MUNDO AGUILÓN 14th November 2006
COSTA ALMERÍA, SPAIN
29% below Only 10% deposit
market value Great leveraging
golf development €2,564 per m2
Only 45 minutes
All apartments from Almería airport
with sea views
Less than €26,000 down
We are pleased to bring you a deal that has everything - prospect of capital growth, considerably
under the market value and serious leverage - all in Britain’s number one second home destination,
Spain, in the heart of its hot spot region of Almería.
We’re very excited about Santa Ana. It is located 20 minutes from Mojacar, and being oﬀered at
€2,564 per m2 against the market price of at least €3,800 per m2.
Santa Ana is part of the greater Mundo Aguilón golf resort, a high-end development oﬀering
2-bedroom apartments with underground parking and private terrace space, fantastic views of the
golf course and of the sea just under 2km away. Sea views and a golf course location tend to add
high premiums to property prices. In addition to these, there will be excellent facilities including
golf clubhouse and tuition, communal pools, year-round security, shops, bars and restaurants and
a hotel and spa to be built at a later stage. In short, it is planned as a top quality development.
Santa Ana is part of a master plan which is funded by one of Spain’s foremost banks, BBVA.
Furthermore, BBVA’s development arm is one of the active partners in the project.
By far the best thing about Santa Ana is the ﬁnancial package. The price is €256,400 (£176,828)
for a 2-bedroom apartment, an amazing 30% under market value. With just a 10% deposit
required and 90% payable on completion, the opportunity is there to use leveraging to great
advantage. At a conservative estimate of 5% growth over 5 years, the value of your property could
increase by 81%. This means a truly remarkable 810% return on your initial investment. And all
this in a stable, mature market like good old Spain!
Read on to ﬁnd out more – we think this deal is a winner.
Spain - Santa Ana 2
Key Points WHY COSTA ALMERIA? (PAGES 4-5)
Reasons why we think that the Costa Almería is a great place to invest.
• Only 10% deposit required
LOCATION AND INFRASTRUCTURE (PAGES 6-7)
• 30% discount About the area and transport links.
• €2,564 per m2 ABOUT THE DEVELOPMENT AND DEVELOPER (PAGE 8)
2-bedroom apartments on a golf development with sea views.
• 70% LTV mortgages
SITE PLANS AND FLOOR PLANS (PAGES 9-10)
• Assignable contracts
UNDER MARKET VALUE (PAGE 11-12)
• 45 minutes from On average 30% below market value.
RENTAL COMPARABLES (PAGE 13)
Average returns for similar properties in the area.
DEAL STRUCTURING (PAGE 14)
10% deposit, 90% payable on completion; range of ﬁnancing options.
SENSITIVITY ANALYSIS (PAGE 15)
LTV available and contingency.
COVERING YOUR COSTS (PAGE 16)
Rental yield forecast.
PROFIT FORECAST (PAGE 17)
Capital growth projections.
RETURN ON INVESTMENT (PAGE 18)
Equity increase due to capital growth.
PAYMENT TIMETABLE AND EXIT STRATEGY (PAGE 19)
TAX (PAGE 20-21)
Overview of tax system in Spain
MORTGAGES (PAGE 22)
We recommend Bancaja for mortgages, others available.
LAWYERS (PAGE 23)
CURRENCY (PAGE 24)
Spain - Santa Ana 3
Why the Costa Almería?
EXCELLENT CLIMATE RESTRICTED PLANNING
The south coast of Spain has long been a magnet for northern Having learned the lessons of over-development further
Europeans seeking respite from cold, cloudy drizzle and round the Mediterranean coastline, the authorities have
when you look at the climate it’s not surprising. With an clamped down on the planning permission process. Much
average of 325 days of sunshine per year, the south eastern of this region is protected national parkland with the
corner of Spain enjoys beautiful year-round weather. It has remainder being agricultural land. It is notoriously diﬃcult
a semi-arid climate with mild winters and long, warm to to obtain change of land use permission, and all other
hot summers and very low rainfall too. In fact, Almería building requests have to go through a complicated and
is reported to be the sunniest region in Europe, with an time-consuming process at various levels of government
– local and regional. It is not permitted to build on front-
average 3000 hours per year1.
line seafront land, any new buildings must be set back, and
no building can rise higher than three storeys. This is good
EASY TO GET TO
news for the property investor as it restricts supply and
South eastern Spain is extremely well-served for air preserves the region’s natural beauty.
travel. There are major airports at Almería, Malaga,
Alicante and Murcia. It is possible to ﬂy to the area
direct from all parts of the UK, with no need for a
The Almería province will beneﬁt enormously from
time-consuming transfer in London. All the budget
the upgrade of a stretch of road through the region to
airlines ﬂy to either Malaga (2 hours drive), Alicante
motorway status. When completed in approximately 18
(2 hours), Almería (1 hour) or Murcia (11⁄2 hours).
months (mid-2008), it will create a high speed route to
Flight time is approximately 21⁄2 hours. Valencia and Barcelona and onwards up into France. This
will make travel in and out of the region much quicker
GORGEOUS SETTING and will drastically reduce journey times to these attractive
The province of Andalucia is a large one, and its eastern cities, making it easier to explore other parts of Spain.
end, the Almería region, is blessed with beautiful scenery.
