Strong Abogados provides a comprehensive service to individuals and investment groups who want to buy property in Spain. We listen carefully to your investment plan in Spain and we review the costs associated in executing your plan. We have lawyers, accountants, and economists to handle the legal work in the property purchase, the licensing work if you plan to rent the property, and tax work for the company.
SOCIMI: The SOCIMI is Spain's version of the Real Estate Investment Trust.
ETVE: Spain is an attractive choice for establishing a holding company for foreign securities.
The following is a short financial summary for an actual building for sale in Barcelona, with 7 apartments for rent.
|Area||365 square meters|
|Number of apartments||7|
|Expenses related to the purchase (taxes, notary, property register)||41.200 €|
|Materials (1000 €/m2)||365.000 €|
|Total investment||865.650 €|
|Up-front investment||400.000 €|
|Annual mortgage fees||30,984.00 €|
|Cleaning||2.200 € per month|
|Utilities||1.500 € per month|
|Administration||1.800 € per month|
|Total annual expenses||66.000 €|
|Rent per apartament per day||140 €|
|Annual income||214.620 €|
|Annual cash flow||117.636 €|
|Return on investment||10,66 %|
The real estate meltdown that hit Spain especially hard in 2008 left the country with thousands of unsold and foreclosed properties. Some of these assets are still in the hands of the banks, others are owned by construction companies, and others remain in the hands of the creditors. There have been many attempts to promote and to reduce that pile of properties. But with the Spanish real estate market suffering the largest price drop in centuries, many of these properties are still waiting to be sold. After the agreement between the government and the Spanish banks, a great number of these assets are now in the hands of SAREB, the so-called "banco malo".
SAREB stands for "sociedad de gestion de activos procedentes de la reestructuracion bancaria". SAREB was established by the government in order to save the banks from ruin. The main activity of SAREB is to manage and sell the properties from those bank entities that received protection (primarily BFA-Bankia, Catalunya Caixa, NCG Banco-Banco Gallego, and Banco de Valencia). Banks, energy companies, and other investors own a 55% share of SAREB; the other 45% is owned by a governmental institution called FROB. As of today, SAREB has received 197,474 assets: some are loans, others mortgages, and some plain properties.
The signs of recovery are clear. The massive discounts and the 40% price drop is once again making it attractive to invest in Spain. Pura Strong, partner at Strong Abogados, said that the renewed interest in real estate in Spain is revealing a different type of investor than in 2006. The current clients are not looking for a holiday home on the coast, but tend to come from investment groups or holding companies who want to invest in whole buildings in the cities. They want to renovate these buildings and then rent or sell the individual units, according to Ms. Strong. The Spanish market is perceived as "supply" by investors from countries such as Russia and China. Group investors and real estate holdings companies are watching the Spanish real estate sales figures with interest.
How does SAREB fit in? In the opinion of experts, SAREB is not going to be of primary interest to these investors. In many cases, the properties sold by this institution are termed as "toxic" -- they lack the quality or location to attract international investors. The big Spanish banks have made great efforts in online marketing and which already have their websites full of properties ready to be bought.
If you buy a property principally as an investment, then depending on the value of the property or properties and your future plans, it may be cost-effective to form a company (SL), paying off the cost of forming the SL and accounting for the SL.
You should consider the question of whether to become a legal resident or not, and whether to create an SL or not, as part of your international tax plan, a plan that should be thought out if you live or work in more than one country.