Advice on investment strategy in Spain. Buy 1 apt in cash or 2 with mortgage

[Louis Albers]

hello. I'd be interested to hear feedback from some of the experts on this platform. 

What would you recommend: buy 1 apartment in cash or buy 2 apartments with a mortgage. Country is Spain (where it's still possible to buy relatively cheap). 

Thanks!

[Michael Stoyanov]

Hi Louis,

I would highly recommend purchasing cash the 1 apartment.

Few reasons for that:

1. Properties without mortgage cash flow fabulously. If you stretch and things get a bit south, you will find yourself in a quite a pickle, versus having the stability and security with owning outright offers.

2.Less restriction  - since you do not have a mortgage you would have more leeway in terms of what you do with the property - you can self-insure it, sell, rent as you please, bring partners in  and can also borrow against it in the future if you would like to.

3.I am not sure if US institution will finance the purchase of  property in Spain, so I assume that you will look for a lender overseas. Here is the thing to consider ( I am from Europe originally)  - the ECB ( European Central bank - the equivalent of FED) has a different approach. In the US the mortgages are usually with a fix interest rate for the 30 year period. In Europe, mortgages are usually for 20 years and they are not fixed, but rather the rate is the  Current Base rate as determined usually by ECB plus a margin ( example - the ECB rate is 3% and the margin is 2%, your mortgage will be 5%). However if the  base rate changes, which it is right now and slowly, but surely it is going up, your mortgage payment goes up immediately - from next month.  This is one of the reason why interest rates in EU have been lagging substantially  behind the US.

To summarize, since it is your first time, I think you should go with the strategy - the best offence is a great defense. If you can do all you can not to loose, the chances of winning increase substantially.

I hope that helps...