Let me let you in on a little secret… buying a second home in Mallorca is pretty much a sure thing. I don’t mean “a sure thing” like the guy next to you at happy hour telling you to bet the bank on Flying Gypsy in the 2nd at the Hipòdrom. More like “a sure thing” when it comes to a safe and solid investment in your future.
Historically low interest rates combined with a healthy real estate market and a lot of choice means buying that second home here on the island not only sounds like a fun idea, it makes good fiscal sense. Look Mallorca is here to give you all the information you need to help you decide!
Why buy a second home in Mallorca?
In general, purchasing property in Mallorca is a reasonably secure way to invest. The island is a popular tourist destination. Further, it has spent a great deal of time and money over the past several years cleaning up its image and attracting a new and more discerning type of visitor.
The mild Mediterranean climate, an increasingly sophisticated ex-patriot community, fantastic infrastructure and schools, beautiful beaches and mountains, safety, and a government dedicated to strict planning codes, construction control and protection of natural areas have all merged together to create a sort of idyll for many people tired of life on the continent or across the pond.
Short Term Rentals
Nevertheless, looking at the practical side, even if you don’t plan to live on Mallorca full-time there are pluses. There is always the possibility to rent when it is not being otherwise used and whilst the rules on short term rentals have changed recently, they are not outrageously restrictive. Unless the property in question is an apartment in Palma, the current guidelines of which are dictated completely separately than the rest of the island, jumping through the hoops to obtain a rental license is more time-consuming than difficult. Therefore, persistence, adherence to procedural instructions and patience are key here, and the efforts will be well rewarded if you just keep the faith and don’t attempt to shortcut the system.
With low interest rates and a strong British pound,
now is the time to buy that second home of your dreams
That being said, certain parts of the island, like Palma, are very stringent and getting a permit to rent may not be possible AT ALL. Fines are hefty (€20,000 and up) if you break the rules, so best to keep on the straight and narrow with regard to this point.
Short term rental is also a good idea as it keeps the house occupied
I had a real estate agent friend who used to say that houses hate to not be lived in. It is only when a home is unoccupied that things start to seriously go wrong. Mice chewing wires, spiders making nest, burst pipes going weeks without attention…all of these things are avoided so long as there are people around to keep an eye on things.
That’s not to say people don’t put a certain amount of wear and tear on a home, it’s simply to say that renters will alert owners to even the tiniest problems before they have a chance to explode into massive ones. As the number of visitors is increasing each year, with 2019 set to break the record of 2018’s 13.8 million, finding renters has never been easier, and between agents and websites, managing a rental property is easier than it’s ever been as well. Practicalities aside, the personal reasons to buy a second home here are even more compelling.
Why to buy a second home in Mallorca
Let’s start with the most obvious, shall we? Firstly, most of the expats I know here come from places where I’d rather chew my right arm off than spend a winter. Cold, dark, grey and rainy/snowy are wrist-slashingly depressing ways to spend a full third of the year.
Secondly, Mallorca suffers from no such maladies. The winters are mild and filled with enough sunny days to keep that smile from turning upside-down. They are perfect for pursuing outdoor activities, al fresco lunches, and days spent window shopping. Conversely the summers here are hot and dry, whereas those same aforementioned places can suffer with unpredictable conditions.
Which comes to the next reason…friends and family. Having a second home on offer means having a place where you can rally the troops for holidays and vacations, especially helpful to those who may be lower on funds and would otherwise not be able to join in.
Finally, the second home can easily be converted to a primary one once the decision to retire is made. Now your getaway is home base and the opportunities to lure loved ones to you are even more compelling. You can host year-round if you fancy and know that you have a plane ride between you and guests when you prefer a bit of peace and quiet.
How to Do It?
Now that you’ve made the decision to buy, the question is how to make it work. First and foremost: make a budget and stick to it. Some compromises may need to be made in terms of location, size of the property and amenities, but by being realistic from the start, you won’t run into trouble down the line. Also, be honest about must-haves. For example, if you’re a golfer and you find a property you like that’s is 35 kilometres from the nearest golf course, you may want to rethink it.
Speak to a lawyer and make sure you are aware of all the hidden costs, fees and taxes. Nothing kills a house buying buzz like finding out that what you thought was in your budget no longer is.
Some of the costs to consider are:
- Spanish Transfer Tax, which stands at 7% in Spain, but can vary in the autonomous regions, such as Mallorca.
- Income tax provision if buying from a non-resident. This means the buyer is required to withhold 3% of the purchase price and pay It to the tax authorities.
- Agency fees. These range from a reasonable 2% up to a whopping 15%. Be careful who you get into bed with before you buy, especially as most sellers have multiple agents on the case.
- Legal fees. Typically, this is 1% of the purchase price, but they are worth it as they ensure you and the house are in compliance, legally-speaking.
- Notarial fees. These run between 0.05% and 1%.
- Spanish Land registry Fees. These are also roughly 1% of the purchase price.
Renovation and Decoration
If the home was formerly a rental, the option of buying everything down to the last salad fork may be possible. But if it was a family home, the house will need to be outfitted, and this costs. Happily, there are many home decorating options on the island at varying price points, and with a bit of high end mixed with a bit of IKEA, you can make your home look like a million in no time.
It’s also wise to expect the unexpected. Architectural inspections are not common in Spain, so its buyer beware when it comes to structural damage and the like. One can be requested at the buyer’s expense and could reveal serious problems before they become your problems.
These things may all sound a bit intimidating, but in reality, they are mostly like buying your own country, albeit, in another language. A lawyer can ensure you keep missteps to a minimum and before you know it, you’ll be sipping mojitos from your pool.
So, go on! Take the plunge! The trifecta of low interest rates, stable prices and strong foreign currencies against the euro mean you could be in your new house before you know it!