Real estate investing is more than just finding a place to call home. Investing in the real estate sector in Spain has become increasingly popular over the last couple of years and has become a common investment thread. The real estate business investment opportunities are truly lucrative and profitable, the real estate business is really booming in Spain and people are making millions from the business. One good thing about the investment opportunity in real estate in Spain is that the investment opportunities it presents are so diverse.
Real estate business investment opportunities are one of the oldest forms of investing, having been around since the early days of human civilization. Real estate investing is broad and the financial activities centered around making money from tangible property or cash flows somehow tied to tangible property.
Being a foreign real estate investor looking for real estate business investment opportunities in another country necessarily implies seeking the peace of mind of leaving your affairs in professional hands, which can provide exquisite and efficient service and the safety of the transaction.
To start with the investment opportunity in real estate in Spain, it t is advisable to use a Spanish local-based Lawyer who will check the legal status of the property that you are intending to buy, and the real estate lawyer will consult the information about the property available at the official sources of information, making sure it will be free of charges, encumbrances, liens or debts, and that all payments of local contributions, taxes, fees, and charges are up to date.
Power of Attorney and NIE Document you need for your Investment Opportunity in Real Estate
It is convenient to grant a Power of Attorney to your lawyer to act on your behalf with regard to every step in the purchase. The Power of Attorney can be granted in Spain before the Notary. It can also be signed in a foreign country, but in that case, it must be translated into Spanish and legalized in order to be enforced before the Spanish Authorities.
To complete the power of attorney to start your investment opportunity in real estate, it is very important to attach a Notary verified a copy of your passport or any other ID document for the real estate business investment opportunities.
The NIE is a Spanish document granted by the Homeland Authorities. It will be requested by banks (when opening a bank account), by the Notary upon signing the public title-deed, and by the Tax Office when settling and paying the taxes from the purchase. This document has to be applied for at the National Police Station, and the application form must be submitted along with the following other documents:
– The reservation agreement (to prove a legitimate interest in obtaining the NIE)
– Copy of the return plane tickets
– Copy of the NIE application public fees payment
Costs and expenses
Purchasing investment property in Spain involves certain costs that have to be paid to the correspondent authorities (taxes) and services provider (fees) that work throughout the transaction. 2 types of costs must be clearly distinguished:
* upfront expenses, and
* completion expenses.
Upfront expenses: They are essential to start working on the file as they will allow your representative to have a clear knowledge of the legal status of the property. The upfront expenses are:
Land Registry Report (nota simple) and Certificates: these documents show the legal status of the property, the owner’s identity, its charges, encumbrances and any other limitations on the title that might affect the free use and enjoy of the property. Estimated budget: 100 Euros.
Town Planning Certificate: this is a document produced by the Urban Authorities at the Council, and it certifies the status of the property according to the local Town Planning regulation, making sure it is not in breach of any law, as certain urban charges do not appear in the information from the Land Registry. Estimated budget: 400 Euros.
Power of attorney Estimated budget: 100 Euros
Property valuation: in cases where, according to the Town Planning Certificate, the property shows a charge or encumbrance, it is advisable to evaluate the matter. Estimated budget: 300 Euros.
NIE. The estimated budget of 25 Euros per applicant
Legal Fees: 1,25% of the property purchase price, plus VAT. These documents provide very important information about the property and its legal status. Therefore it is strongly recommended that they are paid as a deposit together with the legal fees.
Completion expenses: They are paid at the completion stage, and it can be done by bank transfer to the client’s own bank account in Spain. The completion expenses are:
Taxes: The taxes to be paid depending on who you purchase the property from when buying from a developer or a company trading in the real estate market (considered the first sale) the following taxes apply:
* VAT 10% of the purchase price
* Stamp Duty 1,5% of the purchase price
When buying from an individual (considered a resale), the following tax applies to Transfer Tax. The rate is established according to a progressive scale:
* Up to 400,000 € 8% of the purchase price
* From 400,000 up to 700,000 € 9% of the purchase price
* From 7000,000 € 10% of the purchase price. When VAT is applicable, it is paid simultaneously upon every payment made to the seller. And when Transfer Tax applies, this must be paid within one month after the signing before the Notary.
Fees: The services rendered by the Notary and the Land Registry are covered according to a fee scale based on the purchase price. In order to be on the safe side, it is advisable to budget 0,8% of the purchase price, split as follows:
* Notary fees: 0,4%
* Land Registry fees: 0,4%
Other costs: After the signing of the public title-deed of purchase, other services have to be considered and set up to complete the buying process:
* Change of the utility contract for electricity, water and gas services. These are established by the supply companies. Estimated budget: 500 Euros.
* Community of Owners representation and arranging Community quotes payment as direct debits to the client’s Spanish own account.
* Plusvalia tax settlement at the local tax office. This is a tax established by the local authorities and it is determined according to several criteria like the cadastral value, size of the property (m2), the price that the seller paid, etc. This tax is paid by the vendor, but it is a normal practice that this amount is withheld by the purchaser from the price on completion and paid by him/her on the seller’s behalf within one month after the signing.
Culled from Butterfly Residential | Purchasing a Property in Spain
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