The Sierra del Aguilón (Mountains of the Eagles) rise up BEAUTIFUL TOWNS AND PLACES TO VISIT
to the north and gorgeous sandy beaches stretch out along Andalucia is a stunningly beautiful region, jam-packed
the Mediterranean. In between there are quaint hill towns with fascinating historical sites, reﬂecting and celebrating
and the famous, atmospheric “white villages” where it hundreds of years of civilisation. Not-to-be-missed
seems time stands still. Dramatic rock formations dot the destinations include the Alhambra of Granada, the
coastline and you might recognise places you have seen in romantic and historic Seville, several nature reserves
famous “spaghetti westerns”, and “Lawrence of Arabia”, including the mountains of Sierra Nevada and Cabo de
which were ﬁlmed in the region. Gato-Nijar reserve. Mojacar was built as a Moorish hill-
fort and its streets snake up the steep hillside, oﬀering
great views from the top. Dotted along the coastline are
old Moorish towers, lookouts for sea-borne invaders.
Spain - Santa Ana 4
Why the Costa Almería?
The south of Spain has always attracted the keen golfer Life in southern Spain is laidback and relaxed. Perhaps it
with its excellent year-round temperature and challenging is something to do with the weather, or maybe it is the
and beautifully designed courses. There is plenty to interest proximity to the beach, but life is lived at a slower pace
players of all levels. In addition to the course at Mundo there. In common with the rest of Spain, life should be
Aguilón, there are several other courses in the area which enjoyed, and spent happily with family and friends in
oﬀer variety to players of all standards. front of a cold glass of wine and a plate or two of tapas,
or relaxing on the beach, or savouring the great outdoors
ACTIVITIES (INCLUDING SKIING WITHIN 2 HOURS DRIVE) or just making the most of your absence from the rat race,
This region of Spain is one of those places where it is even just for a little while.
possible to spend a morning on the beach and then enjoy
an afternoon’s skiing in the Sierra Nevada, approximately
2 hours inland. As well as golf – there are a couple of other
courses in the area if you fancy a change from the course at
Mundo Aguilón – there are the obvious attractions of the
beach – swimming, boating (there is a marina at nearby
Garrucha) and water sports. You can also go horse-riding,
hiking, play tennis and enjoy a host of other outdoor
activities, thanks to the pleasant weather.
With its mild climate, south east Spain attracts visitors all
year round. Golfers, in particular, relish the opportunity
to play in the mild weather, compared to the heat of the
summer. This means good potential for rental yields, even
outside of the high season. On a recent site visit at the end
of October, there were still plenty of people on the golf
course, by the pool and in the sea.
Spain - Santa Ana 5
Costa Almería, Spain
Mundo Aguilón golf development is situated on the Costa
Almería at the eastern end of the Andalucia region in the
south east of Spain. At the foot of the Sierra del Aguilón
range of hills, and just under 2km from the coast, the
development will occupy a 200 hectare site, built around
an 18-hole golf course.
The Costa Almería consists of miles of sandy beaches,
interspersed with rocky outcrops and hidden coves. The
nearest seaside town is San Juan de los Terreros where the
beaches are excellent for families as they are gently shelving.
The town itself has good amenities and has recently begun
upgrading its beachfront, including a brand new esplanade
with wooden beach-side bars and restaurants.
The coastline is unspoilt as large-scale and high-rise
development is not permitted on the frontline, and no INFRASTRUCTURE
building can rise above 3 storeys. This means that while
there are plenty of tourist amenities, the area retains an
The south east of Spain is extremely well-served for airports.
authentic Spanish feel, with no shortage of friendly local Almería is the nearest airport to Mundo Aguilón, and is
bars and restaurants to while away a pleasant few hours. 45 minutes drive away.
Other airports in the area include Murcia (90 minute drive),
The ancient Moorish hill town of Mojacar is a short drive Alicante (2 hours) and Malaga (2 hours). There are also plans to
away. Popular with writers and artists, this settlement is build a second runway at Murcia Airport to accommodate the
demands of tourism.
a warren of narrow streets lined with shops, boutiques,
All the budget airlines ﬂy from all major airports in the UK
restaurants and small galleries. It is an attractive place direct to one of these airports, removing the need for a time-
to visit and has a weekly market, as well as colourful consuming transfer in London.
annual ﬁestas, the best known of which is British Airways, British Midland and Iberia also ﬂy to the region
“Moros y Cristianos” in June. 2km away on the coast is from London airports. Flight time on average is 21⁄2 hours and
Mojacar Playa, stretching for 9km along sandy beaches, fares start from £40 return.
with bars and restaurants to suit every taste. Just east of
Mojacar Playa is Garrucha, a former ﬁshing village and later Almería region is well served for roads and has had much
a port where the metal from nearby mines was shipped, funding to improve and upgrade the network. The latest project
where there is now a large marina. is the upgrading of a section of road to fast motorway linking
this area to Valencia, Barcelona and France. This is due to be
Elsewhere in the region there is much to explore, completed mid-2008.
including a large national park, Cabo de Gata-Nijar, a
marine and land eco-system of great signiﬁcance. It covers Spain has an efﬁcient high-speed rail network, but outside of
a huge area south west of Mojacar. Also in the region the main cities, rail services are minimal. It would therefore
are several systems of caves and an attraction called Mini be advisable to hire a car on arrival. All the major car hire
Hollywood, which celebrates the numerous “spaghetti companies are represented in Spain and you can expect to pay
westerns” that were ﬁlmed in the region. around €240 for a week’s hire of a family-size car.
