Buying holiday home

Cricketer said:
@Leper Must have been a long day at work!
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Hi Cricketer, You have the advantage of me and I'm having a few senior moments about another thread on chest freezers; in another I'm getting confused about somebody zooming (means different things to me, I've just discovered) you'll have to explain and I'll see if I can get the fingers moving to answer you.
 
Cricketer said:
@Leper You said you'd come back with Chapter 2(b) but you had to head to work. On 8th October 2015!
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Cricketer, you're right. More importantly, I can now trace my "senior moments" to 2015. I didn't realise I have been in these parts for over five years. The railway line I spoke about is still dormant, but the new international airport (Murcia International) is operating smoothly.

I'll call this post Chapter 2(b), now where did I leave that mug of Hot Chocolate . . . .?
 
Cricketer said:
@Leper You said you'd come back with Chapter 2(b) but you had to head to work. On 8th October 2015!
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Hi Leper
I’ve really enjoyed your posts and advice on buying a holiday home abroad. You’ve made me think twice and strongly reconsider.

However, when I start day dreaming and come back to the idea of buying a holiday home in Spain, I write out the positive justifications for owning a holiday home and the negative reasons. The negative reasons always seem to out number the positive ones.

You mentioned in one of your posts that you wouldn’t recommend buying even at a bargain price. I would have thought that buying at a good price would have been a positive. Maybe the seller for genuine personal reasons needed a quick sale etc. Would you still recommend not bying if the “good quality” property was significantly reduced?

I mentioned “Good Quality” property because I feel there’s no point in buying something cheap in a bad area.

Does the annual taxes, fees and maintenance, eventually knock the fun out of it?

One of my concerns is the Spanish inheritance tax. It varies from region to region and can be quite high. It’s just something else to consider if the property is passed on to the children.

Always happy to read your thoughts on this topic, as it might prevent me from making a mistake.

Derry
 
Hi Derry,
I didn't walk blind into buying Spanish property like some in that recent RTE television programme. Their motive largely was greed (but with few exceptions). Mine was investment especially for our retirement years (a different sort of greed). I was never astute with money, lost heavily on Eircom shares (but it could have been much worse) and a subsequent investment portfolio was about as inspiring as Donald Trump's recent efforts. We bought an Irish holiday home years before and the location was too isolated, I kid you not. We took a hit there too with replacing the kitchen's flat roof, refurbishing the whole house with new windows etc, improving the site etc before we sold it on. Twenty years ago I had a lump sum to invest and I did all my research and that was a time when Jetmagic advised that 50,000 people from Munster had purchased property in the Alicante region alone.

My sights were set on Spanish bricks and mortar. What could go wrong? We bought an apartment that was going to have us set in clover after retiring. In 2007 the hit came and price of property in Spain was hit much harder than in Ireland. OK! - We weren't selling anyway, but thought we could plough through the recession, pick up some rentals, keep costs down and wait for things to improve. Then B R E X I T, something I needed like root canal treatment. But, in the years leading up to what will eventually be Brexit, property prices increased and even ours was within €20K of what we paid. We thought we'd have another year of increase in prices and lax as we are we decided to hold ground and with my luck, the Coronavirus struck. Certainly, this will affect mainstream property prices in Spain, but probably only those that were "rubbishy." Rule Number 1 if buying property in Spain:- Ensure you can sell it, even at a loss. Some properties there cannot be sold, I kid you not (no planning permission, water treatment plant near etc).

We continue to use our apartment and rent it out when we are not using it. But, the rental market on the Costas is swarmed with people like us and it is a Renters' Market. Our apartment is good, centrally located, modern, has magnificent views, within 2 mins walk to the beach and supermarket, restaurants and rental prices off season are around €700 per month including utilities, internet, parking etc. It is the warmest and driest area of Spain and attracts retired couples mainly from the UK.

If I were asked to provide one sentence to prevent people buying property in Spain it would be:- You will pay €2K in community fees, Spanish taxes, Public LIghting Tax, Car-Parking tax even before you pay for electricity, water, refuse, internet charges, advertising. If you are comfortable with this then go ahead and buy Spanish property. Now is the time that is right and you'll never get a better chance to buy the right property.

