All Forum Posts by: Erwin Groenendijk

Hi @Susan Welland,

Biggerpockets is a forum to help out everyone who has a question rather than sharing contact details and obviously trying to get leads in.

Hi @Josh McCarthy and hi to all others who are responding to this post about Spain.

Are you starting out in real estate or do you already have experience in another country?

Spanish real estate offers different interesting points:

- it is relatively cheaper than most other (European) countries

- there are quite a lot of distressed properties that can be flipped or kept to rent for a good yield

- managing to get a tourist license in combination with a tourist location will boost the yield even more

We are hosting a meetup btw in Barcelona if at one point you would like to get in contact with many other people who want to or are already active in real estate here.

@Lewis Anderson, that is not that difficult. Banks are open to giving financing to international people if the risk analysis is positive.

Hi @Mollie Rigby, not specifically however you could try the international-oriented agencies in Spain like Engel & Volkers and Lucas Fox (I used to work for them for some time in Barcelona). It depends also on the type of real estate you are after because these agencies focus on the more luxurious/expensive properties 

Hi @Michelle Hedborg,

Congrats on the move and go for it. If you need to survive in situations, beautiful things are happening 👍

At the same time, try to make decisions that make sense number-wise and not only follow your heart. 

With that amount you could do a lot of things. The real questions is 'where are you guys getting energy from?'

Hi @Jake Woodhouse, nice and let's do a coffee in person when you finally figured everything out and are staying some time here in Spain.

We are working with a partner that is offering our investors hard money lending for their projects in Valencia.

Will send you a PM.

Hopefully the lending landscape will change here at some time as well so that we can apply the BRRRR method as how you guys are doing it.

Then we wouldn't need any entities etc which can sound scary at times to investors.

Good to hear from you 👋

@Joaquin Camarasa, we wish we would have the same cash out refinances here in Spain. However, now with the interest rates that are rising and people are buying less, they were saying that the BRRRR method also became a bit more difficult there right?

Yes, you are right regarding the closing costs. In theory, you would need to pay the closing costs 2 times. When purchasing the property in the beginning and then after selling it again to your other entity. 

The thing is that with a company you can do some creative things. As we are buying with an entity commercial real estate from (most of the times) other companies, the purchase tax changes from transfer tax (ITP, 10% in Spain) to value-add tax VAT (21% IVA in Spain).

Why this is important is because as a company purchasing in this way in Spain, you can receive and pay the VAT at the same time, meaning buying the property and ending at 0% and effectively not having to pay purchase tax. 

Now, once done with the development of the property, when selling it to your other entity, the same is happening because we are usually investing more than 50% in structurally improving the property. And when you do this, the property is seen as a newly developed unit, and newly developed units can be sold with VAT again. And the same story as before applies. Two times you could be at 0%.

The only downfall would be if you would transfer the property to yourself as an individual because then you would need to pay the 21% VAT (which is kind off the transfer tax). 

Yes so if you are used to refinancing in the UK then see it like this: how banks in the UK are willing to lend up to 75% of the newly taxated value in the same entity that you are using, this in Spain is different. In Spain, they will only lend you up to 70% of the purchase price. And there the whole model doesn't play out anymore.

However, this is only when you keep it in the same entity. 

As previously explained, if you create a second entity (even if this is yours again) you can buy the property against a 70% LTV on the newly taxated value and the money that you are paying as a purchase on one side is being received as a sale by the other side. And this means that your development entity can reinvest it again in new projects while at the same time, you are building a rental portfolio in your management entity.

Hope this helps   

Pleasure @Simon Thomas.

This is for @Robert Downs to comment.

What we have been doing to simulate the BRRRR method is creating company entities and selling the property from one entity (usually the developing part) to another (the property management part). By doing this, the property management entity can obtain financing up to 70ish% and pay the developing entity. The interesting part is that you can own both entities yourself.

This set-up we are now doing this on big scale and yes it is working