How can I earn money with real estate in Mallorca?

Earn money with real estate in Mallorca

You have probably already thought about how you could earn money in Mallorca. One very interesting option is to invest in the real estate market. The island is not only beautiful, but also very diverse, which in turn offers many different investment options.

Mallorca has shown over many years that it has a stable and constantly growing real estate market. Nowadays, the rising prices of real estate, together with the low interest rates for financing from the bank, are the best conditions for making money with real estate in Mallorca.

The island has several real estate zones; southwest (Port Andratx, Son Vida, Port Adriano..), west (Soller, Deia, Valldemossa..), Palma city, south (Santanyi, Ses Salines..), southeast(Felanitx, Portocolom, Calador, Portocristo..), northeast (Calamillor, Arta, Capdepera, Colonia de Sant Pere..), north (Alcudia, Pollenca..) and the center of the island.

How can I earn money with real estate in Mallorca?

Now you’re thinking, all well and good, but how exactly can I invest in Mallorca without failing in the attempt? Don’t worry, we’ll explain some options and examples here. If you already have some investment knowledge and are looking for more detailed tips, check out our article on the “5 Top Real Estate Investments in Mallorca”!

Buying, renovating and selling real estate

1. it all starts with browsing the real estate market in Mallorca, which you can do during your stay on the island or from the comfort of your home on the websites of real estate agencies. In addition, you should check out some blogs, videos and the other article about Mallorca to also evaluate the surroundings and the pros and cons of the different real estate zones (the city, beaches, stores, highway connections…).

2. the second step is to decide on a zone in Mallorca. It is not the same if you are looking for an apartment in Palma or a house with several units in the southeast (Felanitx, Portocolom, Cala Murada…). As an investment, a decisive 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 good locations, where a complete renovation is due, but the building structure is in good condition (masonry, roof, foundations, pipes, etc.).

4. once you have found a property that you can buy cheaply, you should consider whether you want to part-finance it (the terms will depend on some of the buyer’s characteristics, but on average, financing for 25 years is at a fixed interest rate of 2.5%).

5. after buying the property (and you should always get good professionals involved, such as a lawyer or real estate agent), you should hire a good building and construction company to do the renovation . It is best to agree 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 can consider waiting for some time to achieve an additional market increase or selling directly. In order 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 properties (and have the necessary customer network).

7. when one of the professional real estate agents has found a client, everything has been discussed and a purchase option contract has been signed (with the usual 10% advance payment), all you have to do is sit back and let the real estate agent do his work. As soon as the notary appointment has been made and you have signed on that day, we can congratulate you! You have earned money!

Looking for a property to renovate in Mallorca? Here you will find a list of properties in need of renovation.

 

Buying a property and renting it out long-term

3 With this option, steps one and two are exactly the same as the previous one. However, a third step is added; it is best to look for a property with active tenants where there is evidence of good rental coverage over the last 10 years. Townhouses with several residential units, where you can achieve several rents, are also very interesting.

4. here too, you can consider whether you want 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 (it is usually worthwhile to finance part of it, as it is practically paid off automatically).

5. once the property is purchased and you cover the financing with the rental income (plus possible surplus), all you have to do is sit back and wait for the financing to be fully covered and then have a passive income and a townhouse in your possession!

 

Buy a property and offer it for vacation rental

3 Option number three has the same steps as the previous options. However, the search factors are different for this investment option. Of course, the selected property must have an ETV license (vacation rental license). It is also interesting if the previous owner can provide annual gross and net income (to see in how many years you have covered their investment and the subsequent profitability). Most properties with vacation rental licenses are fincas (preferably with a guest house 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 yourself (private contacts, create a website, offer it via social networks, etc.) or give it to vacation rental portals such as AirBNB or Fincallorca. There are also more and more real estate agents who can help you with this, but you should pay attention to their online marketing strategy (it should be professional).

5. note that depending on the decision you have made in the previous point, you will have to deal with the following things if you have decided to market your property yourself, such as handing over the keys, house introduction, key collection and final cleaning (this is of course not necessary if you have a real estate agent on your side who has been commissioned to do this).

Looking for a property with an ETV license in Mallorca? Here you will find a list of exclusive properties with this feature.

What should I do now to buy my investment property?

Either you choose one of these three options, look for more information about investing 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 still have questions about investment properties in Mallorca?

Then feel free to contact us by e-mail or write in our comments, we always reply as quickly as possible and can give you a tip or two. Also in general Real estate in Mallorca you will find with us!

We at Lucas Froese Real Estate are also happy to receive feedback about the article!