Buying a rental property in Spain in the middle of COVID-19

[Verity Macdonald]

Here's the deal:

Agreed price: €159,000

€1000 Reserve put down and lawyer instructed

10% deposit not yet paid (can walk away)

70% mortgage pre-approved but not officially offered (€514/m) 

pre-Corona rental income: €850-950/m

Based on no particular expertise but a bit of research I came to think that any dip in the real estate market due to COVID-19 was likely to be V shaped and short-lived. Therefore as a long-term investment, provided the deal was good, I could go ahead with this purchase now and as long as I had rent coming in, it made sense. However, there are two variables I´m now worried about and would love some advice:

1) The property is located in Barcelona by the beach. Part of the attraction of the property is the elevated rental income over the summer, which is now all but impossible. Who knows when travel restrictions will be lifted, September? Later? 

2) I'm British so I follow the UK news and have seen articles about the mortgage market coming to a complete standstill: https://www.bbc.com/news/business-52106119 Some providers are no longer offering new loans or asking for a much larger downpayment. Will Spain follow suit? Should we take advantage of the current offer ASAP? Currently both full-time employed but who knows..

Does anyone have any clever strategies to a) mitigate our risk in the short term (avoid paying a mortgage with less or no rental income), b) figure out whether now is the time to get a mortgage or c) have any general advice about timing etc.? I´m basically stuck between wanted to delay completion on this deal for as long as possible without losing favourable mortgage conditions by waiting too long. 

I'd appreciate any thoughts or comments!

[Erwin Groenendijk]

He @Verity Macdonald, it all depends whether if you have multiple back up strategies that would work. How are you thinking to fill the apartment if the normally targeted person is not willing to/can not rent it for the meantime? And which amount for rent could you then still get?

In terms of mortgage rates, it will probably not get any better than right now. If you work with a mortgage broker (or even without), you can add a clause in the contract contingent on 'buying the apartment if a mortgage can be obtained'. 

Have in mind that buying an apartment (especially via a mortgage) takes time to finalize. At least 2-3 months before you will have the keys to the apartment. Does the apartment need a renovation? If yes, add another month or 2 to the equation. You can be quite sure that in that time the situation around the virus will be way less than it is now. 

Also, this is a good moment to bid lower and got it accepted. Try to see how far you can go.

Erwin