Is it easy to rent out your Spanish property?:- During June, July and August you could make a fortune (€550 - €650 per week in rentals; deduct utility and internet costs). We use the place during the whole summer for family and friends thereby sacrificing the high end of rental earnings.

Can you purchase good quality property property in Spain?:- Yes. Remember, many bought off plan at a much cheaper price and can now sell fairly cheaply and still make a profit. I was not one of those, I regret to say. But, buy off plan is risky, what you are buying can change at any time before the building work is completed (a little secret you heard here first and probably the best advice you'll get).

Do I wish we hadn't bought?:- Yes (especially when I see how much I can rent there in the off season).
Will we try to sell within 12 months?:- No. But, perhaps in the near future?
Will we continue to use Spain for holidays?:- Yes.

Summary:- If we hadn't bought in Spain we would have invested in well known investments and would have lost much, much more. There were worse investments than Spanish property, you know . . .
 
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Leper said:
Hi Derry,
I didn't walk blind into buying Spanish property like some in that recent RTE television programme. Their motive largely was greed (but with few exceptions). Mine was investment especially for our retirement years (a different sort of greed). I was never astute with money, lost heavily on Eircom shares (but it could have been much worse) and a subsequent investment portfolio was about as inspiring as Donald Trump's recent efforts. We bought an Irish holiday home years before and the location was too isolated, I kid you not. We took a hit there too with replacing the kitchen's flat roof, refurbishing the whole house with new windows etc, improving the site etc before we sold it on. Twenty years ago I had a lump sum to invest and I did all my research and that was a time when Jetmagic advised that 50,000 people from Munster had purchased property in the Alicante region alone.

My sights were set on Spanish bricks and mortar. What could go wrong? We bought an apartment that was going to have us set in clover after retiring. In 2007 the hit came and price of property in Spain was hit much harder than in Ireland. OK! - We weren't selling anyway, but thought we could plough through the recession, pick up some rentals, keep costs down and wait for things to improve. Then B R E X I T, something I needed like root canal treatment. But, in the years leading up to what will eventually be Brexit, property prices increased and even ours was within €20K of what we paid. We thought we'd have another year of increase in prices and lax as we are we decided to hold ground and with my luck, the Coronavirus struck. Certainly, this will affect mainstream property prices in Spain, but probably only those that were "rubbishy." Rule Number 1 if buying property in Spain:- Ensure you can sell it, even at a loss. Some properties there cannot be sold, I kid you not (no planning permission, water treatment plant near etc).

We continue to use our apartment and rent it out when we are not using it. But, the rental market on the Costas is swarmed with people like us and it is a Renters' Market. Our apartment is good, centrally located, modern, has magnificent views, within 2 mins walk to the beach and supermarket, restaurants and rental prices off season are around €700 per month including utilities, internet, parking etc. It is the warmest and driest area of Spain and attracts retired couples mainly from the UK.

If I were asked to provide one sentence to prevent people buying property in Spain it would be:- You will pay €2K in community fees, Spanish taxes, Public LIghting Tax, Car-Parking tax even before you pay for electricity, water, refuse, internet charges, advertising. If you are comfortable with this then go ahead and buy Spanish property. Now is the time that is right and you'll never get a better chance to buy the right property.

Is it easy to rent out your Spanish property?:- During June, July and August you could make a fortune (€550 - €650 per week in rentals; deduct utility and internet costs). We use the place during the whole summer for family and friends thereby sacrificing the high end of rental earnings.

Can you purchase good quality property property in Spain?:- Yes. Remember, many bought off plan at a much cheaper price and can now sell fairly cheaply and still make a profit. I was not one of those, I regret to say. But, buy off plan is risky, what you are buying can change at any time before the building work is completed (a little secret you heard here first and probably the best advice you'll get).

Do I wish we hadn't bought?:- Yes (especially when I see how much I can rent there in the off season).
Will we try to sell within 12 months?:- No. But, perhaps in the near future?
Will we continue to use Spain for holidays?:- Yes.

