Six tips for property investors in Spain looking to maximise profits

Wednesday, February 05, 2014

Six tips for property investors in Spain looking to maximise profits

The Spanish property market is attracting small investors again. The property crash has increased the number of buyers and lowered their starting budget.

These tips from the Spanish Property Investment finder Daniel Talavera are for those who aim to make money and generate wealth from property in Spain in 2014 using different strategies and trying to reduce taxation.

The market will never be as it used to be, but now and in the future there is and there will be a market to invest in - whatever is the framework and economic climates.

1. BUY TO REFURBISH AND RE-SELL... great opportunities.
This is a very powerful method when the location and the price is just right. It is working well in this climate especially now that refurbishing prices are low. The problem is that you will have to pay a good rate from the profit in tax (up to 27 per cent Capital Gains Tax).

2. HOLIDAY LETTINGS... Good profit but uncertain in some regions.
This is a good option if you are the sort of investor looking to enjoy your Spanish property for holiday breaks rather than being completely hands-free. But it's not as simple as it used to be, and you must be aware that some Spanish regions are restricting private holiday rentals in order to protect their hotel industry. There are restrictions already in place in Mallorca and Catalunya, and the Canaries and Andalucia policy makers are seriously considering the ban. Research carefully the region where you are planning to invest, and take legal advice - not just the estate agent's.

3. BUY TO LET... declare you income. Declare the rental income and deduct as much as possible from your earnings. Now many things have changed in the Spanish property market, including being able to "hide" your rental income from the tax office - especially because tenants get a tax back when declaring the rent. If they declare the rent and you do not, you will be caught and get a fine. The taxation on rental income is currently 24.75 per cent. Nevertheless, in order to maximize your rental you can deduct a number of expenses that can be justified as landlord-property owner expenses to maintain the rentable standard of the property.

4. FORM A LIMITED COMPANY that runs property rentals. Currently there is a good option to reduce by 80 per cent your tax from rental income. Create a limited company that exclusively rents properties - the minimum number of properties to do this is eight.

5. BUY DIRECT FROM OWNERS... who become your tenants. Currently there are opportunities to buy below-market-value properties that are already tenanted. You need to know distressed sellers and the right people in this sector to find the right opportunity. Tread carefully and seek independent legal advice, as always.

6. REDUCE TAX IN RENTAL PROFIT... To reduce tax on rental profit and reduce costs, negotiate with your tenant to pay the Council Tax (IBI) (which in Spain is at the owner's expense) and reduce their rent to compensate. This way you will get let gross income but you will be taxed less and pay one less expense.

Get help buying a property in Spain

A Place in the Sun produces free detailed guides to buying property abroad. Download the guide to buying a property in Spain or search our for sale listings for a property in Spain.


A Place In The Sun