Sunday, November 30, 2008

Other Options for Property and Loans in Spain

If you want to earn some money in something apart from just simply buying a property here in Spain off the main site,, then here are some options. We can help you out with all of the things below and if you have friends or colleagues you refer you can get a commission.

In principle there are four main areas and then of course there are other ops that come up;

1) Private Capital Loans.

These can range from 6000 Euros up to a few million. They are loans making the loanee the first debt on a property or second when the first debt is very low compared to value. The guarantee is notarial and the loan is inscribed in the property registry. Time periods for PCL's are 6 or 12 months. Interest rates are 20-25% and payment has to be made in full if done before the end of the time period. If a PCL is not repaid then you start the process of repossession of the property that guarantees the loan. This usually takes about 6-8 months from the beginning to the end of the process but is very open and transparent. We earn from the person who we have obtained the money for initially and then on the earnings of the investor. If the investor gets the money back then we take just 15% of earnings, see example below. If the investor gets the property then we earn 30% of income if rented on an ongoing basis or 25% of net capital gain if sold on, again see example. These earnings would be split with anybody referring clients.

Example 1
PCL of 1 million Euros. Paying 20% in one year.
Return 1.2 million Euros.
Valuation of Property. 3.2 million Euros with no debt on it currently.
Property consists of 10 flats and a shopfront right by the Plaza de la Reina in Valencia. Dossier available.
Probable outcome. Payment by the debtor.
Possible Outcome. Get the block of flats and be able to sell on at 200-240k each unit for very quick sale plus 200k for shopfront.

Debtor profile.
Builder needing liquidity to finish off other projects and sell them. By being able to finish off he expects to sign for them and therefore have the money to pay within the year. If not repo process starts on day 366 and is guaranteed.

Commissions. 45000 Euros on obtaining funding, paid for by builder. And then the 15% if repaid (30000 Euros) or 25% if we get the building and then sell on. Estimate of net gain around 1 million Euros therefore 250k commissions.

More simple example 2
21000 Euros PCL
Property value 72000. Suggested sale price for quick sale 60000.
One year for repayment at 20% = 25200 Euros.
Potential earning 4200 Euros. Costs 15% = 630 Euros.
Potential Earnings if Getting Property 25% of 60000 - 30000 (Approx after lawyers/barrister and costs.) 7500 Euros.

Debtor Profile
A man who has just got a new job in Northern Spain and needs the money to set up his business there and get working. He expects to refinance after around 6 months and pay back the money at that point as he will have been working for six months and the banks may be lending better by then

2) Purchasing bank debt.

If a property is already in the repossession process then we can make an offer to the bank to purchase that property. We would usually do this in blocks of 5, 10 or 20 properties that we would offer at a certain price from the bank. Obviously the higher the number of properties bought the better the discounts. On some properties however we do not need a discount as the LTV is so low so we pay what the banks call the foreclosure fees. We then offer a service of taking the property through the repo process. What we charge on this is the initial study fees for each property purchased (1700 Euros) and a percentage of earnings depending on IRR for the batch. The investor needs to realise that they purchase the debt and then pay for the lawyers to conduct the process, we have an agreement at 4500 Euros per property for lawyer and barrister fees reducing to 4000 on the purchase of multiple units. The lawyers are paid half up front and half on completion. Barristers are paid on demand.

If we earn 25% in three months on one property it is annualised to 100% roughly. If we earn 10% in two years it is annualised to 5%. I am sure you get the picture. Our earning capacity depends on the higher IRR (Annualised Return) because we take a percentage of earnings. If the real return is less than 10% and the IRR less than 20% we take nothing. We choose debts and properties very carefully to make sure a good IRR and fast turnaround is possible but we also choose the investors carefully as we need to be sure that they let us work for them and use our methods rather than using the baseball bat method of recovering debt. The investor needs to provide a power of attorney for the lawyers and barristers to act on their behalf and a letter of intention showing their interest in the project. We are happy to visit or receive visits to explain the process.

3) Purchasing Repossessed Properties.

Properties that have already passed through the bank's repo process are sitting on their books gathering dust. Through our contacts in the banks we can identify the best purchases and negotiate discounts on the asking prices for properties in their portfolios. Banks are happier giving big discounts to cash buyers and the more units purchased the bigger the potential discounts are. We can supply blocks of properties or indiviudal properties for the investors. In these cases the investor pays a commission fee equivalent to 3% of purchase price to cover initial studies. They are also asked for their business plan and we can help them out with that. If it is disposal at market values then we arrange the sale through an exclusivity contract again at 3% on sale. If they wish to hold and rent out then we can come to an arrangement for property management too. (This can also be done for investors in option 2) Sometimes we are able to have a purchaser ready for purchase before taking on the property and in these cases the earnings are huge. If we do this then we take a percentage of net gain.

