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If you´re investing in property in Valencia, you´ll know there´s a lot to consider! Buying a property is a massive undertaking and the financial side of things can be very complex. In this blog, we´ll share financial advice for buying a property in Valencia, and buying a property in Spain generally.
Below are tips to help you get prepared and avoid some of the most common financial pitfalls.
First weigh the pros and cons, then make a gameplan!
The good news about buying a property in Spain is that the buying process is relatively straightforward. There aren´t any specific requirements for someone international to buy a property in Spain. In fact, the Spanish government encourages foreign investment in Spanish real estate! So there´s less bureaucracy in comparison with some other countries.
The second piece of good news is that properties can offer better value for money than some other locations in Europe. Although Spain´s economy was hit by the global recession, the housing market is showing signs of improvement. If you´re buying a property and moving to Spain, you´ll likely find the cost of living to be lower. Of course, this depends on where you´re coming from but Valencia is known to offer a competitive cost of living.
Now for the cons… No matter which country you choose to buy a property in, you´ll have to pay the associated property taxes. In Spain, you´ll also need to consider that you´ll be taxed on your worldwide income. If you plan to travel in between countries, your annual income tax in Spain may be affected.
Along with the cost of the property and taxes, there are many other costs such as estate agent commission fees and legal fees. These, along with other costs, can quickly add up. By getting financial planning advice early on, you can talk through your options before making your decisions. Getting financial advice for buying a property in Valencia is a great first step for making your investment game plan.
Crunch the numbers and seek financial guidance for buying a property in Valencia
When taking out a mortgage, a good rule of thumb is that it should never go above 40% of your income. But, you´ll need to compare mortgage interest rates at different banks with different conditions.
You can speak to a financial advisor at a bank to get an overview or with a mortgage broker to discuss your options. A financial advisor at a specific institution will be able to give you mortgage details for their bank. Your mortgage broker should have more in-depth knowledge of your case and give an unbiased view of what is best for you and offer alternatives if necessary.
It´s important to consider whether buying a new or resell house makes more financial sense for your situation. Currently, the resale market in Valencia is showing more growth than for new builds. However, if you have more time on your side, you may find that a new build can help you save money as you avoid doing renovations. Once you’ve found a property you´d like to buy, you´ll need to look at the current state of prices and the possibilities of capital appreciation.
After working out how much money you need overall, you should also factor in a `rainy day fund´. Even when you have everything planned out perfectly, you may encounter some unexpected problems and costs. So, it´s wise to leave yourself some wiggle room in case you need extra funds quickly. The amount itself depends on your financial situation and you can discuss this with your financial advisor or mortgage broker. As an example, you could save 1% of the cost of your house for repairs each year.
Get to grips with property tax in Valencia
Buying your dream house is just one piece of the puzzle. You can´t afford to forget about the associated property taxes. When making your final offer for a house you´ll need to take this into account.
As an expat, the process for paying taxes is more complex than buying a house in Spain as a resident. There´s a lot of detailed information available online that you´ll need to go through carefully. It´s important you understand the different types of taxes that apply to you. But you can save yourself the headache of navigating through this information by working with a professional who specializes in property tax in Valencia. This also helps with avoiding any costly mistakes down the road.
When buying a property abroad, it´s worth investing in solid advice to help make the experience as painless as possible. Of course, you also need to be sure that the professional you work with is well-recommended and that you aren’t overcharged for their services. As part of our process at Dream Properties Valencia, we connect you with trusted professionals and ensure you are being charged fairly.
Consider location, location, location
Last but not least, you need to consider the financial impact of different locations. Because this will affect more than just your living environment. Simply put, some locations are better investments than others. For example, there may be an up-and-coming area that will receive significant government investment. Buying a property in an area like this could pay off years down the line as the area becomes more popular.
This leads to our next point on weighing up the pros and cons of a property´s location carefully. The most amazing house in a poor location may never be a sound investment. While you might find a property that needs a lot of work in an excellent location that could pay off later. A small flat in a central location could be more profitable in the long run than a larger one in a suburban area. Again, each situation is unique and it´s wise to get guidance before investing your money.
The next point may seem obvious, but you must visit the neighborhood for yourself before buying a property! You might see incredible photos of a property in another country but you may be disappointed after visiting the location. Perhaps an area seems quiet during the day but at night it gets very noisy. Maybe major construction plans will be taking place in a few months’ time. With a huge decision like buying a house, you want to make sure you´re comfortable with the location and know about future local developments. So, be sure to do your due diligence and ask your real estate agent thorough questions.
If you´d like to be guided around Valencia by experts, our colleagues at Relocation Services Valencia offer orientation trips.
Our final piece of financial advice for buying a property in Valencia?
Don´t be afraid to ask for help! No matter where you are on your home-buying journey, Dream Properties Valencia can help you throughout the process. Tell us your story and we can help with finding the perfect property for your budget. Our services include financial advice, legal advice, interior design, plus more.
Contact us to find out how we can help make your dreams of living in Spain a reality.