Spain - Santa Ana 6
Road networks in the area are good, with a stretch of with many historic buildings and a charming old town.
dual carriageway currently being upgraded to motorway It has galleries, museums and good shopping facilities. It is
standard. It will link the region with the motorway even possible to take a ferry from here to North Africa.
network to Valencia and Barcelona, and on into France.
When this road is completed (mid-2008) it will slash Almería is well provided with golf courses – Desert
journey times to these fabulous cities. Madrid is currently Springs, Playa del Este and Marina Golf are all within an
around a 4 hour drive away. The city of Almería, the capital hour of Mundo Aguilón. These oﬀer challenges to all levels
of the region, is an hour’s drive and is a bustling port, of golfer and provide variety for the golf aﬁcionado.
• Puerto de • Los Jurados
San Juan de
los Terreros • N
MUNDO AGUILÓN Location
San Juan de los Terreros Seaside town with bars, restaurants etc - 2km
Mojacar Pueblo and Playa
Hill town with shops, boutiques and restaurants, and beaches – 20 minute drive
Almería City 1 hour by car
Madrid 4 hours by car
Almería Airport 45 minute drive
Murcia Airport 90 minutes by car
Malaga Airport 2 hours by car
Alicante Airport 2 hours by car
Spain - Santa Ana 7
ABOUT THE DEVELOPMENT ABOUT THE DEVELOPER
Mundo Aguilón is a high-end golf development, which The Mundo Aguilón development is underway with the
aims to be the best in the region. The 18-hole golf course backing of Anida, the property development arm of BBVA,
was started 6 months ago and has already been landscaped. one of Spain’s largest banks.
The apartment buildings are arranged around the course,
oﬀering views of the greens and fairways, as well as sea and The architect for the Santa Ana section of Mundo Aguilón
mountain vistas. The basic infrastructure of the site is well is a ﬁrm called Arquivir, a well-established Madrid-based
underway, roads have been laid and surfaced, streetlights company who have enormous experience in all kinds of
installed and a long cycle-circuit already completed which building projects, all over Spain. The Mundo Aguilón
skirts the whole site. design is headed by Antonio Arrechea Fúster, a senior
architect in the practice. You can visit their website at
The development as a whole will beneﬁt from the amenities www.arquivir.com where you can view their extensive
provided for the golfer. The main attraction is the course track record, which includes residential and tourist units,
itself, and residents will be oﬀered preferential rates to use apartments and schemes all over Spain, in addition to civic
all facilities, including the clubhouse, the golﬁng school and municipal work for a variety of public bodies as well as
and shop. Each section of the development will beneﬁt commercial projects, hotels, schools and libraries.
from a large communal swimming pool, shops, bars and
restaurants. There will also be other sporting facilities, The project manager for Santa Ana is Barry Haslam-Walker,
including tennis courts and ﬁtness centre. At a later phase a quantity surveyor with 20 years of project management
of the development a hotel and spa will be built. Owing experience. His company’s website (www.novopro.com)
to its proximity to the foot of the Sierra del Aguilón, it is gives full details of their work and experience. He has
easy to enjoy hiking in the hills, which oﬀer great views of extensive experience of the Spanish construction market
the surrounding area. You may even spot an elusive eagle – sector together with international experience on a wide
these hills are named Mountains of the Eagle in Spanish. range of development/construction projects throughout
Europe, North/South America and the Middle East.
The section of the Mundo Aguilón development we
are oﬀering is called Santa Ana. It will consist of 238
apartments in total, with the great advantage that all of Price 2-bedroom, 100m2
these will be sea-facing, providing great views. There will be Euros € 256,400
ninety 2-bedroom apartments available to the investors,
and these will be ﬁnished to a high standard. They will Sterling £ 176,828
have underground parking, garden areas and the whole Exchange rate calculated at 1.45 euros to 1 pound sterling
site beneﬁts from year-round security surveillance. The
apartments will be arranged in terraced “stepped” design,
with each enjoying their own private outside area.
Spain - Santa Ana 8
Santa Ana Siteplan
The area marked in red indicates the development plot. The coast lies 2km south east of the plot.
View from Santa Ana plot.
Spain - Santa Ana 9
The above image shows a conceptual design for the Santa Cristina plot belonging to BBVA ANIDA, elsewhere
in the Mundo Aguilón, designed by Antonio Arrechea Fúster.
