Seriously Researching Buying Rental Property in West CDS

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Digitrac
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Joined: Wed Apr 04, 2018 10:09 am

Seriously Researching Buying Rental Property in West CDS

Post by Digitrac »

Hi - We originally posted this over on the Spanish Expat forum but didn't get many replies (Probably not the best place TBH) Now I have discovered this forum and I've already found out lots of relevant information regarding the pros and cons of owning and renting out Spanish property within the posts on here.

I would like to gauge peoples opinions on our plans to buy a property on the Costa Del Sol with an initial view of renting it out for holidays during the summer months and maybe spending a bit of time there ourselves at each end of summer. With a long term view of spending much more time there in the future when our kids have left the nest and I have retired.

We are in the fortunate position of owning two houses outright in the UK one of which is now empty due to my parents moving into sheltered accommodation. We plan on selling this house to fund our potential purchase. It might be better off financially to rent out the UK property but our hearts are saying buy in Spain! Also being upfront I guess I'm more of a full English breakfast type guy who enjoys the sunny weather than someone looking for the full Spanish lifestyle!

We have spent many great times on holiday in the CDS and we are quite familiar with some parts (Specifically Rivera Del Sol - Calahonda - Cabopino areas)

We are looking at purchasing a 2/3 bed 2 bath apartment on an established well maintained complex that would obviously need to appeal to the holiday rental market including beach and golf. Any income over and above the running costs and rental management would be regarded as a bonus but as we don't need a mortgage I hope this would be achievable.

Any advice on what to look for or avoid would be much appreciated. I realise this post will hopefully generate positive and negative views regarding our plans which we welcome. We aren't going to rush into this and we also realise that Brexit may have implications in the future. Some sources on the Web (Not estate agents!!) are indicating the market may be showing signs of growth but I am not really convinced

Sorry for the long debut post but as you can appreciate there are a lot of questions
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CSE
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Post by CSE »

I have nothing certain to add except welcome to the forum
Obviously one has to undertake a full survey of the market and what it does and does not offer. Can you add a USP to make your property stand above the others?
There is loads of information posted in the past about licences etc.
The national TV news suggests housing prices are rising, although we have not seen it here in the campo in the North. I expect they take an average for the country and include the likes of the larger cites. If there are a lot of sales for returning Brits then I could not see how overall prices would be rising.

let us know if you have any specific questions.
Never try to out-stubborn your guests.
Ecosse
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Post by Ecosse »

Hi welcome to the forum!

I'm afraid as I am in France I can't answer specific Spanish questions, but I do have a couple of observations that might help you reach a decision:

Firstly, carry on with the research you're doing - so many people make the mistake of not researching enough - and, as you've already found out, Lay My Hat is a great source of useful info... from people who are enjoying holiday letting and on the whole, are reaping the rewards.

Secondly, and perhaps more importantly, I would take a step back and ask yourself a few important questions. These questions can only be answered by you... while it's worth asking any and everyone's opinion, your friend/neighbour's feelings about holiday letting/owning property abroad/what they feel comfortable with are unlikely to be the same as yours:

1) You enjoy the CDS and you obviously holiday there often. Great - you're looking to buy in a tried and tested location. Ask yourself honestly... what added benefit would you have from owning a property there, over and above renting a nice place each summer? Perhaps you're the type of family who love to know where you're going each year, and get a lot of pleasure out of returning to the same, comfortable space, knowing that it's 100% yours. If this is the case having your own place will be a huge added benefit. However, you should also be aware that a second home abroad comes with a suite of unfamiliar costs, taxes, maintenance issues, worry because you're not there to see/deal with issues easily etc. as well as, if you do wish to rent it out, the reality of not being able to use it at the times you wish to use it with your family... because that's the peak weeks when you'd lose the most money. As I said, nobody other than yourselves can answer this for you, but if you're reason for buying on the CDS is more as an invesment rather than as a family getaway pad, you may find it's more cost effective to invest your spare money in a property closer to home, and use the profit to book a great apartment on the CDS u mothat you can return to year after year.

