I decided to brave a Spanish realtor with my fucked up Spanish to see what buying a condo in Santiago de Compostela entails. I contacted the realtor after seeing his listing on idealista. It’s similar to our Zillow stateside. I asked him a few questions and he showed me the condo last Thursday.
I view a condo purchase in Spain as an investment. I am not looking to buy my dream home here, or anywhere. Just a little place which I can live in for a while, fix up, and eventually rent out. The numbers are favorable and flats (condos) are more popular than single family homes here.
This home was advertised at 60,000 euros and it was a 3×1. Only two of the bedrooms fit a grown adult, the other one has a slanted roof which makes it rather unusable. I’ll discuss what I learned about the real estate process here in Spain and throw out some numbers at you.
Shopping for a Condo in Spain
When looking through listings you’ll come across a lot of privately listed homes compared to ones listed by realtors. It’s still recommended that you have a realtor or at least a lawyer represent you during the purchase. There are a few details which you don’t want to skip over. I’ll discuss some Spanish real estate pitfalls a little later in this article.
Realtors aren’t as money-hungry as the ones in the US. In fact, they are rather laid back and it might take some time to schedule a viewing of a unit. I think this is a good thing. People here seem to handle this process rather calmly.
It’s rare to find a family which has owned multiple units over their lifetime. People either rent or buy a condo and stick with it. The reason they can hold onto a condo even when retired is because property taxes aren’t back-breaking. A household on a retirement budget can still afford owning a piece of property because they don’t have hefty annual property taxes to deal with. Nor insanely high HOA dues.
There are two different realtor types in Spain. The traditional realtors deal with the locals, simple. Then there are falshier realtors who deal with the expat community in Spain. They often speak English and do a lot of things in-house.
The all-inclusive realty offices have lawyers, architects, designers, and connections in city bureaus to help expedite any processes. They deal with buyers who live outside of the country and they can help handle all the documents and translations.
Prices in Compostela
The prices range from 35k to 5m. You can find villas and you can find rat’s nests. For 35k the flat will be very beat up and will need major renovations. You may even have to deal with squatters for those lower prices.
For 60,000 euro you can get a livable 2-bedroom flat in the older parts of the city. This will be an older building. Meaning, it won’t have an elevator and it’s just a bit more rundown.
A newer building, usually in the newer parts of the city, will be around 150k for a studio and 200k for a 1-bedroom. A 3-bedroom will cost closer to 300k in the newer buildings.
60,000 Euro Condo
I stumbled on this cond through idealista.com when searching for units in the 60k euro range. I like the older part of the city more than the newer part. It has a little more character and you can find quieter pockets in there.
This unit has a little mold on the bedroom walls because the roof window is old and probably leaks. Could be moisture as well which is a little more of a problems in the humid weather here in Galicia, northern Spain.
It’s the top floor, the 4th floor, and so you get a rooftop patio which is small but gets direct sunlight. The roof of the building is slanted which is why the ceilings are low and also slanted inside the unit. I have to admit that this isn’t the best example flat I picked but for the price it’s not terrible.
It’s a stone building much like many of the buildings here. There is no drywall, instead it’s a stucco finish which isn’t something I’m too familiar with.
The floors and the kitchen and bathroom walls are tiled. That was the thing here in the 80’s, everything got tiled. It makes for a very messy renovation but it’s not impossible.
Purchasing a Condo in Spain
To buy a condo in Spain you must have a NIE which is a government identification number and helps track taxes. You will need a bank account for which you’ll need that NIE. That’s really all you need. You don’t have to live here, you don’t have to be a resident.
As of 2019 Spain is very open to foreigners owning real estate here. They will readily extend you a mortgage if you can qualify for it. They give mortgages in the 30-40 year range and interest rates are in the 3% range as of this writing.
The underwriting is very similar to that of the US. You prove your income, you list your debt, and list other real estate ownerships. You won’t need a credit report from your country from what I have gathered here so far.
Mortgage fees aren’t exorbitant. Expect 1-2% for the cost of getting a mortgage.
The arbitrage for Americans is rather favorable if you’re willing to purchase a cheaper flat here. If you have $50,000-$100,000 saved up then you can purchase a home here in cash. You won’t have to deal with a mortgage.
You’d save on all the paperwork and documents and on the origination cost of a mortgage. Your next headache would be to transfer cash from your own bank in the US to a bank here. I hear it’s not that hard but I have a hard time believing that.
Problem Real Estate
Here are a few real estate purchase pitfalls from what I have learned. I’m sure there are many more.
Fake listings. This is common enough, especially when it’s listed as a private sale. The person might even show you the place which they don’t own. Crooks can get rather creative when they know a piece of property has been sitting empty.
Tax problems. The current owner or previous owner may owe back taxes. There might be liens on the property, etc. You need a good realtor, ideally a lawyer, to look into all of that before completing the purchase. Or else you’ll inherit those back-taxes.
Utilities. If you’re buying a condo then you’ll have water and electricity but you may not have gas. There is propane which comes in the portable canisters and there is natural gas which is also sometimes called city gas. The advantage obviously lies with the latter and not all condos have them. You should inquire if it’s available and it might be something as simple as running the pipes.
Neighbor trouble. This is rare but if an adjacent neighbor is squatting or has a leak in their piping which they refuse to repair, you’re screwed. There is no stateside HOA so there isn’t as much enforcement as we are used to. You can go to the city and fight your neighbor there but the leak can continue. I’ve only come across very few horror stories but it happens.
Heating & cooling. Climate control is a big deal here because summers can get pretty hot and winters cold. You should inquire about both heating and cooling. Electricity can be rather expensive so many opt to have radiator heaters which run off of hot water, which is gas heated. If A/C isn’t installed and you want it then you have to make sure the building will let you install one.
Squatters. It’s not as big of an issue in these smaller cities but you could run into a squatting situation. In Spain the person living in a particular place is very well-protected. The red tape here will make it a nightmare dealing with the city in order to get someone evicted. I won’t get into the politics but you have to know people who know people.
Rental Income Investment
You can rent your flat out by signing a contract with a tenant, much like in the US. It’s a 12-month lease. There are a lot of AirBnb’s here as well but you have to register with the city and it’s slightly more involved but not impossible.
If you’re not a Spain resident then you pay 24% in taxes from your rental income revenue. It’s 18% if you’re resident of Spain. Taxes are much simpler here though overall higher.
The height-challenged flat from above would probably rent for 320-375 euros a month. I know, it seems like very little. There aren’t a lot of flats available for rent here so there is a demand for them but at the same time people pay the higher prices for only newer buildings.
Rent goes up to 900-1,000 euro usually for a 4×2 or a townhouse versus a flat. A townhouse in the newer parts will cost nearly 1 million. A townhouse that’s renovated in the older parts of the town will go for around 600k.