Spanish portfolio building

Spanish portfolio building

Posted on June 4, 2005 in Buying, Educational blog, Finance, International, Property, Strategy

Brett Alegre-Wood

Hey gyus,

Since I bought my first Spanish property my immediate thoughts were to building a portfolio in Spain. I am a strong believer that if something works for you once you should do it again. The second time is always simpler.

So once l had my first I thought lets get my second.

Problem number 1:
The Spanish finance system doesn’t have buy to let the same as the UK.

In Spain most borrowings are based on your income. This is a similar method as l was familiar with in Australia. The challenge with this system is you are restricted on how much you can borrow.

Let’s take a look at how the calculate your maximum mortgage amount.

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Spanish Salary/Loan Calculations

The generally accepted means for calculating the maximum mortgage is simple.

1. You take your Net income after tax. (say £50,000)
2. Take off 37% which is a allowance for what is called ‘accumulated debt’. (£50k x (100-37) = £31,500)
3. Multipy your answer by 10. (£31,500 x 10 = £315,000)
4. Now multiply this by the exchange rate at the time. (£315,000 x 1.43 = £450,450)
5. So from this we can assume that we can borrow a maximum of £450,450.

Now when I first calculated this I was a little frustrated that it wouldn’t allow me to build a big portfolio of properties due to having a limited amount of income and being used to buy to let criteria in the UK which allows unlimited amount of buy to let properties.

Problem number 2:
Building a portfolio bigger than my income.

Well this is where some good due diligence, lots of quality questions and meeting the right people comes into it. After speaking with some of my contacts over there I realised that in fact the income multiples was only restricted to one bank. I could effectively build a portfolio by spreading my investments over a number of Spanish banks.

So now I was free to build my portfolio in Spain and in the UK. Of course just because I could get the money doesn’t mean that I should forget the due diligence that is required of every property I purchased.

Live with passion,

Brett Wood

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