Why purchasing cheap Spanish properties may not be a good investment?

Main reasons for avoiding cheap Spanish properties

1. Location, location, location
The most recognisable reason for steering clear of low-end cheap real estate, especially in Spain, the location. Pricing will be indicative of it’s surroundings:

- Local amenities: Restaurants, bars, shops, local cafes, day to day professional services such as car mechanics and health & beauty salons, quality schools for all ages, frequent and well connected public transport, proximity to nearby airport (especially if you are buying as an investment property for holiday letting or need to travel to an from countries abroad on a regular basis), access to healthcare. All of the above and more, can impact not only the ease of living in an area but also heavily affect the valuation of a home. Public infrastructure of the village, town or city where you purchase Real Estate is paramount to the price you pay towards your investment.

- Internet and phone coverage: The use of mobile phones and the internet is something that in our day in age is taken for granted. Due to the vast size of Spain, it’s built up cities and coastline where the bulk of the population resides – internet and mobile signal is what you would expect for any first world country in 2023. However, many rural areas have been left behind, broadband speed, as well as mobile telephone coverage can be an aggravating issue to say the least. Large network providers still have not provided rolled out fast internet speeds, mobile phone usage can be non existent in some rural inland villages throughout mainland Spain.

- Desirability of the neighbourhood: Sometimes it may not be quite as clear by visiting and a viewing of a property on the market, yet – factors such as crime rates and statics, unemployment, work opportunities and wage growth, deprivation of public services as well as public funding, can all be under the radar factors that can have an influence on property prices an area. Whether you are purchasing for investment, full time residency or holiday home, carefully taking these factors into consideration is crucial for your investment.

2. Rental Potential
The rental potential is profoundly associated with location and amenities on offer. Depending on whether you are looking at long term letting to the local market or as a holiday let on a short term weekly basis, there are a few other aspects to take into account:

- Competition and availability: Is the property located in a sought after location for rentals? Is the market already swamped with a host of properties still available for rent and a lack of interest for prospective renters? Are your weekly or monthly returns enough to cover your repayments? Are rental yields going to be worth the financial risk?

- Parking: It may not seem as a big a problem as other listed points within this article, but it can be a make or break decision for potential renters. In built up areas, street-parking can be hit or miss. More and more roadside parking is giving way to bus and bike lanes, with European cities required to reduce emission levels to ongoing set targets – as public and green transport now prioritised. Owning a designated parking space or private garage is an added bonus for any real estate investment in Spain.

- Security: Again, linked to location! Tenants and property owners want to feel safe and secure in the home where they choose to live. Though you can spend heavily on securing the property with window and door grills, security doors, alarm systems and deadlocks – living in a potentially unsafe neighbourhood can also affect your chances of renting out your investment or future resell of your property. A clean and safe environment goes a long way towards the dwelling valuation and possibilities of being-able to shift a listing quickly when coming to market.

3. Age and condition
The age and condition of a Spanish property can vastly decide whether your investment is a sound Investment or you stand to lose out heavily on your initial outlay.

- The bare bones: Purchasing an older property in Spain can present numerous issues that will need-to-be addressed first before moving forward. If you are buying a property that is 20 years old or over, a complete upgrade of the electrical system is a must. Maybe you are in luck may have already been upgraded by the previous owner, unfortuntately if this is not the case – then it is paramount for the safety and use of the building that a complete overhaul of the electrical system is updated. The same can be said for the plumbing, piping and gas systems. These deteriorate over time – to help save on any unwanted surprises later on down the line, it is best to have them fully revised or replaced if a complete home renovation is required. New constructions are built to higher standards using the latest technology, designed to be eco-friendly and energy efficient – purchasing an older property will require more time, money and effort to bring it inline to todays guidelines.

- Upgrades and general wear and tear: Total reform? Gut and start over? Or simply an upgrade and tidy up project? Due to the on going conflict in Ukraine, prices of materials is at a very un-certain point. Daily cost changes to metals and other imported commodities is hard to effectively evaluate the exact cost of how much the final outlay will be. Not to mention the expenditure increase on labour to employ professionals to undertake the project, vastly reducing your final yield for the resale or letting of your property.

- Inspection: Like any high value purchase, such as a vehicle or high end electronic equipment – getting a professional to ensure everything is in good working order is essential. You will want to protect your money before committing to the purchase by ensuring that you have a surveyor establish that the building is structurally sound and that there are no hidden and unwanted surprises. Anything that could derail you moving forward – potentially become a money pit. In some locations, especially along the coast, the Costa Blanca being an example, where developments were built at an alarming pace to keep up with the demand of buyers from Europe and the UK. Cheap holiday homes and apartments were constructed in record numbers, low quality that regularly have issues due to the low grade building materials, poor planning and design, low skilled worksman-ship and no attention to detail. Such is where the perception began that you could purchase a cheap property in Spain, a shell with doors and windows!

4. Hidden Surprises
Indeed, you may have found a seller that requires a fast sell due to personal circumstances with the property being below market value – good for you. Still, sometimes people fall foul to some hidden surprises.

- Illegal Builds: Years ago, the Spanish property market hit the headlines for all the wrong reasons as the fallout from the scandal of years of poor regulation and unlicensed building came to light. Many unfortunate property owners lost out on their life savings as off plan properties were built on greenbelt land and without the correct building licenses, something that was highlighted in Murcia, most notoriously – Almería. This issue isn’t just confined to the new developments sector of the Spanish property market, as you can imagine, owners adding extra square meterage to their homes without applying for the legal and correct planning permission along with properties built on agricultural or natural land that can not be re-classified to urbanised land intended to be suitable for development.

- Inheritance and ownerships issues: This is a common issue in villages where properties are in a state of disrepair, legal ownership is of a person or persons that have passed away, leaving behind a legal nightmare locating the now legal owners through inheritance.

- Dodgy sellers: Anyone can become an Estate Agent, market and sell properties in most regions of Spain. Currently, there isn’t a governing body in the country which requires registration, certification or education to become a Real Estate Agency. Going it alone and purchasing from a private seller or a man you met in a local pub without the professional knowledge and legal know-how when you do not fully understand the buying process in Spain can potentially open up a can of worms. Using a well known, established and professional Real Estate company and an independent lawyer will safe guard you through the legal spiderweb that the Spanish property market can be without the appropriate support. Cutting corners and trying to save small amounts of money really isn’t advisable. Protecting yourself against pitfalls is highly recommended – if it seems too good to be true, it usually is. There could be a possible problem that you haven’t been able to pinpoint.

- Local Climate: Certainly, by choosing to purchase a property in Spain – you are banking on the weather being one of the main reasons that will attract holiday makers, if you are planning on holiday letting or escape the darker and colder climates of the northern hemisphere. With climate change looking-like an evident geographical issue in many countries, the same can be true in Spain. With wildfires scorching thousands of hectares of forest land, approaching upon nearby villages and properties on the edge of dry woodland, flash flooding and burst river banks destroying everything in it’s path, causing devastation and damage to property and belongs running into millions of euros in recent years. The climate emergency is now a topic of new importance.

Conclusion
Researching and understanding why a property is so cheap can save you a lot of heartache, stress and money in the long run. Investing little capital may yield limited to no return. Studying or having the professional support of a quality Real Estate Agency with the investment know how within the Spanish property market will enable you to make your money work for you in the correct fashion and the success of investing in Spain.