Can I rent my property in Madrid?
There is no MLS in Madrid, no Zillow, or any comprehensive database or website with all Madrid real estate listings. Thus, when you walk into any real estate office in Madrid they can only show you their own listings. Further, up to 20% of all Madrid apartment sales are for sale by owner, and there are nearly 2,000 agencies representing the thousands of properties on the market, but with no networking between them. These are just some of the reasons you need trusted help when buying a property in Madrid.
What are the necessary steps for purchasing a property in Madrid?
We get this question so often we wrote a whole blog post about it. Can can read it here: The Steps to Investing in Madrid Property
What is the role of the notario?
A notary verifies all the documents that are signed. They also make sure the property is clear of debt (in Spain, mortgage debt is attached to the property, not the person who took out the mortgage. If there is debt, your lawyer will work to get it cleared before you close) and it is 100% owned by the person that is selling it.
Are there more/less tax advantageous ways to purchase a property in Madrid?
Yes! If you set up a Spanish company and buy the property via that, you can save up to 45% in real estate taxes. In short, if you are a non-EU citizen, you should set up the company regardless of the amount you are investing in the Madrid real estate market. If you are a EU citizen, it is tax efficient to set up a company to buy the property if you are investing more than 500,000€.
What about a property inspection?
Property purchase in Spain doesn’t require the seller to provide any type of inspection to the buyer. Furthermore, the seller has no obligation to correct any problems that are revealed. It is thus important that you hire one of our trusted make a thorough inspection (the cost is about 500€ + VAT) to determine the status of gas, electricity and pipes on the apartment you select, so that you can make an informed decision whether to purchase the property.
Are there other arrangements to make at the time of purchase?
Besides all the legal due diligence that must be done on your selected property, we encourage our buyers to purchase insurance on the property, and its contents, that is effective as of the closing date.
Once the purchase is complete, you will want to have the utilities transferred to your name, set up telephone and Internet and open an account with the building management company. Madrid Estate takes care of these arrangements for our clients as part of our start to finish service.
It is customary, as well as convenient, to set up automatic debit of these bills directly from a Spanish bank account, so that you are not struggling to keep up with bills from afar.
How can I manage my property when I’m not in Madrid?
Madrid Estate provides a 360 degree, complete service which includes everything from high-end marketing and management, as well as ensuring the best maintenance and security of your property. We monitor your property while you’re away, making sure that everything runs smoothly while you are gone. We provide continuity of care and maintenance in your absence, helping you to avoid dealing with emergencies, rent collections, damages to your property or paperwork. We take care of reservations and contracts, rent collection, check-in, professional check-out cleaning & laundry, top maintenance of your property, check-out, property inspection after check-out, inventory review and restock after check-out.
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Is the Madrid real estate market expensive?
Madrid real estate has been an incredible investment over the past years, rising dramatically in value since early 2016. The average price in some neighborhoods has doubled, tripled or even nearly quadrupled over the last 5 years, with an average annual appreciation of around 7%, and a conservative rental yield of 5% average. All this makes Madrid real estate a wise and safe investment.
Is it possible to finance property in Madrid?
It is possible to get a Spanish mortgage as a non-Spaniard. However, banks will usually only lend about 50% of the purchase price in this situation. Also, note that any funds provided by Spanish banks do not count towards a Golden Visa.
What closing costs and fees must be paid on a property purchase in Madrid?
You should expect to pay the following, in addition to the money you pay to purchase Madrid real estate:
- ITP (transfer tax) which is 6% of the purchase price
- The IAJD (land registry tax) which is 0.3%-0.7% of the purchase price
- Legal fees, which amount to 2500 or 1% of the purchase price
- Notary fee, to make the purchase official. These depend on a variety of factors, but are typically between 0.1% and 0.4% of the purchase price. Typically, one pays a smaller percentage on higher priced properties.
How is the purchase completed, and must I be in Madrid for the final signing?
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Who is committed to what at the signing of the preliminary contract?
Both the buyer and seller are committing to complete the transaction. The buyer has to put down 10% of the agreed upon purchase price. However, there is a law that says the seller has to give you back double the amount of the down payment if they back out of the offer. Thus, the more down payment you put down, the more likely you commit the seller into selling, even if they get a better offer.
