Investing in real estate in Marbella: to live in or to rent out?
Are you thinking on investing in real estate in Marbella or Costa del Sol? When you’re buying a property and assessing it from an investment perspective, there are important factors to bear in mind.
People who look for properties to buy in Marbella are usually driven not by investment as much as by lifestyle criteria, but the current and future value of a home is something that is of importance to all owners, so it should be taken into account at various key stages:
- When you assess the property before buying
- Whenever you expand, modernise or renovate the home
- At the time of selling
These are three key moments in the life of any home – and homeowner – and quite apart from the primary drivers of lifestyle and enjoyment of the property, its potential for return on investment is of course a key consideration too.
Marbella buyer or investor?
When someone invests in real estate in Marbella, they do not always approach it from the same perspective, depending upon their main reasons for acquiring the home. For a lifestyle buyer and resident, the main focus is on personal criteria, and investment, though important, is of secondary consideration. For this kind of buyer the purchase will always be driven by a strong emotional element, no matter how sensible and focused on facts and figures they are. Whereas those people who buy purely for investment approach it primarily as a business venture, and as a result are far more factual and dispassionate about the whole process.
Ultimately, return on investment (ROI) – i.e. the property’s capacity to earn money over what was invested, is the main interest of a pure investor, yet it should also feature prominently in the choices of end-user buyers, especially in a market such as that of Marbella, where so many of the properties bought are second homes.
Types of income from your real estate investment
Generally, there are two types of income to be derived from investing in real estate:
1. Rental income
The first is income derived from of two types of rentals:
- short-term holiday lets by the week
- long-term tenants renting by the month with a one-year or on-going contract.
In Spain, some owners reserve such a property for their own use in summer, or rent it out as holiday accommodation for thousands per week. This is particularly tempting, but it requires an understanding tenant.
The commercial renting out of properties can be highly lucrative, but carries with it certain legal requirements and income declarations, so is usually best left to a professional property management or rentals agency, who also take care of customer service, maintenance and cleaning for a share of the income. When buying a property to rent out it should be modern, appealing in style and well-equipped, but not too heavily or expensively furnished and easy to maintain.
2. Capital growth
The capital appreciation of the property refers to the difference between the value at time of selling and the cost of buying, and while you can ride a strong upwardly mobile market in the short-term – a practice known as ‘flipping’ if you buy off-plan and sell before completing – there is more chance of making money on a home if you have owned it for some time. Usually, properties don’t lose much value during a recession, and they tend to increase in value considerably more than the rate of inflation during a boom or other circumstances, so property remains a classic asset class. Capital gains tax applies, but can be offset by bona fide expenses made, so it’s worth checking the details with your lawyer or agent.
Of course, properties can fall into more than one category in terms of their usage and potential income, making up one of the following combinations:
- A private residence used as a permanent home by the owner that is never rented out
- A holiday home used part of the year and not rented out
- A holiday home used part of the year and rented out during the remainder
- A property used purely as an economic asset to earn rental income
All of the above properties should under normal circumstances gain in value during ownership, producing a profit for the vendor, but the last two will also earn money while you own the home – be it to minimise maintenance and/or mortgage costs, or to actually earn money. The latter is usually described as an annual percentage return on the purchasing price (after deduction of costs), and in a decent rentals market should get you around 5%. During the recent boom, rentals market returns as high as 10% or more have been realised in Marbella.
What makes a good investment in real estate?
Though a pure investor will be more clinical about the process, a property asset and an actual holiday/home follow the same main criteria in terms of investment value. This is because a good investment property is one that arouses enthusiasm in buyer and rental client alike, though keep it neutral in décor and features, as not everybody shares the same taste. When at the stage of searching for the right home, keep the following factors in mind:
- Location – is the property well-located, in a peaceful, private and secure location yet close to important practical and leisure amenities? This will be important to you as the user as well as any tenant or future buyer.
- Views – does it have good views and ideally attractive natural surroundings? Here sea views are top rated, followed by golf and country/mountain scenery.
- Surroundings – is the surrounding area attractive?
- Design and Style – is the villa or apartment attractive in style and interior detailing?
- Space, Quality and Amenities – is the home spacious, well-built with fine quality materials, fitted with the latest comforts and also featuring such luxuries as a pool and sundeck, indoor pool and spa with gym, and gated security?
- Would you just love to live or spend time there? Well, chances are any rental clients or future buyers would also pay good money to stay in or own such a well-chosen property, and this forms the basis of a good investment.
A benchmark of a good investing in real estate
If you are thinking on investing in real estate in Marbella or la Costa del Sol, you should consider to buy a property at The View Marbella, the first development of Wilma Sierra Blanca in Spain. It is a select gated community of beautifully styled and exquisitely finished sky villas and penthouse apartments designed to offer a superlative lifestyle while earning a big tick on all the elements listed above.
From its hillside position in an elegant, peaceful location it enjoys some of the most spectacular views in Marbella – all the way across flowing golf courses to the sea. Surrounded by exclusive residential areas, it stands out for its architectural styling, gated privacy, superb detailing and luxurious set of amenities.
The View is a landmark residential development, and as they are harder to come by in Marbella, the rarity of such a fine offering makes this not only a prime lifestyle choice, but also an excellent future investment, for few things appreciate as much as scarce privilege.
The View Marbella enjoys some of the most spectacular views in Marbella – all the way across flowing golf courses to the sea.