INVESTING IN SPANISH PROPERTY
BUY FROM THE PLANS AND MAXIMIZE RETURNMany small investors are achieving very high returns - up to 200% per annum and more - by buying property in new developments on the Costa del Sol to where, it seems, that the majority of Northern Europeans would like to relocate. This high level of return is achieved as a result of a combination of factors, the main being the continued increase in demand for Costa del Sol property and the very advantageous terms of payment offered by promoters.
ONE YEAR AGO A PROMOTER IN TORREBLANCA OFFERED 2 BEDROOM APARTMENTS FOR 100.950 EUROS. THE SAME PROMOTER TODAY IS OFFERING A NEW RELEASE ALSO IN TORREBLANCA WITH 2 BEDROOM APARTMENTS AT 141.322 EUROS.
This example is not exceptional and the increase in price over the one year period simply reflects a general price increase in this type of property caused by increase in demand and inflation.
When you purchase property in a new development directly from the plans there are normally very good terms for payment. A pre-arranged mortgage of around 70% is usually available and the purchaser will need to pay only 30% of the purchase price in stage payments over the 2 year construction period. During this construction period the following factors may cause the value of the property to increase.
INFLATIONGeneral property values should increase with inflation and 5% per annum would be a reasonable expectation, although in recent years this has been much higher.
BEST UNITS SOLDThe best units such as penthouses, corner units, etc. usually sell out quickly, then prices of these units start to increase.
INCREASE IN CONFIDENCESimilarly as sales progress and very few units remain, the promoter increases his original prices and everything else follows.
CONSTRUCTION PROGRESSESOnce the main structure is up or a show flat is ready, prospective buyers can envisage the finished product, this makes the project more attractive and values continue to increase.
COMPLETIONOn completion of the project you will have a brand new apartment in a new block with beautiful gardens and pool. This will obviously be worth much more than when it was only a plan and a plot of land.
The above explains why prices should increase during the various stages of development of a new project. Often units in these new developments are bought and sold before a brick is laid and sold on again changing hands several times before completion.
200% PROFIT IN 12 MONTHS.
The very favorable payment terms enable small investors to make high returns, as you need only a small proportion of the purchase price to secure the property.
For example let us suppose you purchase an apartment from the plans for € 100.000 contracting to pay € 30.000 in stage payments over the two year construction period. If you are able to sell this apartment after one year, for € 115.000 you have a profit of € 15.000. At this point you will have paid only half of your agreed stage payments i.e. € 15.000. But this € 15.000 of payments will have been made gradually over the year and on average you will have had approximately € 7.500 invested during that year. As this has made a profit of € 15.000 your return is approximately 200%.
Copyright © 2009 richboytoys.com