Buying Property in Spain: Pros and Cons

Purchasing real estate in Spain, like any serious deal, requires prior preparation: careful tax planning, as well as checking a property before buying, will avoid the potential for frustration in the future.

Pros of Buying Property in Spain

Let’s start with the fact that buying property in Spain is a good investment option. After the country’s emerging from the crisis, real estate prices have been showing steady growth for many years. There is also a growing demand for tourist property offered for short-term rentals. Thus, the buyer has every chance not only to become the owner of a good house or apartment, but also to make money on them by obtaining a tourist license and renting out housing, or by reselling it after some time for a profit.

But even buying Spanish property which is not aimed at making profit, will bring its owner many advantages:

• This is an opportunity to obtain a multiple-entry visa and spend up to 90 days in Spain in each six-month period. This is also a good option for those who does not plan to move to Spain for permanent residence, but want to spend as much time as possible here, enjoying the wonderful climate, the sea, fresh vegetables and fruits, the opportunity to do active sports all year round, etc.
• This is a possibility to request a residence permit without the right to work. Buying a property in Spain does not automatically entitle you to a residence permit, but it is a big plus if a relevant application is accompanied by documents confirming that the applicant has a high and stable income. A foreigner who has remote sources of income and own housing in Spain has every chance to obtain a residence permit, which, in turn, will give its owner the right to obtain Spanish citizenship after 10 years of legal and continuous residence in the country.
• This is a possibility to apply for the so-called Golden Visa or Investor Visa by purchasing an expensive property. The Golden Visa is a special residence permit that gives its holder maximum freedoms, as well as a simplified system for its obtaining and renewing.
• As a plus, we also note simplicity of carrying out a deal. The law does not make any distinction between Spanish citizens, EU citizens and third country nationals who buy property in Spain. On the part of banks that provide mortgage loans, one can observe a different approach to these three categories of buyers, but the sale process, the notarization of a bill of sale and the registration of the transfer of ownership are the same for everyone. There are no restrictions on foreign buyers: they have the right to buy both residential and commercial real estate, both at their own expense and with borrowed funds. The only condition is confirmation of the legality of income.

Cons of Buying Property in Spain

The disadvantages of purchasing real estate in Spain, as we noted above, can be minimized by checking the property and by tax planning before making a deal. If these measures are neglected, you may encounter the following problems:

• Repairs. Before buying a house, we recommend to conduct technical clearance of the property. The Engineering Technician can to identify shortcomings that are not obvious to uninformed people. In turn, these shortcomings can require extensive repairs and, therefore, considerable costs. The purchase of arrested bank real estate is a matter of seriousness of attitude. If the deal conducted on the secondary market protects the buyer and obliges the seller to be responsible for hidden defects revealed within a certain period after the purchase, then the bank property is sold in the form in which it is, with all visible and invisible shortcomings and defects, and without the ability to make claims to the bank after the fact.
• Transaction costs. As a rule, taxes and expenses accompanying the transaction stand at 11-13%. In the case of a mortgage loan, the percentage will be slightly higher. Also, additional costs may be required for the services of a specialist who will legally represent you in the property purchase process, an independent assessment of the market value of the real property, technical expertise, etc.
• Costs and taxes for property maintenance. These expenses include utility bills, condominium service fees (which can significantly hit on the owner’s wallet), mandatory fees – the annual one is on property and annual or quarterly ones are on income of non-residents. Not all sellers duly notify foreign buyers of the obligation to pay IRNR – non-resident income tax, which is an imputed tax and it must be paid even when the property does not bring its owner a single coin of profit. The tax is calculated from the cadastral value of housing, so it will not be difficult to calculate and schedule it.
• Ongoing repairs. Any property requires maintenance and internal refurbishment. In Spain, it is very important not to break the rules and regulations of the condominium. Before carrying out any repairs or works affecting the external part of the property (installation of satellite dishes, awnings, balustrades, glazing of balconies and terraces, etc.), it is necessary to obtain the approval of the housing association. Internal maintenance and construction works may also require a presence of the municipal license.