All Forum Posts by: Mike Lambert

@Basit Siddiqi

You came to the right conclusions when it comes to LTRs, although there are always exceptions and deals to be made/had.

I don't agree with your assessment of the economy being poor though. In fact, the Spanish economy has been doing quite well in a European Union context over the last few years. I'm not sure where you spent time in the country but there are wealthier and less wealthy areas and there are areas of Spain that have a much better economy than most of the US. Of course, if you compare with your home city of New York, it's another story but that doesn't seem to be fair.

If you look at the GDP per capita, it's indeed significantly lower than in the US but that's reflected in the property prices. And that's why we buy property at Spanish prices and rent them to wealthier Northern Europeans and Northern Americans. That's how you get the best of both worlds.

 A few of us have replied to your question in this thread.

@Alex F. you're generally spot on with your comments. Bear in mind that many people don't want to self manage. Time and lack of stress are more precious commodities than money after all.

Also, the train has been  totally overhyped by the real estate promoters. I don't see why it'd bring significantly more tourism to the Riviera Maya and it's not its purpose, which rather to help develop the inside of the Yucatan peninsula (mind you it won't hurt either). The first section that was opened shows that by the way. If it was about developing the Riviera Maya, they had much better spent the money on the road network, which leaves to be desired in my humble opinion.

Hi Emily,

It's all a question of definition but the high season typically ends in April, not May although Covid distorted things a bit over the last few years. Peak season is typically Summer, not March April but there's typically high occupancy during the Easter Holidays.

Hope this helps!

@Emily Anderson

You are correct with the way the taxation works but it makes no difference to most foreign buyers when it comes to cash flow. This is because they're generally in high tax brackets and high tax countries.

Foreigners (Americans and Canadians included) will be taxed in their home country according to their home county's tax rules and their marginal tax rates would generally be higher compared to what Spain will charge, even considering the 24% withholding tax. They generally will be able to deduct the amount of taxes paid in Spain against their domestic taxes. So, even if they were allowed to take tax deductions in Spain, they'd have to pay the amount of the deductions as extra taxes in their home country so it makes no difference to them whatsoever.

Youtube videos can be great but oftentimes they don't give you the whole/real picture.

@Rick Albert

Clearly, Spain isn't the best country for your typical LTR but it's a great place for STRs. It's the second most visited country in the world, ahead of the US, even though it's smaller than Texas!

Agreeing with @Erwin Groenendijk that the price of the average property in Spain is much cheaper than in Boston + as low as the average LTR cash flow might be in Spain, it's probably even lower in Boston.

This being said, you create wealth with capital appreciation, not cash flow. And the capital appreciation is much higher in Boston or the US because Americans are generally significantly wealthier than Spaniards.

That's why we buy in the Costa del Sol, as it is a special part of Spain where there's a huge amount of (wealthy) overseas buyers, including many Americans, who are pushing real estate values higher compared to other parts of the country. For them, these properties are still cheap by international standards hence the real estate market si still booming in spite of all the economic difficulties and uncertainties and there's likely a long trajectory upward ahead for prices.

@Spencer Feuerbach

It seems that you got your real estate education at a time when it might look normal to put very little money down at a very low interest rate. That's not normal and it's never been in most places across the world.

The reality is that being able to invest with a bank putting up 70% of the purchase price at a low interest rate is an excellent deal. This is what I've been getting and we're sitting on huge gains because we're buying right so we're enjoying huge capital gains in a record time with high short-term rental income to boot.

Because LTRs aren't very profitable there, you won't get a high return if you have to put down 30%. That's the fault of the business, not the fault of the bank.

Also, Spanish banks are very conservative in several respects:

1. They generally don't like rental properties because they think it's too risky (low profitability and tenant rights)

2. In order to qualify for a resident loan, you might need 2 years of Spanish of W2-style income. Otherwise, you'll need 2 years of US W2 income. Business income might work but it's more difficult. Also, bear in mind that the DTI ratios are much less favorable than in the US.

3. It isn't that easy to qualify. For example, we had a deal for which one of our investors, a US high net worth business owner, was making several times the amount of the mortgage in cash every year (properly documented) and yet the bank would refuse to give a mortgage. Thankfully for him, he still could get into the deal as a co-investor.

There could be exceptions but do you want to base a business model on exceptions. Spain is a great place to invest provided you do what works there. Trying to duplicate what works in the US (that you learn here) oftentimes won't work.

Hope it helps!

 @Spencer Feuerbach

You can't get the same type of commercial loans or cash-flow refinancings. Basically, the type of loans are different and it's also much more difficult to qualify. Loans aren't just about interest rates.

@Kevin Stewart

Personally, I'd never invested in anything like that anywhere in the world because you have zero control and the promoters/managers end up making up most of the money. But it's a question of personal risk/return appetite.

From my years of experience investing in the Riviera Maya, these numbers seem totally overhyped and idealistic. One thing I've learned is to never trust the developer's numbers. They're generally fabricated and reverse engineered to get the return they want to show. You need to do your own due diligence and come up with your own numbers.

While these numbers are already irrealistic today, I don't know if you're aware but there's a tidal wave of competing supply coming to market in the coming years with hundreds of developments under construction, planned or going to be planned. Ask yourself who's going to buy or rent all these properties.

Finally, I know the search tool here isn't optimal but there are plenty of posts that have been written about Tulum recently.

Hi Spencer,

Welcome to BP and good luck with your Spanish endeavours. Bear in mind that a lot of the BP content is US-specific and doesn't apply to Spain.

As mentioned by @Andreu Ferragut, the rent/price ratio of long-term rentals in Spain is low in absolute terms and compared to many areas in the US and you can't boost your returns with leverage the same way you can do it in the US. Also bear in mind that tenant laws favor the tenants.  For these reasons, we're focusing on short-term rentals in the Costa del Sol.

Hope this helps.