4) Purchasing off plan projects and excess capacity from developers.

Sometimes a developer runs out of money and needs to sell up. Sometimes they just want to get rid of the last few units and realise some sort of profit but there are always ops at the moment as the banks won't lend. Opportunities that come up require a good background knowledge as most developers are massively overexposed on their borrowings. Therefore we find developers who although in need of liquidity are not too endebted because then there are too many charges on the properties and they cannot sell at the prices we want to purchase. Here there is a simple commission payment structure and a disposal or business plan can be arranged post purchase too.

All investors will need a NIE number in Spain or a company through which they purchase the debts/properties. We can discuss this further down the line as there are many different ways to structure the investments to make the best returns.

Hopefully this helps you go through the ideas. If you have any questions feel free to ask of course.

Graham Hunt

Tuesday, November 25, 2008

Who Owns Valencia Property?

Lots of people feel that buying abroad is a risk. So in order so that you feel more comfortable when you are visiting Spain for purchase or rental I thought it might be useful to show you who you will be dealing with. I belong to an online business community called Ecademy, you can also find me on Linkedin amongst others. But have a look at my Ecademy profile here and follow what I am doing on Twitter here

If you have any questions or doubts about buying in Spain get in touch and I will send you an ebook on the purchase process or give you info and recommendations of people in Spain and elsewhere that can help you out.

I look forward to networking with you and helping you out online.

Thursday, November 20, 2008

Urbe Time Again

If there is one thing that marks the changing of the seasons for an estate agent in Valencia it is Urbe Desarrollo, the Valencia property and development fair. This year it has changed the nom de plume to Urbe so that it doesn't get compared with previous years' events I suppose.

So anyway I went this morning and was out within an hour, truth be told 50 minutes of that time could have been better employed. The deals from the developers ranged from 12-62% off previously listed prices. There was nothing new or planned (Some very small developments) apart from the Valencian Council's plan for the area around the Grand Prix circuit for which they are looking for collaborating construction firms.

There was not one golf development represented, last year I counted at least 12 and last year I described as a funeral! Well for developers the time to make hay has gone and they need to adapt to the new realities. Most of what was shown is already finished or on the point of being so. Therefore it is competing with second hand resales which usually have established gardens or an infrastructure around them and are therefore much more attractive to a potential purchaser.

Marina D'Or, the biggest carbuncle of them all, was represented selling off their project in Egypt.

Wednesday, November 05, 2008

El Menu Del Crisis

Walking through La Pobla this morning there was a TV crew filming outside our local Tapas Bar. They have introduced something on their blackboard outside the shop the Menu of the Day for 4.95 Euros and they call it the Menu Del Crisis.

I will get a fuller report on it later this week because I may be there for lunch tomorrow or Friday. Photos to follow.

(I have still not got the photos but just to tell you the bar is Tapas y Jamon on the main through road of La Pobla right next to the Caixa Catalunya bank.)

Lovely Rental Flat in Valencia. Short or Long Term

Now finally finished and ready to be used this excellent third floor flat comes very well furnished and presented and can be found in the Ruzafa area of Valencia. It has three rooms, a good sized living room, a large kitchen/dining area, two bathrooms and hall. You can rent it for short term or longer term rents and prices start from 800 Euros pcm for longer term rents to weekly rates on demand starting from 400 Euros per week.

Have a look at the pictures and get in touch if this is something that may interest you.

Sunday, November 02, 2008

More Rain in Spain. Bumper harvest to follow

And it just keeps on coming. Expect a bumper harvest of olives, oranges and all of the other stuff you get from Spain because the last month or so has been virtually every day and apparently in the vast majority of places the "good" rain that comes down not in a torrential torrent but at a more leisurely pace making sure that it soaks in rather than running off.
Christmas mandarins should be really juicy this year.

In Valencia we are consdiered to have had a real Gota Fria this year, this is a type of monsoon that engulfs this specific area of the Med around October time. Anyway if you want to know what it can look like check out these images from the Riada of 1957 in Valencia. (Turn the music off though)

Ebay Auctions of Spanish Stuff

About Me

Today is a new day, the sun is in the Sky. I wake up this morning and greet the new day.