Summary:- If we hadn't bought in Spain we would have invested in well known investments and would have lost much, much more. There were worse investments than Spanish property, you know . . .
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Hi Leper

Thank you very much for your reply and more importantly, your honesty.

Your experience is really a flashing warning light for people interested in buying a holiday home abroad. You highlight very clearly the positives and negatives and to be fair, there are many positives. I’ve paid a lot of attention to all your posts on the topic, I do appreciate you coming back to me.

The area you purchased in is beautiful and your property should eventually regain its value. At that stage, you can decide to jump ship If it suits.

I wish you the very best
Derry
 
I’m starting to think about buying somewhere overseas. Not today but sometime in the next 5 years or so. The plan would be to borrow some of the money. I think it’d be important to borrow the money locally rather than here. Just in case the Euro goes bang or something bad happens in that country.
 
I have the price of a decent Spanish property sitting in the Prize Bonds at the moment. My "wins" in the past year have been appalling. I keep saying that I am exiting these and am going to buy something somewhere.
I was lucky in that I purchased shares in a well known cement company last March when they hit their "low" in many years. I know "timing the market" is frowned on here but I like to think I did. Unfortunately I sold after a £5 rise per share, they have continued to rise by another £9 per share. So I didn't time the exit properly. Still I made a chunky profit but not the huge profit that I could have made. Is this good luck or bad luck?
Leper, none of us get our timing right.
I talk through purchasing an overseas property with my wife constantly. As Derry 2020 says above the reasons not to purchase outweigh the reasons to purchase. I am not sure if I like the idea of returning to the same place every year as the world is a huge place with lots to see. Then again Covid has made me look at things differently. Maybe I need to stick to one safe place than put myself at risk by travelling all over the place.
I am not sure if my sons, with their own families, would want to or have the time to use an overseas property. It could sit idle for long periods. I would not need to rent it out.
I was looking at some pretty nice Spanish hotels this morning with a view to going away next year. I could have two nice holidays, including flights on the taxes and community fees that I would have to pay. Another couple of holidays on the other utility bills etc that I would have to pay. I usually have about 5 overseas DIY holidays every year. I spend about €5k in total. That is usually enough to sate my appetite. Throw in a couple of Irish summer breaks and that's enough.
But the lure of having somewhere abroad still draws...
 
It’s an interesting question. I’m also wary of tying myself to one place and feeling ‘annoyed’ if I’m somewhere else whilst I’ve bricks and mortar costing me money.

We have a plan to ease off quite significantly on the run-in to retirement and to try to spend a lot of Thursday evenings to Mondays outside of Ireland. Of course you could do that anywhere and rent, but I like the idea of a nice base that we could travel to easily, that could host family and friends comfortably, and that we could transition to living in for some months of the year over time.

On the one hand, you mightn’t choose to buy something now but equally you’ve longer to fund it and a greater ability to borrow.
 
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Gordon Gekko said:
It’s an interesting question. I’m also wary of tying myself to one place and feeling ‘annoyed’ if I’m somewhere else whilst I’ve bricks and mortar costing me money.
On the one hand, you mightn’t choose to buy something now but equally you’ve longer to fund it and a greater ability to borrow.
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I owned a mobile home in Brittas Bay back in the 90's. It was expensive to keep.
I did not get value out of it. I was working during the week and could only use at weekends. Many husbands travelled there on a Friday after work to meet up with the family who were spending the summer there. My own children were teenagers and didn't want to be there either.
They have their own young families now and would probably love it if we still had it.
We also felt annoyed when we went elsewhere, knowing that we had this expensive holiday home sitting idle.

In retirement I am not sure even now that I would spend every weekend there during the summer. It really depends on the type of person you are. Many fathers were members of the local Blainroe golf course and played golf at weekends or just sat in their mobile homes and read the newspapers.

My brother owns a house in Spain. He spends a lot of time just reading books sitting in the sun. He has a car there but he hasn't travelled around Spain. In fact he seldom strays from the area where he bought.

I would hate this. I like to see lots of new places. If I owned in Murcia let's say but I wanted to travel to Seville I would need to stay overnight. I would probably think that I am paying for a hotel in Seville while having a home in Murcia. Why not just fly from Dublin to Seville for a few nights instead and not own a holiday home.
 