Spain - Santa Ana 10
UNDER MARKET VALUE
An apartment in the Santa Ana development is a great to raise ﬁnance through early, discounted sales is
investment because of the combination of two factors: diminished.
a great discount (30% to market value) and the fact
that only a 10% deposit is required. As you will see in However, as with all markets, individual situations
the proﬁt forecast on page 17, this combination could and conditions sometimes occur where a developer
produce a return on investment of 800% within 5 years is happy to sell some of his property quickly and at a
at just 5% capital growth per year. large discount. If he has a high risk approach, this could
be in order to maximise his land buying and building
Finding a suitable development and negotiating ability on multiple sites. If the developer has a low risk
a large discount to market value is not an easy approach, he may wish to cover his downside by securing
task in the emerging markets of Eastern Europe. steadfast ﬁnancing through selling oﬀ-plan contracts. At
In Spain it is twice as diﬃcult, especially on golf Santa Ana the latter is true.
developments with direct sea views. Demand for
this type of property is still strong, the market in To verify the discount on oﬀer from the developer, we
Spain is mature and developers have access to can compare prices and values of other developments of
excellent ﬁnancing options, meaning that the need a similar nature. The following table shows a selection
of our comparables.
Playa Macenas- Lorca Golf Valle del Este
Santa Ana Desert Springs2 Marina Golf4
Los Patios 1 Resort3 Golf Resort5
Building type Apartment Apartment Apartment Apartment Apartment Apartment
Bedrooms 2 2 2 2 2 2
Price € 256,400 € 422,950 € 279,000 € 294,496 € 243,480 € 210,000
Living area (m2) 100 100 100 100 65 63
Price per m2 € 2,564 € 4,230 € 2,790 € 2,945 € 3,746 € 3,333
San Juan de
Location Mojacar Vera Lorca Mojacar Vera
Sea view Yes Yes No No Yes Yes
Swimming pool Yes Yes Yes Yes Yes Yes
Golf Yes Yes Yes Yes Yes Yes
Private parking Yes Yes Yes Yes Yes Yes
Spain - Santa Ana 11
When comparing property prices to determine market At only €2,564 per m2, Santa Ana apartments are
value it is essential to compare like for like – compare 30% below the average market value of €3,638
apples with apples. The previous comparables show a per m2. A discount of this magnitude locks in
selection of golf course apartments on the Costa Almería considerable instant equity. In fact with only 10%
closest to Mundo Aguilón. However, sometimes factors deposit it actually quintuplicates your equity! Buying at
exist over and above simply the category of a property discount also covers your downside – the market would
that will aﬀect its value. In the case of Spain, sea views have to drop by the value of your discount before you
play a major role in determining property value and would begin to lose money, and to help ensure a quick
conservatively add a premium of over 20% to property sale, you also have the luxury of being able to pass on
prices. This should be factored in when calculating part of your discount when you come to sell.
the average market value by adjusting the price per m2
of properties without sea views, as represented in the
table below: ALMERIA GOLF COURSES
Calculating the discount Price per m2
Playa Macenas - Los Patios € 4,230
Desert Springs € 3,348*
Lorca Golf Resort € 3,534*
Marina Golf € 3,746 MOJACAR
Valle del Este Golf Resort € 3,333
Average price: € 3,638
Santa Ana € 2,564
* Conservative 20% adjustment due to non-sea views
A 2-bed 100m2 apartment normally worth €363,800 costs only €256,400.
That’s a saving of €107,400!
Spain - Santa Ana 12
The rental market on the Costa Almería is strong. With
Spain remaining the number 1 destination for UK
holiday-makers this comes as no surprise. There are a
number of property management and rental companies in
the area that can manage both the property and the rentals
for investors. The resort managers have also oﬀered this
service and we are looking at the possibility of organising
a rental pool for the investors. Regardless of this we will
put you in touch with rental companies closer to the time
As with the price comparables, to get a feel for the likely
rental income, we can compare the current rack rates of
other golf course apartments in the region:
Resort Name Type Season
With 320 days sunshine a year the Spanish season is
Valle del Este 2-bed apartment € 525 high long. The high season stretches from mid-June to mid-
La Torre golf September with two weeks at Christmas and two weeks at
2-bed apartment € 825 high
development Easter. Occupancy over these periods is always very high
La Torre golf and rental rates are reﬂectively increased. The weeks either
2-bed apartment € 675 high
development side of the high seasons also tend to do better than the
Valle del Este 2-bed apartment € 600 high remainder of the year, which does not beneﬁt from such
High season high occupancy or rates.
The following table represents the rental yield that could
Marina Golf 2-bed apartment € 203 low
be generated for a 2-bed, 100m2 apartment at Santa
Valle del Este 2-bed apartment € 220 low
Ana, taking into account both the high season with
Low season high occupancy and the low season with a conservative,
average lower occupancy.
Season Occupancy Total Weeks Weekly Rate Total Income Yield
High Season 100% 16 € 656 € 10,500 4.10%
Low Season 40% 14.4 € 211 € 3,038 1.19%
Combined Season 30.4 € 13,538 5.28%
Spain - Santa Ana 13
10% of the property purchase price is due at reservation Using a 100m2 2-bed apartment costing €256,400 as an
and 90% at completion. To maximise leverage and returns, example the ﬁgures could look like this:
ideally this 90% would be covered with a mortgage. This
would also mean that no extra capital need be contributed Purchase value € 256,400
by investors at completion. Unfortunately current mortgage
90% due at completion: € 230,760
lenders in Spain do not oﬀer interest-only mortgages at a
90% loan-to-value. An 80% LTV is achievable but 70% Market value at completion: € 363,823
LTV is more common and easily accessible. So as investors
how can we make this work? 70% LTV available at completion: € 254,676
The answer lies in the discount. Mortgage lenders in The €254,676 mortgage that can be raised on the market
Spain are prepared to lend on the valuation amount of a value of the property would be more than enough to cover
property, not just the purchase value. This means that as the €230,760 due on the purchase.
the development nears completion, the lending bank will
value the property at its market value at the time and will
then lend against it.
