Spain - Buy-to-Let Strategy

"Buy To Let" In Spain

Spain has a huge "Buy to Let" market due to massive demand for Spanish accomodation mostly during the Summer months. It is this demand that has driven the Spanish investment property market forward. With so many low cost airlines servicing such a wide range of UK and other European airports into many locations in Spain on a daily basis it is little wonder that investors look to Spain for solid rental yields on investment property purchases.

The Internet revolution has also greatly improved the occupancy rates for Spanish property investors as now growing numbers of visitors to Spain avoid the traditional travel agents and book flights and accomodation online.

Spain´s coasts have several major demand drivers that help generate good all year round tourism and in proportion rental occupancy rates:

Weather and beaches - High Season

During the summer obviously the beaches are popular and millions flock to the Spanish Costas from within Europe to the guaranteed sunshine. Obviously this generates huge demand for rental accomodation in major Coastal areas.

Golf - Low Season

In the low season Spain managaes to maintain a high level of tourism and property investors occupancy rates with the demand generated from its many golf courses. This is a major reason why investors look to the Spanish coast as investors near major golf courses can expect good rental profits in the low season also, extending the rental year, and allowing owners to operate longer on more profitable short term rental rates rather than look for lower yield long term tennants.

Skiing - Winter (Mountains)

The Sierra Nevada Mountains near to Granada, offer investors yet another serious rental income stream. The Ski resort here is growing in popularity and generates visitors from great distances for Skiing breaks.

Low Cost Of Travel

As mentioned above the large number of airlines operating from so many European destinations into many Spanish airports is also a huge advantage to property investors looking for rental return as it makes their investment accessible. Also with so many airlines in competition if forces the price of flights down making visiting Spain very competitively priced.

Case Study

John decides to purchase an investment property and after joining the IPIN and discussing his requirements with our investment experts, he decides that the "Buy-to-Let" investment strategy is for him.

John has savings of around €80,000.

Our investment advisors suggest property development X which has been vetted by the IPIN (International Property Investment Network) as a solid investment opportunity and meets with John's deliverable criteria.

Investment property X is a new development with beautiful sea views on the Costa del Sol and priced at €250,000.

Initially John pays his reservation fee of €3000 to hold the property.

Next John pays a 30% deposit of €75,000 (minus his €3000 reservation fee already paid)

Our investment specialists negotiate a mortgage for John for the remaining €175,000 at a rate of 2.75% (example only) this translates to a monthly mortgage repayment of €481.00 (interest only) which is equal to €5772.00 over 12 months.

John starts to rent his new property immediately and during the 3 months "High Season" he receives €2000 per month in rental income. These rental payments exceed his annual mortgage repayments and still leaves John with 9 months of rental potential to make a further profit.

If we assume that average rental rates for Johns new property are as follows (conservative figures):

High Season - €2000 Per Month
Low Season - €1300 per Month

Now we assume that John decides to go on a short term rental strategy maximizing his income over the High Period. He easily rents his property for 3 Months during the high period earning €2000 per month. After this period he has a delay in getting his next tenants but over the course of the year he rents his property for a further 6 Months only.

3 Months x €2000
6 Months x €1300

Total Rental income = €13,800 after subtracting the €5,772 Mortgage repayments John has made a profit of €8,028.

* During this example we have not included any rental management or community fees that may apply but also we have only assumed rental income for 9 months of the year and with many holiday makers now booking private accommodation via the Internet this is very achievable, see Sky News article about private rental bookings increase.

The "Buy-to-Let" model is becoming more and more popular with the increase in demand of rental property as many holidaymakers are now utilizing the Internet to benefit from cheap flights and cheaper accommodation by booking direct.

Short-Term letting v Long-Term Letting

The final decision to be made by the "Buy to Let" Investor is which letting strategy to use. Its obvious that the highest income is made by the property owner by letting out short term during the high season. However you can off-set this against the increased overheads in constantly finding short term rental clients and the maintenance costs between clients. Long term rentals typically pay less on a month on month basis but usually require far less input from the property owner and the rental income is fixed over the course of the year. Some property owners choose to rent long term during the low season and then short term to higher paying holiday clients during the high season. The decisions to be made on your letting strategy are usually answered in part by the property you purchase. Some properties lend themselves to short term holiday makers and others to long term locals as a permanent home. Our experts will help you decide what's best and choose the property and rental strategy that's best for you.

The "Buy to Let" Strategy is not ideal for EVERY investor and it is essential that property for this strategy is chosen wisely as it needs to be a rentable property in a popular location to allow the investor to maximize income from the Investment.

The other benefit from this type of investment property in Spain is that during the time this property is being rented and earning the Investor an income and holiday home it is still appreciating in value at one of the fastest rates available. All in all the "Buy to Let" Investment model is a sound investment decision and Spain is currently an ideal location to deploy this strategy.