Have you fallen in love with an apartment but you’re not sure if it is a good investment? Many times we find a space with ideal architecture, layout and design but it isn’t aligned with our lifestyle or business plan. To keep this from happening to you, here are five tips for successfully buying a property in Madrid.
1. Evaluate the area and see how much renovating the property would increase its value
Consider buying a property that needs renovating. Did you know that each 1€ spent on renovating a property in Madrid increases its value by 1.5€? Although the Madrid property market has undergone much transformation in recent years, there are still some “fixer-uppers” to be found. This is why it’s important to work with an experienced agent, as they often know about hidden gems that haven’t yet hit the broader market.
Madrid Estate has access to exclusive, off-market property listings. You can contact our founder Fabiana Greci directly to learn more. Her email address is fabiana@madrid-estate.com or you can reach her on WhatsApp at +34 680 306 337
2. Buy with an objective in mind
It is important to always keep in mind why you are purchasing an apartment in Madrid. Are you buying a property to live in, or to rent? If you are purchasing a property to live in, you should make sure the neighborhood matches the lifestyle of you and your family. Not a party person? Then Malasaña is not the neighborhood for you.
Relocating to Madrid
If you are relocating with kids, schools will be of primary importance. If you want to live in the city itself, Trafalgar is a great option as The Brewster Academy has a campus in the neighborhood for grades K-12. For those that prefer extra space and the peace of the suburbs, La Moraleja and Pozuelo de Alarcón both have excellent schools and detached houses on offer.
It’s also important to keep in mind that if you are buying a property in which to live, rental yields are not your primary concern. Thus you can comfortably buy in a more expensive neighborhood and benefit from the future capital appreciation of your real estate investment.
Investment property
When buying a home to rent, you must be practical and think about what will bear fruit from the beginning. It’s important to like what you buy, but it doesn’t need to be the apartment of your dreams because you will not be living there. Rather, the neighborhood and floor plan must be optimized for business. Do you want to rent to college students? If so, properties in Tetuán and the Center are the best located. You should also consider whether your want to rent it medium (our recommendation) or long term as this will be a key variable when you choose your neighborhood and layout. If your target client is a business person, the neighborhood of Chamartín is your best bet, as this is the location of Madrid’s Central Business District.
Focus on the things about a property that you can’t change. Ceiling height, luminosity and the number of windows are all key factors on the rental market. Essentially, you want some distinguishing feature(s) that make the apartment “pop” amongst all the other property listings in your neighborhood.
3. Always add an additional 10% to the property’s value to budget for closing costs
You have to take into account the additional costs associated with buying property in Madrid: taxes, notary fees, legal fees, accountancy fees and registering the property with the Land Registry.
Here is a brief summary of the fees you will need to pay:
ITP (purchase tax): 6%
IAJD (land registry tax): 0.3% – 0.7%
Lawyer: 1% of purchase price
Notary: 0.1% – 0.4%
4. Don’t lose a good opportunity because you negotiate too much
If you find a property in Madrid that checks off most of the boxes on your list, don’t look much further. We have had clients so concerned with getting a good deal that they let the perfect property slip through their fingers. If you find the perfect property in Madrid, our tip is to buy it and don’t fixate on negotiating the perfect deal. Good properties with ideal characteristics are flying off the shelves as demand is so high. The maximum you can negotiate on properties like this is 3%.
5. Get your documentation in order before you begin your property search
We always advise our clients to start their property searches by getting their paperwork in order. If you need a mortgage to buy your property, you need to find a Spanish bank that will pre-qualify you for a Spanish mortgage so you know exactly how much money you have to work with. Spanish banks can be slow, so you need to work with a bank that can close the deal.
You will also need a clean criminal record from your home country to obtain Spanish residency. This can take some time, so best to start the process early. If you are a US citizen, we have found the Washington DC based firm Roca Authentications to be very helpful in obtaining government documents and getting them apostilled. An apostille is an international version of a US notary. Official documents need to be translated into Spanish by a certified translator (don’t get your friend from Mexico to do this as they will not be accepted by Spanish immigration authorities) and apostilled by the issuing agency. All of this can take some time so best to be prepared.