2) Are you happy managing a holiday let? Do you mind dealing with enquiries, cleaners, breakages, (the odd) bad guest and the maintenance? Are you happy spending your holidays sourcing replacement cups/sun loungers and giving the place a fresh lick of paint or... if you don't want to do all of that, are you happy to hand over a significant chunk of your rental profit to a management agency so they can do all of this on your behalf? Again, only you can answer this... on this site you'll find a whole bunch of owners who are more than happy to do this, and get a lot of pleasure out of dealing with guests and maintaining their properties. Equally, I have, as I am in a tourist area where literally thousands of apartments are rented out, seen a number of people give up because it's just too much hassle for them, personally.

Ultimately, the question to ask yourself is: what option would enable you to enjoy the best holidays in CDS?

Whatever you decide, best of luck!
costa-brava
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Post by costa-brava »

Good research can serve you well but at the moment perhaps just a wee bit of "rule-of-thumb" may help.
Selling your UK property will cost you 3-5% of the selling price.
Total costs of buying in Spain are about 10% on new property and 12-13% on second hand.
Difficult to say how much you'd lose in currency exchange but probably about 5%.
You can easily see how much you'd get renting weekly by comparing with similar properties currently advertised.
BUT< BUT< BUT count the overheads. It's well nigh impossible to rent now without being in one of the big sites and this usually costs about 20%. Income tax here in Spain plus their peculiar capital gains tax for weeks unrented will be roughly 20%. Then you'll have the local tax (probably 500-700 euros per year). Then there are the community charges for pool, cleaning, gardening etc. (about 700 to 1000 euros per year)
Add on a couple of hundred or so per year for a Spanish Gestor (accountant)
You can only offset the costs against the actual weeks you have rented and for the other weeks they have this crazy "imputed" capital gains thing that means you have to pay a small tax for the weeks it is not rented.
So rule-of-thumb your costs are about 50% of what you earn and don't even dream of trying to do it under the radar.
Others will maybe give you more exact figures but the bottom line is that you will not make a fortune. If you are not going to be on site all the time you will have to have local help and this will push costs up even more.
Aside from the economics you will also see from other posts in LMH that you have to set up an online arrangement for notifying the Spanish Police of the names and identity details of all your guests.
Martha
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Post by Martha »

I agree with Ecosse's points (*waves!)
Could you let out the UK property to pay for rental of a property in Spain, rather than selling it?
Chalet la Foret, Chamonix
gardenboy
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Post by gardenboy »

Some interesting points raised above. I personally would not sell in the uk to invest in a holiday let in spain. I d rent in uk and earn a nice passive income, buy something to live or holiday in in spain.

Too many unknowns to sell uk and buy spain, illness, boredom, spanish law. Keep it simple and enjoy your holidays.
Digitrac
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Joined: Wed Apr 04, 2018 10:09 am

Post by Digitrac »

Thank you all for your replies. There's some very interesting points covered, maybe we are letting our hearts rule our heads here, the thought of having our own place is very appealing but the downside is we aren't in a strong enough financial position to not have to share it. It would have to at least pay its way and the whole process seems very complicated and a bit of a money pit. Just the actual cost of changing from a house here in the UK to one on the CDS seems like throwing money away, especially as we couldn't currently use it for more than a few weeks at a time.

The dream has always been to have a place to spend winters away from the awful UK weather, we haven't necessarily given up that dream, just reassessing the options now. For now, we shall retain the UK property, sweat the asset and hopefully one day be in a position where we can just buy for us.

Thank you all for you advise and wisdom.

Cheers
costa-brava
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Post by costa-brava »

I'm on the Costa Brava and have basically given up renting so I'm not punting for business. But I'm sure there are a few owners in LMH from the area you want to go that would be happy to rent to you. Why not take a month or so in low season. You can see the lie of the land and check out what's available. When we came here (1986 with 3 kids in a motorhome) our motorhome got smashed up before we reached Manchester. The firemen shovelled our possessions of the fast lane into a blanket and we spent a week in Ashton in Makerfield. We had sold our house in Scotland so there was no going back. We flew out from Manchester and spent the first summer jumping from flat to flat.
Now you have internet, mobile phones, amazon shopping, Ryanair etc. It's easy-peasy to fulfill your dream now. But check itall out carefully before you decide that holiday-rents are the thing that dreams are made off.
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