
it's worthwhile whichever way that you do it and obviously with everything there are some pitfalls here and there
30:08
but you need to get yourself uh properly informed to get some proper advice um alakan
30:13
lawyers. is the website that webinar coming up there in around about half an hours time the guy's going to hot foot
30:20
it up the road uh to uh to be on camera for that actually I saw you setting up on one of those webinars recently on one
30:26
of the featured videos made great to talk to you guys and have
30:32
a great summer we'll see you in September we look forward to everyone
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