In other words a 70% LTV mortgage on a bank valuation of
the property at completion should cover the remaining 90%
due of the purchase price:
€ 300,000 30% Equity
€ 250,000 10% Equity
Purchase Value Market Value
Spain - Santa Ana 14
The view from the Santa Ana plot facing west
There are two key variables upon which the success of this greatly aﬀect the market value of property. So although
strategy depends. They are: at the time of publication we believe to the best of our
knowledge that the information these ﬁgures represent
• Calculated market value is correct, we recommend that all investors intending to
• Achievable loan-to-value mortgage purchase with a mortgage have a contingency plan to cover
any extra equity unexpectedly required at a later stage.
The following tables represent how much ‘room for error’
there is within our calculations.
Sensitivity to Market Price
Mortgage Calculated Break even
required market value market value
€ 230,760 € 363,823 € 330,000 10%
If the market value was 10% less than our calculated value,
then with a 70% LTV mortgage the required amount
could still be raised.
Sensitivity to LTV
Mortgage Break even
Targeted LTV Sensitivity
€ 230,760 70% 63% LTV 10%
A 63% LTV mortgage on our calculated market price of
€363,823 would also be enough to cover the remainder
due at completion.
View from the left side of the land looking north west.
Investors should be aware that any market can decrease as
well as increase and that external inﬂuences can sometimes
Spain - Santa Ana 15
STAYING IN THE BLACK
In any deal, an investor wants a property to stay cash the three years that it will take for the development
positive. This means that the rental income should cover to complete.
the mortgage payments. In this way the associated costs
of using a mortgage are not incurred by the investor and This investment is not about yields or generating income.
the leveraging eﬀect that it provides means the capital It is about the massive capital appreciation, achievable
growth makes your equity work a lot harder. through the generous discount, steady growth and
eﬀective leveraging, as covered by the next section.
If the aforementioned mortgage strategy is adopted
for a Santa Ana purchase, then 90% of the purchase
price would be taken as mortgage. As the percentage
of purchase value borrowed increases, the likelihood
of covering the interest payments with rental yield
decreases. However, there is strong rental demand
for golf property in Almería and the added bonus of
sea views means higher rental rates, and therefore the
higher rental yield can be obtained – as demonstrated
on page 13.
The next table shows a breakdown of rental income
versus mortgage payments for a 100m2 2-bed apartment
costing €256,400. We have conservatively anticipated
that 20% of rental income will go towards letting and
Property price € 256,400
Borrowings required € 230,760
Interest rate 4%
Annual payment € 9,230
Expected annual rental income € 13,538
Costs (20%) € 2,708
Net income € 10,831
Rental income for a Santa Ana 2-bed apartment with
a 70% LTV mortgage should cover the mortgage
payments. As always, we prefer to stay conservative with
the expected rental income. We have not incorporated
the option that the rental rates might increase over
Spain - Santa Ana 16
The south coast of Spain in general has already and untainted hand on issuing building licences and
experienced massive growth and it can in no way be rezoning agricultural land. In fact it took the original
considered an emerging market like those of Eastern owner of the Mundo Aguilón land 14 years to get the
Europe. Consequently the current capital growth land rezoned from farm land to development land
remains steady but low in comparison to some of before he sold it.
Europe’s younger markets. However, undiscovered and
underdeveloped pockets do still exist along the coast Current coastal capital growth rates in Costa Almería
where there remains room for growth. The San Juan de are around 7-8%1 p.a. The lack of current and future
los Terreros area is one such place. supply, and the ever higher demand that exists for
golf properties with sea views, indicate that the capital
The little sea-side village has remained very authentic growth for the Santa Ana development may be slightly
and large development there has been restricted. This higher than this.
is partly due to lack of transport infrastructure (a new
motorway expected to be completed in 18 months The following table represents how growth in the market
will vastly improve this) and also because the territory will increase the property value of a €256,400 purchase,
surrounding the area is protected national park land. assuming a 30% discount to market value at variable
Additionally, the local council has kept a vigilant growth rates.
Forecasted capital growth
Capital Predicted Property price increase from capital growth
growth market value
Year 1 Year 2 Year 3 Year 4 Year 5
5% € 256,400 € 363,823 € 382,014 € 401,114 € 421,170 € 442,229 € 464,340
10% € 256,400 € 363,823 € 400,205 € 440,225 € 484,248 € 532,673 € 585,940
15% € 256,400 € 363,823 € 418,396 € 481,155 € 553,329 € 636,328 € 731,777
Forecast growth excluding transaction costs and tax over 5 years, assuming variable rates of capital growth per annum and assuming a €256,400 purchase.