Is Madrid real estate a good investment?
Madrid real estate has been an incredible investment over the past years, rising dramatically in value since the early 2016. The average price in some neighborhoods has doubled, tripled or even nearly quadrupled over the last 5 years, with an average annual appreciation of around 7%, and a conservative rental yield of 5% average. All this makes it a wise and safe investment.
Can I move money into and out of Spain freely?
Yes, you can. There are no exchange controls. If your money is not in euros, we recommend using a dedicated exchange rate broker so you can get the best rate, on an online service such as Wise.
After I have settled in, what other ongoing costs and property taxes are due on Madrid real estate?
The annual Property Tax (Called IBI), which is usually 0.4% of the land value of the property (that’s why it is so cheap compared to the USA) and the owners association fee which tend to vary depending on the number of neighbors and relative size of your apartment (which determines your proportionate ownership of the building), as well as the services and amenities in the building: an elevator, a live-in concierge, a courtyard with flowers that need tending, collective water and/or heating are some of the factors that will play into the amount of the dues.
The fixed monthly dues take care of the regular maintenance and upkeep of the building’s amenities. It also takes care of any special maintenance or updating – a roof that needs to be redone, refurbishing the façade of the building, or adding an elevator – that are voted on by the owners at an annual meeting, or at a specially convened meeting if the need is urgent or if a particular owner wants to bring a point up outside the regular annual meeting. Any special projects that are approved by the owners are paid for by special assessments, which are similarly accorded in proportion to your share ownership of the building.
On average, an apartment of about 80m2 will have dues of between 150 to 300 euros per month.
Why should I choose ME to help me buy a property in Madrid?
As we have mentioned before, the Madrid real estate market is tricky to navigate; especially if you aren’t from Spain. The entire team at Madrid Estate is comprised of expats who have been through the same process you are going through. We understand your needs and will hold your hand every step of the way.
Should I buy as an SL (Spanish corporate entity) or as an individual?
We recommend owning your property via a limited liability company, or “SL” in Spanish.
In Spain, you will pay taxes only on net income, which means total revenue minus costs and other deductions, like amortization or depreciation. On this net income, after all costs are netted out, you will pay 25% in taxes.
However, the net income, after all costs and accounting deductions are taken into consideration, is usually negative the first 1-2 years in accounting terms, because of the purchasing costs, refurbishing etc…
In the end, you pay taxes on income only after 12 to 24 months, and only on 50-60% of income thanks to deductions.
If you’re buying over 300k€, it is better to set up an SL to purchase the property. You will earn 20% more after taxes.
Can I find an apartment in Madrid on my own?
If you don’t speak fluent Spanish, no. It will probably be impossible. Even if you do speak fluent Spanish, it can be very difficult. There is no central listing for homes in Spain, so when you walk into any real estate office in Madrid they can only show you their own listings. Further, up to 20% of all Madrid apartment sales are for sale by owner, and there are nearly 2,000 agencies representing the thousands of properties on the market, but with no networking between them. So it can be done, but it is very difficult and time consuming. We have had clients spend years trying to do it on their own before coming to us.
What documents/requirements do I need in order to buy a property in Madrid?
In order to buy a property in Madrid, you’ll need to first set up your bank account and have the paperwork required by your bank in Spain. In order to do this, we will suggest the best banks for foreigners and will help you all the way to obtaining your bank account. Please note that banks in Spain only accept paperwork in Spanish or English; we will provide official translators so you can submit the required papers to the bank.
Once we have opened your bank account, we will get started on obtaining your NIE (Spanish tax number). This can be done with our trusted lawyers or by going directly to the Spanish consulate in your home country and applying for it (please bear in mind this process might take 3 weeks or more).
The idea is to start with the paperwork and let it run while searching in order to be ready when we find your perfect home or investment in Madrid.
Can I get Spanish residency if I buy a property in Spain?
Yes, you can. In fact, Spain has the best Golden Visa scheme in Europe. If you spend 500,000€ or more on a property (note: this does not include refurbishment costs), you can get Spanish residency for you and your family. After five years you will receive long-term residency, and after ten years you will be eligible for Spanish citizenship. Moreover, there are no requirements for how long you must reside in Spain.