Buying a Property

Investing in property on the Balearic Islands is an exciting prospect, whether it be as a holiday getaway, a lucrative business opportunity or a permanent home. It is however important to examine every aspect of the buying process and assess your personal and financial situation to ascertain the right property for you at the right price and to avoid common pitfalls that can make it more expensive and difficult than anticipated,
At Von Anderson Real estate we have years of experience in guiding buyers every step of the way and have compiled the following list of things to consider before starting your journey to overseas investment.

The decision to purchase property in the Balearics can be inspiring and life-affirming, but some find that having not used due consideration before leaping into buying a home can leave them disillusioned with their acquisition and feeling that they have wasted time and money. This result must be avoided at all costs, so before you start your journey carefully consider the following points.

Why do you want to invest in Balearic property?
What are the total cost implications?
Where on the islands do you want to buy?
What will the property be used for? (Holiday home, buy-to-let, permanent residence etc)
Type of property required, (Villa, Finca, Apartment etc)
Size of property and plot required (square meterage, how many bedrooms etc)
Modern or traditional?
Personal preferences (sea views, country views – coastal or rural property)

Decisions on these factors made before embarking on a property search will result in a smoother, faster, and more enjoyable purchasing process.

Offering almost year-round sun, a relaxed, leisurely lifestyle, and breath-taking natural beauty the stunning Mediterranean Islands of Mallorca and Ibiza have found a special place in the hearts of everyone who has ever visited them. These factors make it is easy to see why so many aspire to own a home here. Demand is undeniably high but there remains scope for finding the right property at the right price, with a degree of flexibility and some (thoroughly enjoyable) locational research.

When deciding where on the islands to buy real estate consideration is needed on more than just personal preference. It is important to look at the intended use of the property, whether it be as a holiday home, permanent residence or buy-to-let. Financial implications also require careful consideration as do culture, lifestyle, amenities, and services. Our guide to ‘Mallorca’ and ‘Ibiza’ will help you to choose the ideal location and type of property for you.

It is strongly advised that you secure the services of a professional financial advisor to assist in setting a realistic budget and to collate information on foreign currency, local taxes, one-off, and ongoing payments. Our sections on Costs provides a general summary of these costs, but a financial advisor can provide a personal plan specific to your needs and budget.

The rate of conversion can significantly affect the price you pay for your property and related costs. The timescale between initiating the buying process and completion can be months apart and a change in the exchange rate could increase the necessary funds and affect the affordability of your dream home when it comes to the final cash or mortgage payments you need to make. Specialist currency brokers can fix the cost of a property from the outset. Currency specialists could also save you money by offering better exchange rates than the banks or building societies. Savings of 2% the equivalent of 3.000 euros on a property worth 150.000 euros are not uncommon. Our currency experts, Currencies Direct, can answer any queries on foreign exchange. Please Contact Us for more details.

These include travelling to view properties and setting up the transaction. You may also need to consider renovation and refurbishment costs, as well as the necessary legal fees, transfer tax, Stamp Duty, and, on new-builds, VAT (IVA). On buying the property you will have to pay the equivalent of VAT (known as IVA) and local taxes (known as IBI’s).

Owning an overseas property incurs a liability to pay certain local authority taxes and, in the case of an apartment or property with communal facilities there will be annual maintenance and management fees. (See our section entitled Buying for more information). Any mortgages or loans made available to foreign investors will be subject to fluctuations in the exchange rate affecting the cost unless it is fixed at agreement stage. Make sure you leave yourself some flexibility in case of a rise in interest rates in the country where you attain your mortgage. Always seek advice from a professional who can explain every aspect involved in obtaining and fulfilling the obligations of an international mortgage. Visit the website of our partners, Mortgage Direct, for more information and guidance.

Home insurance is also a necessary expenditure that could impact on your final budget. If you are using the property as a holiday home, check the policy carefully. Is it fully covered even when you are not there? Are you required to turn off all power or drain the water when you leave? If you are planning to let out your property to tourists, you will need extra cover, such as cover for the cost of alternative accommodation for your guests if your property becomes unavailable due to unforeseen circumstances and to cover any loss of income incurred. You will also need Public Liability Insurance (PLI) in case of injury to a guest because of an inherent fault in the property such as cracked tiles. If your property has a swimming pool ensure it is also covered by the policy, both against damage and for public liability.

Choosing the right Real Estate Agent plays a vital role in ensuring a secure and affordable investment. Personal recommendations from a solicitor or someone who has successfully bought an overseas property in your chosen location is one of the best ways to find a suitable agent. The internet also provides invaluable information to find reliable well-established English-speaking agents with local knowledge and experience in the Balearic property market. A good estate agent will listen to your personal requirements and possess a sound understanding of the assistance and advice needed by each individual buyer.

Several factors need to be considered if you are buying a property to let, either as a holiday home or long-term rental. Firstly, it is imperative that Balearic legislation be fully adhered to and that any local income taxes are paid, and legal obligations met. Always seek professional legal advice on this matter. It is also important that you choose the correct property in the right location for its intended use. If your intention is to attract a higher, short-term lease in holiday rentals for example coastal properties in beach resorts, or peaceful rural villas with a range of facilities are the best option. It is prudent to look at areas where there are attractions such as golf courses, waterparks, or stunning beaches with a sound infrastructure of local shops, bars and amenities. Apartments and houses intended for long term rental should be equipped for year-round living, and whilst the income from such rentals will be lower, given the right tenants, it will be reliable and without the obligation of providing services such as cleaning and linen change. It is essential that professional advice is sought to ascertain the most suitable property for your requirements, to calculate anticipated income and to ensure that the letter of the law is always followed.

Finding the right lawyer will speed up and simplify the buying process and ensure that you do not fall into any of the potential ‘traps’ that have been widely publicised in the media. A good, independent lawyer will be able to confirm that the property you are buying is legal, in that it meets all building regulations, is constructed on a plot designated as urban and not green land and that all paperwork is in order and up to date. Familiarise yourself as much as possible about property law. For example, have debts (mortgage, etc.) been accrued by the owner, on the house? In some countries, the previous owner can lend against his property, with the debt then passing to the next owner of the property. (Nota Simple). These are issues that need to be addressed to eliminate any pitfalls before the transaction goes ahead.

*This information is intended only as a guide. Taxation, planning regulations and local laws on the Balearic Islands are subject to change at any time so, even if you are experienced in property investment, it is always best to seek professional advice at every stage.