For cash buyers this would translate into the following proﬁt:
Forecasted return on investment
Capital Predicted Return on investment for cash buyers
growth market value
Year 1 Year 2 Year 3 Year 4 Year 5
5% € 256,400 € 363,823 49% 56% 64% 72% 81%
10% € 256,400 € 363,823 56% 72% 89% 108% 129%
15% € 256,400 € 363,823 63% 88% 116% 148% 185%
Forecast ROI excluding transaction costs and tax over 5 years, assuming variable rates of capital growth per annum and assuming a €256,400 purchase.
Spain - Santa Ana 17
RETURN ON INVESTMENT VIA MORTGAGE
Our four principles of successful property investing are: buying below market value; capital growth; adding value and
eﬀective structuring. We usually recommend that an investment beneﬁt from at least two of these principles to really
maximise returns. Santa Ana ticks 3 of the 4 boxes. It beneﬁts from a great discount to market price, and value is
added from the fact that it sits on a golf course overlooking the sea. Although the expected capital growth is average,
it is compounded by the great deal structuring available. This means the equity you put into the property works
Forecasted equity stake growth if bought with a 70% mortgage (covering the remaining 90%)
10% equity Equity increase from capital growth
Capital Equity value due
growth to 30% discount Year 1 Year 2 Year 3 Year 4 Year 5
5% € 25,640 € 133,063 € 151,254 € 170,354 € 190,410 € 211,469 € 233,580
10% € 25,640 € 133,063 € 169,445 € 209,465 € 253,488 € 301,913 € 355,180
15% € 25,640 € 133,063 € 187,636 € 250,395 € 322,569 € 405,568 € 501,017
Forecasted equity growth excluding transaction costs, tax and mortgage payments over 5 years, assuming variable rates of capital growth per annum and assuming a €256,400
purchase with 90% borrowing.
Translated into proﬁt, the magnifying eﬀect of leveraging is clear. The return on investment available to investors who
purchase 90% of their property with a mortgage is 10 times greater than those who purchase with cash.
Forecasted return on investment if bought with a 70% mortgage (covering the remaining 90%)
Cap growth Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
5% 419% 490% 564% 643% 725% 811%
10% 419% 561% 717% 889% 1078% 1285%
15% 419% 632% 877% 1158% 1482% 1854%
With such a substantial discount to market value and with great leveraging available, if
only 5% growth per annum is achieved, then you could see a Return on Investment of
over 800% in just 5 years.
Spain - Santa Ana 18
We present below a broad payment timetable for a generic purchase.
Payment Amount Timing
Reservation £2,500 +17.5% VAT (£2,937.50) Immediately 1
Deposit 10% of purchase price On contract (21 days after reservation)2
IVA on deposit3 7% on ﬁrst deposit On contract (21 days after reservation)3
Legal fees 50% of legal fees On contract (21 days after reservation)4
Final payment 90% of property value On completion5
IVA on ﬁnal payment 7% on remaining 90% On completion
Legal fees Remaining 50% of legal fees On completion
Additional closing costs Approximately 2% of purchase price On completion6
Approximately 20% of rental income Annually
and rental fees
You can see from the table above that additional property purchase costs in Spain usually equates to approximately 10% of
the purchase value.
As previously mentioned, the strength of a Santa Ana purchase lies not in the yield but in the rapid equity growth. That said,
the leveraging eﬀect of a mortgage will always magnify the capital growth, so a number of exit strategies could be adopted.
1. SHORT TERM – SELL BEFORE COMPLETION high standard ‘bricks and mortar’ property on a golf course will
The majority of the capital appreciation for this deal is made always be a more attractive option to this type of buyer than an
over the initial period. With only 10% down, the 30% discount oﬀ-plan opportunity.
to market value creates an immediate ﬁve-fold growth in equity.
This creates an ideal situation for investors looking for a ‘quick 3. MID TO LONG TERM
ﬂip’ – to potentially sell their contract before completion. Many overseas buyers/investors often want to utilise their
Part of the discount can be passed on to help initiate a quick properties both for investments and as holiday getaways.
onwards sale and there is also the possibility of never needing Although the rental yield is not expected to be very high, it
to take a mortgage out on the property yourself. That said, this should nevertheless generate enough income to cover the
type of strategy is normally considered high risk – if you fail mortgage payments. Keeping the property long term should not
to sell the property on to another investor then you will have impact negatively on investor’s cash ﬂow. The expected capital
to cover the ﬁnal payment yourself. We recommend that any growth in the region is also steady and sustainable and its eﬀect
investor looking to adopt this strategy has a contingency plan on equity is heavily leveraged via the mortgage. Consequently,
to be able to cover the mortgage payments should the property a longer term strategy could be maintained indeﬁnitely with
not sell before completion. the invested equity in the property working very hard for you
as an investor.
2. SHORT TERM – SELL AFTER COMPLETION
The advantage of waiting to sell after completion is that the 1. Payable in GBP
majority of potential buyers in Spain are lifestyle buyers as 2. Payable to developer in euros
3. IVA is the Spanish equivalent to VAT and is due on each payment
opposed to strict investors. In fact, 80% of coastal apartment 4. Spanish legal fees are usually 1% of purchase price
buyers are still Spanish families looking for holiday homes7. 5. Payable to developer in euros
6. Including: notary, registry, and mortgage costs other documents
This is your primary resale market. Therefore a completed, 7. http://www.siprograms.com
Spain - Santa Ana 19
As a property owner in Spain, whether you are a resident
or a non-resident, you will have to pay tax. You are
considered a resident if you spend more than 183 days
per year in the country or if the majority of your activities with
economic worth occur in Spain1.
