Earn money with real estate in Mallorca
Surely you have already thought about how you could earn money on Mallorca. A very interesting option is to invest in the real estate market. The island is not only beautiful, but also very versatile, which in turn offers many different investment options.
Mallorca has shown over many years that it has a stable and constantly growing property market. Nowadays, the rising prices of real estate, together with the low interest rates for financing from the bank, are the best conditions to make money with real estate in Mallorca.
The island has several real estate areas: southwest (Port Andratx, Son Vida, Port Adriano. . . . ), west (Soller, Deia, Valldemossa. . . ), city of Palma, south (Santanyi, Ses Salines. . . ), south (Ses Salines. . . ), Southeast (Felanitx, Portocolom, Calador, Portocristo. . . ), northeast (Calamillor, Arta, Capdepera, Colonia de Sant Pere. . . ), north (Alcudia, Pollenca. . ) and the island center.
How can I earn money with a property in Mallorca?
I’m sure you’ll think, all right so far, but how can I invest in Mallorca without failing in the attempt? Don’t worry, here we’ll explain some options and examples:
Buying, renovating and selling a property
1. It all starts with browsing the property market in Mallorca, what you can do during a stay on the island, or comfortably from home at the websites of real estate agencies. In addition, you should also look at some blogs, videos and other articles about Mallorca to evaluate the surroundings and the pros and cons of the different real estate zones (the city, beaches, shops, highways. . . ).
2. The second step is to choose a zone on Mallorca. It is not the same if you are looking for an apartment in Palma, or a house with several apartments in the southeast (Felanitx, Portocolom, Cala Murada. . . ). As an investment a crucial point is the price you pay for a property in need of renovation, the ancillary purchase costs (10-13% of the purchase value), renovation costs and of course the price for which you can resell the property.
3. Most interesting are townhouses in need of renovation in a good location, where a complete renovation is planned, but the building structure is in the correct condition (masonry, roof, foundation, pipes, etc. ).
4. Once you have found a property that you can buy cheaply, you should consider financing it in part (terms depend on some of the buyer’s characteristics, but on average 25-year financing is at a fixed interest rate of 2. 5%).
5. After the purchase of the real estate (whereby they should always get good specialists in addition, like lawyer or real estate agent) you should assign with the renovation a good building and construction company. It is best to arrange a fixed date with the builder by which the renovation should be completed (otherwise the builder will have to pay you a penalty).
6. After you have purchased and renovated your property, you may want to wait some time in order to achieve an additional market increase or sell it directly. To sell your property as quickly as possible, you should choose 3-4 competent real estate agents, as they are specialized in selling and marketing real estate (and have the necessary network of clients).
7. Once one of the professional real estate agents has found a client, everything was discussed and a purchase option contract was signed (with the usual 10% deposit), all they have to do is sit back and let the agent do his job. As soon as the notary appointment is made and you have signed on this day, we can congratulate you! You made money!
Buying real estate and long-term rentals
3. With this option, steps one and two are exactly the same as the previous one. However, there is a third step; it is best to look for a property with active tenants that has been proven to have good rent coverage over the last 10 years. Very interesting are also townhouses with several residential units, where you can obtain several rents.
4. Here you can also consider whether you would like to work with bank financing. This can be easily calculated by adding up the interest rate and the repayment, and comparing it with the net rental income you will receive from your tenants (most of the time it’s worth some financing as it practically pays off automatically).
5. Once the property is purchased and you cover the financing with the rental income (with possible benefits), all you have to do is sit back and wait until the financing is completely covered, then have a passive income and a townhouse in your possession!
Buy property and offer for holiday rental
3. Option number three has the same steps as the previous options. However, the search factors for this investment option are different. Of course, the selected property must have an ETV license (holiday rental license). It is also interesting if the previous owner can submit annual gross and net income (to see in how many years you have covered your investment, and to know the subsequent profitability). Most properties with holiday rental licenses are fincas (best with guesthouse and swimming pool), although there are also some townhouses or even apartments with these licenses.
4. After purchasing the selected property, you should consider whether you want to market it independently (private contacts, create a website, offer it through social networks, etc. ). ), or offer it to holiday rental portals such as AirBNB or Fincallorca. In addition, there are more and more real estate agents who can help you with this, but you should pay attention to their online marketing strategy (this should be professional).
5. Keep in mind that depending on the decision you made at the previous point, the following things will come to you if you have decided to market your property yourself, such as key handover, house introduction, collecting keys and final cleaning (this, of course, is omitted if you have a real estate agent next to you who has been appointed for this).
What should I do now to buy my investment property?
You can choose one of these three options, look for more information on investments in Mallorca, or contact a professional real estate agent on the island who will advise you and find the perfect investment property for you!
Do you have any questions about investment properties in Mallorca?
Then contact us by email or write in our comments, we will always answer as soon as possible, and can give you one or two tips.
We at Lucas Froese Real Estate are also looking forward to your feedback about the article!