Everything is cheap! You can pick up anything by offering 50% less than asking price, people will accept. Just turn up with some cash in your hand and you can buy anything! Property development in Spain is easy!
All are wrong.
All are rather stupid perceptions of the Spanish property market.
Finding the undervalued gem in Spanish real estate is not easy but it is possible.
Let’s face it there isn’t a Spanish Property Market. (I have written about segmentation in the Spanish Property market many times before) There is nothing so homogenous as a Spanish Property Market as such. Every region is different, every town has its own local factors and every property has a story. Every person or entity (read banks) selling a property sells for their own reasons. Sometimes it is because they want or need to move on, sometimes there are money problems (especially for the banks ;-)), sometimes they are upgrading to their dream home and sometimes the seven year itch hits them and they just fancy a change.
The question however is how do you find the undervalued gem in Spanish Property? It is especially pertinent if you are looking for an investment property to flip or rent out with maybe the potential for capital gain in the future.
So here are our tips for those people looking to find the below market value property in Spain that stands out like a sore thumb. There are various things to look for.
As always in real estate, location is king. If a property is in the right place then it will be good for renting out and also good for eventual sale or flipping. However location is not exclusive. If a property is in a good location then it is unusual for it to be well below market values unless you find one or more of the other reasons below in conjunction with it.
Presentation of property for sale is key these days and many people are too lazy to do anything to make the place look presentable, I won’t even mention the word impressive. If the owner is too lazy to even clean up, or even better has a diamond in the rough that they are either too lazy to modernize or cannot afford to modernize, then you have a good chance of picking it up for a below market value price.
You need to know what is going to be happening in the local area regarding planning and development. Is there a plan to put a new park opposite on the waste ground currently there? Is there a new sports centre going to be built? Will a huge tourist attraction or new shopping centre be opening soon? If so these are all things that can affect the future price and also the desirability of the property for rental and future sales.
If you pick up a fourth or fifth floor flat without a lift (elevator to our American friends) is there the potential or plan to put one in? A lift in a building can double the value of a flat on the fifth floor very easily, however the effect on price of an apartment on the first floor is relatively negligible. Therefore if you notice that there is space to put in a lift and, even better, the community has discussed it and are asking for price quotations from installation companies then it might well be worth jumping on that fifth or even higher floor apartment as it has a huge price jump once the lift is put in.
Modernization of the building
If the facade of the building is looking tired and it needs work or painting then check out if the community have any plans to do anything about it before buying. If they have already started asking for quotes from companies to paint and make it look better then buying before the job is done and selling once finished may mean a much easier sale. Some facades are really beautiful but need a good clean up and painting. The clean look of a classical facade or a simple paint job can change the initial perception of the property for future buyers and tenants.
Is the place you are looking at tired, old, with 1950’s dark wood furnishings, an avocado coloured bathroom that cockroaches would shun, and even a kitchen that would shame the Young Ones? If so you may be able to make it a lot better for a small price. Decoration costs little in Spain, bathrooms and kitchens are not expensive and all other modernization tasks can maybe get done for a lot less than you think. In many cases the apartment will just require freshening up if some of the other reasons given here are in place too then you can do a quick flip for profit.
We are lucky that in Spain properties are built as they are. What does that mean? Well walls do not bear weight in a property in general. Pillars and beams bear weight so you can generally knock out a wall without putting the structural integrity of the building at risk (always get this checked out by an architect or buildings inspector but it is usually the case) This is important because traditionally Spanish apartments have lots of small bedrooms because Spanish families tended to be large in the past. This means oftentimes the apartments seem dark and airless. Opening out spaces and using the light that flows into apartments can give them a totally different feeling and put a lot of value into a property. A four bedroom property converted into a two bedroom one with large bedrooms and light will sell much better usually and that is totally counter intuitive.
If you are looking to buy a house as opposed to an apartment then the classification of the land can mean you are buying something that is undervalued. There are generally three types of land, rustic, urbanizable and urban. If you buy a house on urban land it will generally cost a lot more than a house on rustic land for the same type of house but sometimes you can find a house on rustic land that may have a lot of land and it is due to be converted into urban land in the local plans. If this is the case then you might be sitting on a potential future goldmine.
However bear in mind there could also be an urbanization plan in place and the supply of tarmac roads, mains drainage, street lights, pavements and more will inevitably have a cost. The more land you have the greater this cost. When you have a large plot that cost could well be huge. However the land value on changing from rustic to urban classification is a huge difference and more often than not will massively overcompensate any cost. This is one to be really careful with though and you will need the money to pay for any infrastructure costs that may occur.
The Four Horsemen of the Spanish Property Apocalypse
I have written a previous post about the four horsemen that you can see here. Take a good look. All of the above methods are opportunities but the best opportunities always come from others’ problems unfortunately. You can help people out going through death, disease, divorce or debt even if it seems from outside that you are just taking advantage of their misfortune. You are not. Read the other post well and then come back here for our conclusion.
One More Thing – A Caveat
Remember though it is not as simple as finding a place and selling it a few weeks later for ten per cent more. If you did that you would lose money. The buying costs in Spain are high so you really need to find well below market value properties to even contemplate this. Once you do it though there are plenty of opportunities on the market. There is a system though and if you employ the tactics and look for the conditions detailed above then you will have a much greater chance of finding that diamond in the rough wherever you are.
Come and join us and then you may be able to enjoy scenes like this. Tell us more below.
If this article was useful to you why not make us a mini donation below