Marbella Buy to Let – A Safe Bet?

A wise old portfolio manager once said that successful investing is like dancing – not only must you know the steps, you must get them in time with the music.

Buy to let investments do not have a good reputation with saloon bar investment managers at the moment. Many investors in these strategies got their fingers burnt in the recent property down-turn and it has now become something of an unpopular idea with those who are partially informed. The great thing about getting investment advice from a man in the pub is that you know that it is worth exactly what you paid for it.

Buy to let is a very straightforward strategy and many people have considerably increased their wealth by using it. You buy a property using finance. The rental income covers the financing and running costs and maybe gives you a small income. When the finance is paid off you sell the property for a capital gain or buy another one. However, the investor needs to know the steps. Here are a few guidelines:

1. Buy a decent property. Maintenance will be lower and rentals will be higher. You will attract a better class of tenant and suffer less voids. (Voids are periods when you don’t have a tenant.)

2. Do proper research before you buy. Know what the rentals are in the area and the type of people who live there. The bottom end of the market is simply far too much trouble and you will either give up or go broke.

3. Make sure that there is a reasonable chance of capital gains over the medium term.

4. Do your sums. Know what you can reasonably expect in rent and what your voids are likely to be, especially if you intend to operate in the self-catering market. Make a realistic forecast of your financing costs. You know that you are going to be borrowing so make a forecast of interest payments, or better still, do a cash flow forecast.

5. Be very picky about the managing agent you engage. No qualifications are required in Spain to manage properties. It sounds counter intuitive but a more expensive agent is likely to keep your property fully rented and in a good state of repair. Don’t enter into a long contract, if he is no good he may be extremely expensive. Ask for regular reports.

Those are a few of the important steps but what is the Marbella property music telling us?

1. Capital costs to get into the market are currently low. The market is bumping along the bottom of the price curve but some sectors have started recovery. Importantly, capital costs are unlikely to fall any further.

2. There is a wide choice of property available which is suitable for buy to let in the self catering sector.

3. Financing is historically cheap and because of the breadth and depth of the financial crisis, is unlikely to rise in the short to medium term.

4. Tourism to the Spanish Costas, especially the better areas such as Marbella are seeing significant demand for holiday accommodation. This has increased in many areas by over 20% on a year on year basis. Voids are likely to be low as Marbella enjoys over 300 days of sunshine per year on average.

5. Self catering holidays are becoming more popular. Evidence of this is that the major chains are converting hotels into self catering apartments. This is helped by the availability of cheap flights from the UK.

6. The wide availability of broadband makes communication with your managing agent very easy enabling you to keep on top of your investment’s performance.

So if we know the steps, the Marbella property music is telling us that the time for being a wallflower is over and the time for action in the buy to let market is now.

Altavista Spain offer an impressive selection of hand picked exclusive developments that lend themselves perfectly to the buy-to-let investor model. Altavista Property also continues to offer clients its amazing 100% mortgage deals, having successfully commercialised several such developments.