This section gives a detailed account on the total costs (and margins) involved in a typical real estate project in Valencia. The costs shown below are based on a property recently renovated in the ancient quarter of Abastos, near Plaza España. We have outlined all costs: from acquisition to sale costs. Architect’s fees and project management costs are factored into “Renovation Costs”.
The flat in question is a period flat on the second floor of a listed building, literally eight minutes walk from Valencia’s train station and two minutes walk from Plaza de España’s underground Station. The internal foot print area is 1345,7 sq ft. The flat was bought in June 2005 for 338,560 Euros. It was totally remodelled: Flooring and wall partitions changed, new electrical installation and plumbing installation. a modern kitchen with Silestone and aluminium was fitted. The bathrooms were tiled with natural Brazilian green slate and fitted with design sanitary appliances and chrome finishings. Tall quality lacquered doors and double glazing aluminium windows were installed.
A bank mortgage of €230,350 was obtained on the property. Renovation took six months and the flat was sold in May 2006 at 534,000 Euros, leaving 63,800 Euros before tax profit. The table below summarizes the transaction:

Project Costs

Below are show the costs involved in a sample project for a property costing 318,560 Euros:

(*) acquisition costs: Transfer tax, plus Notary and land registry fees.
(**) refurbishment costs: architect fees plus cost of renovation.

In addition to the cost of the property there are other costs associated with buying a property. Typically, these will total approximately 10% of the property cost.

The costs associated to buying a property in Spain are:

1.- Transfer Tax

If you are buying a re-sale property then you will have to pay 6% transfer tax (Impuesto de Transmisiones Patrimoniales), which is a tax charged on a property sale between two individuals.
If you are buying a new build property or a flat in a refurbished building then you will have to pay 7% VAT instead.

2.- Stamp Duty

You will also be required to pay a documents fee or Stamp Duty of 0.5% of the property value.

3.- Notary Fees

The fee charged by the notary is fixed by an official scale. This fee varies according to the amount of the land as well as the size and price of the property. You should typically allow for 0.5% of the property value declared in the Escritura.

5.- Property Register Fees

This is the fee charged for the inscription of the property in your name in the official Registro de la Propiedad. It is typically 0.5% of the property value declared in the Escritura.

6.- Lawyer Fees

This fee will depend on the amount of work the lawyer has to do. If the basic paperwork was straightforward the charge will be low. Conversely, if there were complications or the need to draw up multi-lingual contracts then the charge will be high. Legal fees of about 1% of the property value declared in the Escritura are considered normal.

Case Study

John Smith buys a re-sale property in Valencia for € 200,000.

Renovation costs typically vary between 545€/sq metre (51 Euros per sq foot) and 866€/sq.metre (81 Euros per sq. foot) depending on the type of remodelation you wish to carry out. In general, because of type of property we renovate and the profile of buyer we target (affluent working-class seeking distinction) we tend to go for top-end remodelations that highlight the elegant features of the property, going for top of the range floorings, quality interiors fittings, and Italian design kitchens.
The following table gives an idea of the costs involved in the complete renovation a period flat in Valencia. The costs shown relate to an 968 sq ft property in Ruzafa bought in December 2005 for 198,000 Euros and that was completely remodelled in the first quarter of 2006. Here we spent 626,6€/sq metre (58,56 Euros per sq ft) Euros. The final result showed it was all well worth it.

We combine two methods for conducting our sale of real estate acquisitions: the Internet, and through small state agents operating locally. We have found from experience that these two methods are by far the most effective means of selling any property. Approximately, 60% of all our sales is conducted directly through us via the internet, and 40% through local estate agents.

State agents commissions vary between 2% and 5% depending on the State Agent. We advice clients to refrain from using Exclusive Agents, since we have found that these generally charge higher percentages and are much less effective than local agents working for lower percentages on a non-exclusive basis. This is probably because Spanish buyers sternly avoid paying commissions and will look for properties in small state agents operating in their area and in which they can negotiate a reduction in the sales commission.

70% of Spanish property buyers will conduct a purchase negotiating directly the price with the owner without the intervention of lawyers or state agents, and will complete the purchase at the Notary. In contrast, foreign buyers will purchase property through a state agent and will invariably recur to a lawyer to conduct the purchase agreement.

For all our clients wishing to sell their property we charge a set see of 950 Euros to cover Internet advertisement costs and to engage three local non-exclusive estate agents plus a sales commission of 1,5% upon selling the property. If the sale is conducted by a local Estate Agent he will typically charge a estate agents commison fee of 2,5%.

The table below summarises the selling costs involved:

These are the average periods of time we hold investments. The period spans from the date of acquisition to the day the property is sold, including undergoing renovation: