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WHY INVEST IN REAL ESTATE?

Can you imagine traveling more, enjoying more free time, and securing your family's future? Investing in real estate can make these dreams a reality. Renting out your properties generates passive income each month, while the value of your properties increases over time. It’s one of the safest ways to build a solid financial future.

Benefits of Investing in Real Estate

Passive income: Monthly rental income provides a steady cash flow that you can use to fund your projects, travel, or simply improve your quality of life.

Property appreciation: Over time, real estate properties tend to increase in value. If you decide to sell in the future, you could make a profit compared to the purchase price.

Diversification: Reduce the risk of your investments by diversifying into a tangible and stable asset like real estate, which is not linked to the performance of financial markets.

Financing: You have the option to finance part of the purchase through mortgage loans, allowing you to keep your capital intact and increase your investment capacity.

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BUYING A PROPERTY TO RENT

Investing in a property to rent is an excellent option for generating long-term passive income and has been a popular choice for a long time. But before diving into investment, you need to be clear about how much money you can save and understand the key aspects of financing.

Savings Capacity and Financing

Opting for a mortgage when buying a rental property helps you avoid depleting your capital and allows you to use borrowed funds to finance part of the investment instead of relying solely on your own resources. By using financing strategically, you can acquire more properties or higher-quality homes.

Your savings capacity will determine how many properties you can acquire in the coming years and at what pace. It's important to avoid depleting your capital completely when buying a property, so financing the purchase might be the best strategy.

Keep in mind that for a second property, whether for rental or as a vacation home, banks consider this transaction riskier than buying a primary residence. Therefore, they usually finance between 50% and 75% of the property's value, with repayment terms typically not exceeding 25 years. This means you will need to provide more initial capital and possibly face a higher interest rate than on a mortgage for a primary residence.

Associated Costs

In addition to the initial capital, you will need to cover taxes and costs associated with the purchase. In the Valencian Community, the property transfer tax is 10% of the property's value, although this percentage varies by autonomous community. Additionally, there are notary and registration fees, as well as other additional costs related to financing, such as insurance.

Limited Savings Capacity

If your savings capacity is limited but you have some money saved and would like to invest in a rental property, the first thing you should do is request a personalized financial study from your bank. Everyone has a different financial situation, and factors such as the ability to secure the loan with another property or having high income can influence the amount of money the bank will lend you. The interest rate is usually lower on operations with more limited risk. With this study, the bank will indicate the type of property you can purchase, the maximum price you can afford, and most importantly, the monthly payment you will need to make.

With this information, you can compare the rental income you could receive from a property to the mortgage payment you will need to make.

Evaluate if the rental income covers the mortgage payment and associated costs, such as community fees (if the property is part of a homeowners' association), contributions, and other costs that may arise and are not the tenant's responsibility.

Remember, if you acquire a property with a 10-year loan, you might generate few benefits until the loan is paid off. It's a long-term investment.

Investors with High Savings Capacity

If you have a high savings capacity, such as businesspeople, investors, athletes, or prominent personalities, investing in real estate can be an excellent way to grow your wealth. If you have sufficient capital, you can combine buying financed and non-financed properties, giving you more balance and flexibility to build a solid rental property portfolio.

This strategy allows you to diversify your investments and make better use of your capital. As your properties are paid off, you will generate more income that you can reinvest in new properties, growing your wealth year after year. By buying properties this way, you will be building a more stable financial future, generating monthly income without having to work actively and letting your money work for you.

It is important to keep in mind that real estate investment carries certain risks. If you are ready to explore these opportunities and want personalized advice, feel free to contact me.

INVESTMENT STRATEGIES

If you’re considering investing in rental properties and have saved up capital, you’re in an excellent position to start building your real estate portfolio. Below, we’ll explore various strategies to help you maximize the return on your investment.

Affordable Homes:

• If you choose to invest in affordable homes on the Costa Blanca, especially in Torrevieja, you might focus on 1 or 2 bedroom properties with an estimated rent between €400 and €600 per month.
• Consider also areas near the coast, such as Los Montesinos, Formentera, Rojales, Dolores, or Almoradí, where you might find 2-bedroom apartments at more attractive prices.