The Spanish ﬁscal system appears at ﬁrst glance to be very tax-
heavy and complex. In 2007 the government will be looking
into simplifying and reducing many of the taxes2.
We have compiled a brief guide to give you an idea of what
you can currently expect from this system. However, we
emphasise that this is for guidance only and we strongly
advise you to seek professional advice from a tax specialist if
you intend to invest in Spain.
1. PERSONAL INCOME TAX (IRPF / INRN) If you’re a non-resident, you are required to pay tax on your assets
If you’re resident in Spain, you will pay income tax on your located in Spain, irrespective of the value of your net wealth4.
total worldwide income (IRPF, personal income tax) from
employment or asset gains or losses. This varies between 3. INHERITANCE TAX / GIFT TAX
15-45%, depending on the income. In Spain you pay tax on acquisition of assets through inheritance
and legacy and other monies. The inheritor does not pay tax on the
If you don’t reside in Spain but earn some income in the country, whole estate but on the actual inheritance. This tax is progressive,
you pay 25% tax on the income you earn in Spain (IRNR, tax ranging between 7-35% depending on the relationship to the
on the income of a non-resident). deceased and on the inheritor’s personal circumstances, and
is calculated diﬀerently according to the region5. In case of
In both cases you need to calculate your own tax liability and donations, the donator is required to pay the tax6.
apply for the tax returns from the relevant local authorities.
However, double taxation treaties exist between Spain and To avoid any unnecessary, and potentially very expensive
other members of the EU, so you won’t be taxed twice on the complications later, it is strongly advised that you arrange a
same income3. Spanish will at the same time as buying your property in Spain.
2. WEALTH TAX 4. VAT (VALUE ADDED TAX)
If you reside in Spain for tax purposes, you need to pay tax on There are three diﬀerent VAT rates in Spain - the general rate
your worldwide net wealth. Charged at progressive rates ranging of 16%, the reduced rate of 7% and the second reduced rate of
between 0.2-2.5%, you are required to calculate your own 4%. The VAT of 7% is added to accommodation or passenger
tax liability, complete the tax return and pay the tax during a transport. The 4% VAT is in use when purchasing food items,
speciﬁed period. books, newspapers, medicines and so forth7.
Spain - Santa Ana 20
5. CAPITAL TRANSFERS / GAINS TAX
This tax is payable on any asset transfers, corporate transactions
and documented legal acts (notarial and administrative
documents) at the moment of transfer or sale8. This applies to
For residents, the system is more favourable – the capital gains tax
is charged at 15% of the net proﬁt. If you are over 65 and have
been a resident in the property for 3 years, no capital gains tax
is payable. This is why Spain is such a highly desirable location
For non-residents, the system is again diﬀerent. If the asset is
held for a year or less, the gains will be taxed in the income tax.
The basic capital gains tax stands at 35%9 and if you have a
buy-to-let property, 25% tax is payable on the gross
However, again there is a double taxation regime in place between
Spain and the UK so you will not be taxed twice.
6. LOCAL TAXES
These taxes include the tax on immovable property (Impuesto
sobre Bienes Inmuebles) at around 0.2% of the ‘national rental
value’; tax on economic activities (Impuesto sobre Actividades
Económicas) and tax on vehicles (Impuesto sobre Construcciones,
Instalaciones y Obras). Construction, installation and works taxes
and tax on the increase in the value of urban land (Impuesto sobre
el Incremento de Valor de los Terrenos de Naturaleza Urbana)
may also be charged11.
7. CORPORATE TAX 2. http://www.lowtax.net/lowtax/html/oﬀon/spain/spnhom.html
Currently the Spanish corporate tax stands at a high 35%. 4. Ibid
However, the country attracts multinational companies 6. Ibid
despite the high rate because there are tax breaks for 8. http://www.graydon-associates.com/taxes.htm
co-ordination centres in certain areas. These centres are the basis 10. Ibid.
for a variety of corporate entities that then enjoy tax breaks12. 12. http://www.lowtax.net/lowtax/html/oﬀon/spain/spnhom.html
Spain - Santa Ana 21
Securing a mortgage in Spain is a relatively straightforward is great news for investors looking to get in and out of the
process as the mortgages are available in euros. The majority market quickly.
