All Forum Posts by: Erwin Groenendijk

@Rafael Pinho forgot to respond to your question regarding the mortgage broker. Yes feel free to send me a message and I can put you in contact 👍

@Emily Anderson true on the flat 24% tax rate on rental income without the possibility to deduct costs from it.

Keep only one thing in mind: rental income is being added to regular taxable income (salary and rental income).

So I could deduct costs before ending up with taxable rental income, however for me, it is being added and calculated together with my salary income.

That means I'm easily reaching higher tax brackets even after the deductions, while with a flat rate it always stays the same (even if you earn way more rental income). Not before that long it could become more interesting for you than for us here.

Now, for us building a portfolio of rentals (and btw also an option for Americans), we avoid this by not doing it as an individual but with a company (SL) and changing it to company tax (first two years 15% and after this 25%) and creatively deduct way more costs.

It is true though that this is a good way if your strategy is to reinvest your money time by time building something bigger/passing it along to kids/relatives etc, because when you want to take money out of your company you would need to pay dividend tax or in the form as a salary.   

Agreeing with @Mike Lambert here that we need to have in mind that the Spanish mortgage market has been regulated more since '07/'08 and that it is normal here to pay down on deals. In other countries the mortgages could go up to close to 90% or above, that is not the case in Spain. 

We think that this is only good though to be investing in deals that you are really confident about.

Mike, by the way, the mortgage landscape is getting more open bit by bit. The BRRRR method becomes possible if you know the right mortgage brokers, also for foreigners (it is true that for Americans they have their specific criteria to look at things). I'm not talking about a cash-out BRRRR by the way, normally they force you to invest the mortgage money they give you directly in a new deal (however, there are also some ways to avoid this).

One reason why you should have Spain in mind and why we could compete with Boston is because of the property prices. Keep in mind that a property in Spain on average costs around ~180.000. In Boston, you probably couldn't even buy a storage space for that money. The entrance barrier is lower and for that reason easier to get started. 

Hi @Spencer Feuerbach, welcome.

We are investing in the Barcelona and Valencia area. We also have a real estate Telegram group where we talk daily about real estate topics in Spain. Send me a message if you think that would be interesting. 

Spain as a country has a lot of things to offer, also in terms of the various provinces. Have you made up your mind about where you would like to focus on?

Hi @Sohina Kareer, like @Mike Lambert is saying within Barcelona it is now possible to obtain a tourist license anymore, also not in the less central neighbourhoods in the city. There is still the possibility of purchasing a property that already has a license, however keep in mind that one of their plans for the upcoming years was to re-evaluate perhaps all licenses given in the 'tense' zones and redistribute them to other places. These are just plans for the moment and I see it difficult that they will get this abusive while the country's government historically has always been left-oriented without involving themselves in this way. 

You could still get tourist licenses outside Barcelona or in other cities and at the same moment keep in mind that this is getting harder. They basically look at the density of licenses already given in a certain location and based on that just stop at one point with giving them. 

HI @Brenna M.,

We are investing with an SL here in Spain and helping many others to do this as well. There are a couple of advantages and basically, the conclusion is that when you decide to build up a portfolio at some point an SL is most appropriate. 

Regarding the tax rate, you are right. The first two years (when making a profit) are taxed at 15% and after that, this is a fixed 25%.

The documents you would need to file, among others, are the ones for paying VAT (IVA in Spain) and the company tax.

We are normally doing the bookkeeping with a professional accountant, just for the sake of wanting a professional person to manage our activities and because it is not our core activity. We have seen at times even higher prices for accounting. 

Hope this helps,

Hi @Emily Eisenhauer, 

We are investing in the Barcelona and Valencia area and are not that familiar with Granada. What we can help you with is what it is like to be investing in Spain, as I came to live here 8 years ago and now do deals every month. 

You can request financing as an individual or company, depending on your long-term strategy. If you are thinking of building a portfolio, managing this from a company is usually the most logical way to go. For individuals, you can get up to 80% LTV and as a company around 60%.

Hope this gives some direction.

Hi @Tony Valle, 

We don't have anything like automated calculations but we do everyone via Excel.

Your gross income minus:

- ~25% for a property management company

- utility and internet bills

- 5-10% capex

- insurance

- building community fees

- potentially a mortgage

- profit taxes over the amount that is still left

This should get you on the way

@Mike Lambert I get your thinking here by reading through it. Just know that we and our clients are getting this as fixed rates for mortgages.

@Mike Lambert no no we are talking here about fixed mortgages.