Large Apartments:

• Another strategy is to invest in large apartments in high-demand areas with limited supply. Instead of renting out the entire property, you could rent it by the room. For example, if apartment rents in an area are around €800 per month, you could rent a 3 or 4 bedroom apartment by the room, generating between €350 and €400 per room. This model is popular among students and people who prefer to share costs.

Strategic Location:

• Location is a key factor in any real estate investment. Consider investing in properties located in central areas, frontline beach locations, or areas with high urban demand. Such properties can command higher rents, attracting tenants willing to pay more for a prime location.

New Build Investments:

• Investing in new build properties can be very appealing. Whether it's villas or apartments, new properties often offer higher rental returns due to their modernity and appeal to tenants. Additionally, they don’t require immediate repairs, are covered by warranties, and over the long term, their lifespan will be longer than that of a second-hand property, making them a more durable investment.

Diversification and Gradual Growth

There are many more investment strategies, each focusing on different types of properties. As mentioned earlier, the ideal approach is to diversify your portfolio across various types of properties and assess which is most profitable.

If this is your first time investing in rental properties, I recommend starting gradually. Purchase an initial property, rent it out, and once it begins generating passive income, consider acquiring a second property. The flexibility in this business allows you to sell properties if needed, adding great versatility to your investment portfolio.

RENTAL PROPERTY RETURNS

If you have the necessary capital, acquiring properties to rent can be an excellent option. This strategy not only generates passive income but also requires minimal time dedication. In terms of profitability, annual returns typically range between 7% and 10%, making it a competitive investment.

When comparing these returns with the average annual yields from fixed-term deposits in banks, which generally range between 1.5% and 4%, or the average return of a company in Spain, which is usually between 5% and 6%, investing in rental properties stands out as an interesting and solid alternative. Moreover, it offers the advantage of long-term stability and appreciation in value over the years.

If you’re interested in building wealth for your future, this is a great opportunity. Contact us to start building your investment portfolio.

POTENTIAL RISKS

Investing in properties is a great option for generating income, but it’s important to be aware of potential risks. The most common include rent default by tenants and illegal occupation of the property. Having a tenant who doesn’t pay and won’t leave can be a real headache if you don’t take precautions from the start.

In Spain, you can reduce these risks by taking out Rental Insurance. This insurance, which typically costs about half of one month’s rent, offers comprehensive coverage for various unforeseen events.

With rental insurance, you’ll be protected against non-payments, legal costs, vandalism, illegal occupations, and debts for utilities such as electricity and water. This solution provides peace of mind that your investment is protected.

Get proper advice to minimize the risks of your investment. Contact us for more information and protect your assets!

THE COSTA BLANCA

An Attractive Destination for International Investors

Spain has established itself as one of the world’s most desired real estate destinations, thanks to its Mediterranean climate, high quality of life, and unmatched cuisine. The Costa Blanca stands out for its extensive range of properties and exceptional climate, making it an ideal option for those seeking homes in a sunny, coastal setting.

The Spanish real estate market has grown steadily in recent years, largely driven by demand from international buyers. Although housing prices have risen slightly, they remain competitive compared to other European countries, making Spain an attractive option for investment.

It is important for investors to understand the legal and tax requirements associated with buying properties in Spain, as these can vary by region and property type. Consulting with real estate professionals will help you make better decisions and gain different perspectives.

Spain offers a safe environment and has a high-quality healthcare system; additionally, housing prices are more affordable compared to other European destinations. These factors have increased interest from international buyers looking to make real estate transactions in the Spanish market.

Our property portfolio goes beyond traditional homes, including exclusive properties such as hotels, industrial warehouses, gas stations, and homes in the most prestigious areas of the Costa Blanca. This diversification allows us to offer our clients a wide range of investment opportunities.

If you’re considering investing in properties in Spain, the Costa Blanca offers very interesting opportunities. At our agency, we would be delighted to provide you with our services and expertise to help you find the perfect investment.

Investing in properties is an excellent way to generate passive income and build long-term wealth. Explore your options, choose the strategy that best suits your goals, and start building your financial future.