of Spanish mortgages are full status and the diﬀerent types
of mortgages available are interest-only and repayment Along with your mortgage application, Bancaja will require
mortgages with either ﬁxed or variable interest rates. These hard copies of the following documents:
rates will be reviewed yearly in accordance with the rates
provided by the European Central Bank. Most Spanish 1. Proof of partial payments for the house
mortgages, whilst linked to a percentage of valuation, (from the Bancaja account)
cannot exceed the price stated in the title deeds. 2. Copy of contract
3. Copies of bank statements
Although we welcome you to use a bank of your choice in 4. Most recent P60 statement
acquiring a mortgage in Spain, we recommend a Spanish 5. Last two salary slips
bank called Bancaja. We have negotiated with them to ﬁnd 6. Proﬁts and losses (conﬁrmed by accountants)
the best possible mortgage deals. if self-employed
7. Copy of tax return form (from Inland Revenue)
It will be possible to secure a mortgage through Bancaja if self-employed
with up to 80% loan to value, although it is highly
likely that in Santa Ana only 70% LTV will be required. If you choose not to use Bancaja for your mortgage, the
Interest rates are around 4.5%, depending on the current application requirements and paperwork may vary from
Euribor rates, and the maximum loan period is 40 years, those listed above. Further, the details of the mortgage
depending on the age of the borrower; the upper age limit is itself may also vary. It should therefore be noted that this
75 years old. page is for guidance only and that you should acquire the
accurate list of details from the bank you choose to use for
There is also a possibility to take an interest-only your mortgage.
mortgage from Bancaja for a maximum of 5 years. This
Spain - Santa Ana 22
Lawyers representing the investors in any foreign country The lawyer’s fees will be approximately 1% of the purchase
must be able to accomplish the following: price. The functions these fees covers are:
• Act as Power of Attorney for the investor 1. Land Registry
• Guide through the conveyancing process 2. Tax Department issues
until completion 3. Legal advice
• Provide a good level of service especially around busy 4. Power of attorney
times, such as completion, keeping the investor up to 5. Notary – ﬁnal deed
date with the various stages in the process 6. Registrations
• Provide an English-speaking key contact who can
respond to enquiries within 48 hours by email or phone Please note that this is not an exhaustive list. For a full list
• Provide English translations of any important contracts and clariﬁcation on each point, please contact Jausas direct.
• Include the cost of all notarisation, apostils, postage, tax As with all our developments, we ask that the investor pay
registration and other legal paperwork that will need to 50% of the legal fees upfront and 50% at completion. This
be done locally “aligns” the lawyer with the investor and ensures a high
• Provide receipts for all disbursements or out of level of representation is maintained throughout the life of
hand expenses the investment.
With these key points in mind, we chose a local Spanish We believe this represents tremendous value for money, as
ﬁrm Jausas, and the partner Sergio Giménez Binder, the service they oﬀer is wide ranging and actually exceeds
as by far the best ﬁrm to represent our investors. Jausas our criteria in many ways.
have oﬃces in Madrid and Barcelona and they have a solid
track record spanning over 40 years. They specialise in If you have any questions for Sergio Giménez Binder,
various areas, including real estate law and town planning. please drop him an e-mail at:
Their philosophy is to provide innovative, internationally firstname.lastname@example.org
orientated and business-minded service, and therefore they or call him on 00 34 93 415 00 88.
can easily provide services in English. You can visit their
website at www.jausaslegal.com.
We have worked with Sergio for some time and ﬁnd him
an extremely trustworthy and experienced lawyer. He also
speaks ﬂuent English and is always ready to provide a high
level of service.
Spain - Santa Ana 23
Small diﬀerences in exchange rates make a big diﬀerence to the end amount you pay, and specialist companies compare
extremely favourably to the High Street banks. We currently work with Moneycorp and Complete Currency, currency
conversion companies in London that oﬀer an extremely personal service and excellent rates.
MONEYCORP COMPLETE CURRENCY
Moneycorp, the UK’s leading foreign exchange company, can This company oﬀers a range of foreign exchange products
help you achieve the best exchange rates, making your money to ensure its clients maximise their potential within the
go further. They have been trading foreign currencies since foreign exchange market, taking advantage of exchange
1979 and are the only foreign exchange company in the UK to rate ﬂuctuations and safeguarding their investment. The
have been certiﬁed to ISO 9000 Quality Assurance. company will provide fast money transfer with a full variety
of foreign exchange products with no hidden charges.
In addition, you can take advantage of the following beneﬁts:
The directors of Complete Currency have over 30 years
• No commission charges or receiving bank fees. of currency trading and money transfer experience at
• Fast, eﬃcient worldwide transfers. your disposal, and they will see to it that you get the best
• A dedicated dealer to guide you throughout exchange rate.
your currency transaction(s).
• Extended oﬃce opening hours Call our contact Steve Rowe on +44 (0) 207 709 2060
Monday - Friday 7:30am - 10:30pm for a quick consultation, between 8:30am and 8:00pm or
and 10:00am - 4:00pm Saturday. take a look online at www.completecurrency.co.uk.
Moneycorp oﬀers a very straightforward, eﬃcient and cost-
eﬀective service. Exchanging and transferring money is an easy
1. Open a trading facility - you can register online by
visiting the Moneycorp website at www.moneycorp.com
or calling their London oﬃce on +44 (0)20 7589 3000
2. Book a transaction - once a trading facility has been
set up, a dealer will call you and discuss your individual
requirements with you. Rates are booked with your
dealer over the telephone
3. Transfer your funds - dependent on the date you
require your currency
Our contact, Ben Nicholson, is always available to take
your calls at their London oﬃce and can be reached on
+44 (0)20 7823 7500
Spain - Santa Ana 24