Hi Folks. We have a one bed apartment in Nice, bought in 2007. Property prices in France have remained pretty static since then dropping and rising about 10-15% in the 13 years I think. We bought in the city centre, so it is saleable or rentable to residents if we needed to go down that route. We rent it out successfully when not in use, this year being an exception, and generally it pays its way. Costs are high with management fees, taxes and utilities, accountancy fees etc, so it would be very expensive to retain it just for personal use. We as a family generally get about 6 weeks use out of it and Nice is a great place with all of the attractions of a beach holiday with city life and cultural life as extras. It has generated acceptable returns as an investment and we are very pleased we bought it.
 
I have a confession to make. Since we bought Spanish property we have gone to many other countries on holidays. OK! we use Spain for our extended off season breaks but we travel to other holiday spots as well. We are pretty partial to Italy and France. Usually we rent a car in Spain (you can pick up some good bargain rental prices in the off season) and we head off in whatever direction we wish. I can remember even one trip where we were skiing in the Alpujarras one morning and swimming in the Mediterranean later that day. Before somebody points out that the skiing in the Alpujarras is not as good as the slopes of Austria/Switzerland, I know that well, but I'm no Franz Klammer.

I know of many reasons for not buying a holiday home in Spain, but being confined to taking holidays there is not one of them.
 
Interesting post and thanks Leper for the well written overview of your experience, I loved that.

I am currently just at the starting phase of thinking of buying a property, most likely in Spain. This is part of a longer term retirement plan (10-15 years time), but rather than wait until I retire (and using the 25% pension lump sum), I am considering bringing forward and purchasing now (well in the next 18m-2 years) for a couple of reasons.

1. I can afford the mortgage and my savings are doing nothing.
2. Prices are relatively low and maybe Covid will see them stall/drop over next year.
3. If prices do eventually rise, I may not be able to afford it later at retirement.
4. It would allow my retired parents who live in the UK to join us on holidays for just the cost of a flight, so will be good for them financially and something they will most likely be past enjoying/not able for by the time I retire.
5. As the complete opposite of what someone said above, the €5/6k I usually spend on holidays with the kids will cover the annual fees and our holiday (flight only). I see this as a positive. Whilst I have no intention of limiting our travels to the one place - at the moment with 3 young kids it would be much more convenient to do so. Plus later on short breaks for 2 can be taken much easier and cheaper when we want to experience over places.
6. I am planning on renting out most of the year, where feasible (at least until retirement) and would hope to cover at least the interest portion of the mortgage and hopefully more.

The only thing putting me off which I do not have full details for is the rates and charges locally and TAX to pay on any income.

Does anyone have any good links for resources to further research?

thanks 50+O
 
In some areas of Spain you are obliged to register as a person who rents out his/her property. You must conform with safety/fire rules. The local "council" will expect to be paid 19% of the rental paid (minus utility fees etc for the periods of rentals). You may have to hire a financial advisor to act for you if you don't speak good Spanish. These fees to the council are paid quarterly in most areas.

. . . . . and Spain being Spain the letting rules can change at any moment i.e. the 19% can be upped without notice and/or the expenses claimed may not be allowed.

On the plus side:- The astute purchaser can bag a bargain by waiting until September before buying. If property is not sold by the end of December, it usually remains on the estate agents' books for most of the following year. You might find estate agents off loading then. But, don't jump into a situation to buy a high rise apartment in Ballymun-in-the-Sun resorts; you'll never sell it if you want.
 
It’s probably worth setting out some of the various options for funding such a purchase:

- You can use savings
- Equity release in Ireland is no longer possible
- You can use some of your retirement lump sum
- You might inherit it (so there are foreign and domestic tax issues to consider)
- You could take out a local mortage; typical rates in Portugal and Spain for non-residents are circa 2.5% with loans of up to 70-75% provided. Terms can go up to 30 years depending on one’s age
- You could downsize and use some of the proceeds
- You could sell up lock stock and barrel and move overseas; friends of my parents did this and regret it to this day
 
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