All Forum Posts by: Spencer Feuerbach

@Spencer Feuerbach,  @Mike Lambert
Also, just to let you know that if you are not a Spanish tax resident, or a EU tax resident, if you rent in Spain, you are not allowed to deduct expenses from your rental income. Which means that all you make will be taxed at a flat rate of 24%. 

Important to take into account if you are looking for cash flow, rather than property appreciation. 

There was this guy on youtube that explained it quite well (have a look from 07:59 onwards)

I watched his other videos on the STR markets for Marbella and Valencia... quite interesting content.

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. 

@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!

Hi Spencer, from my experience I can tell you that the banks here are not so keen on lending to foreigners who recently relocated to Spain. And the LTC they tend to approve is usually fairly low too. It's sunnier than Boston though!

Yes I absolutely agree. 

In my opinion STR and small hotels are where the money is made in Spain. Andalucia is a fairly affordable area excluding Marbella and some coastals towns.

My family also has benefited from really high appreciation in the last 10 years due to a lot of northern Europeans, specially Germans, British and Swedish people who have a higher incomes and net worths than locals, buying a lot of the real estate in the nice locations. 

 @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.

Have close friends to buy vacation rentals in Valencia.

They pay cash and don't care about it as a business- more so a place for them to visit when they want. As the wife is from Bilbao.

The rental ball game in Spain is pretty poor. Pro tenant, terrible RTPs, appreciation really isn't there to trade equity, stickier terms for foreign investors. 

Why not get into Boston earlier? Boston is always going to be one of the strongest markets in America. It's essentially grade A primo for america.