How to invest in real estate in Spain with little money

You want to invest in real estate, but you don't have much capital.

There are many benefits for those who invest in real estate, and for this reason these have become one of the most popular assets today. Real estate investments are a great way to earn income and build wealth. Best of all?

We discover the best options for investing with little money

Why invest in real estate in Spain?

At a time when inflation is affecting the world economy, stock markets are falling and economic uncertainty is on everyone's lips, investing in real estate in Spain can be an excellent option due to several factors.

Constantly growing real estate market

First, the Spanish real estate market has experienced steady growth in recent years, meaning that property prices have increased and are expected to continue to do so. This provides an excellent opportunity for long-term profits.

Attractive return on the rental of real estate

Renting a property can provide attractive returns, especially in areas with high rental demand. This is especially beneficial for those who are looking for consistent cash flow through their investment.

Diversification of investments

Another advantage for investors with high exposure to equities and other volatile assets, investing in real estate assets allows them to have a more diversified portfolio. Having a portion of your portfolio comprised of real estate can help reduce the overall risk of your portfolio.

Increase in demand for housing

As the population in Spain continues to grow steadily, the demand for housing is also increasing. This means that there will be greater demand for housing in the future, which can help increase the value of your investment in the long term.

Euribor increases

Finally, it should also be noted that the current economic situation, characterized by the rise of the Euribor, the slowdown in economic growth and the lack of increase in wages in relation to inflation, makes it difficult to maintain the monthly payments of variable mortgages. According to forecasts, this situation will affect the housing market, reducing the purchase and sale of homes and raising the price of m2. However, this will also increase demand for rentals, strengthening real estate investment as a viable option.

Benefits of Real Estate Investment

As we have already seen, invest in real estate It can be a excellent option for those looking for profitability, diversification of their investment portfolio, generating passive income from their operations and long-term investment. In addition, real estate can provide a constant cash flow through rent, and it can also increase in value over time. Therefore, making a real estate investment brings several benefits, some of them are:

1. Profitability: One of the most obvious benefits of Investing in real estate is profitability potential. If the property is rented, a constant cash flow can be obtained in the form of rent. If the property is sold, a profit can be made on the sale price.
2. Increase in value: Real estate often increases in value over time, especially if it's in areas with high demand. This can provide a great opportunity for long-term profits.
3. Portfolio diversification: Investing in real estate can help diversify your investment portfolio. This means that if other parts of your portfolio are suffering losses, your investment in real estate can help offset those losses.
4. Long-term investment: Real estate is a long-term investment, meaning that its value can increase over time. This provides an opportunity to make long-term profits and plan for your financial future.
5. Investment Control: When you invest in a property, you have control over that investment. You can decide whether to rent it, sell it, or use it for your own use.
6. Tax benefits: There are also certain tax benefits associated with investing in real estate, such as the deduction of mortgage interest and the possibility of depreciating the property. However, it's important to consult with an accountant or tax advisor to learn about your country's specific tax laws.

In summary, we can say that real estate investment is one that acquires a property with which it generates income, offering its investors a wide range of financial opportunities, generating wealth even in times of crisis.

How to buy a property in Spain with little money

When buying a property in Spain, it is important to keep in mind that the average price per square meter (currently in Spain is 1,921€ per m2). This can be a challenge for those on a budget.

According to idealista, the leading real estate portal in Spain, during the last period between 2017 and 2022, the price of m2 has increased by 26%, from 1,524 to 1,921 euros respectively. However, this does not mean that it is impossible to buy a property in Spain with little money, there are several options available that we detail below.

Financing through mortgage loans

Mortgage loans are one of the most common options for financing the purchase of a property in Spain. A mortgage loan is a loan that is secured with the property being purchased.

In Spain, banks and other financial institutions offer mortgage loans with fixed or variable interest rates. The buyer can choose the term of the loan, which can be from 20 to 30 years, and the bank or financial institution will grant him a percentage of the value of the property, which varies depending on the client's delinquency and can range from 70 to 80% of the value of the property.

It is important to mention that mortgage loans in Spain usually have associated fees, such as the opening commission, the study commission, etc. It is also important to keep in mind that the bank or financial institution will request a series of requirements to approve the mortgage loan. Another point to consider is the fact that you have saved the cost of real estate transaction expenses, which usually amount to 12% (taxes + notary fees) this amount will not be financed by the bank where you obtain your mortgage.

For example, to approve the mortgage loan, the bank or financial institution usually requests information about the buyer, such as their credit history, income, debts and savings. An evaluation of the property is also required to determine its value and ensure that it is in good condition.

Renting with an option to buy

Rent-to-buy is a viable option for those looking to buy a property in Spain, especially for those who have financial restrictions or for those who want to test the property before making a purchase decision.

El rent with option to buy is an agreement in which the tenant rents a property for an agreed period of time, with the option of buying the property at the end of the rental periodr. There is the option that the tenant can pay a percentage of the purchase price, to reserve the option of buying the property in the future.

Pros of the rent-to-own option:

-Allows buyers with financial restrictions or who want to test the property before buying it, to acquire a property
-It can allow the tenant to save money for the purchase of the property, since part of the rent is applied to the purchase price
-Can provide a long-term commitment for the renter and landlord
-It can provide a more flexible option than a traditional mortgage loan

Cons of the option for rent with option to purchase:

-It requires a long-term commitment and does not allow the flexibility to move to another property if the tenant's needs change
-It may be more expensive than a traditional rental due to the purchase option and the higher rent
-The tenant may lose the purchase option if he does not comply with the obligations of the contract
-It may be more difficult to obtain a traditional mortgage loan after having rented with an option to buy because of credit history

Costs associated with the option to rent with option to buy:

-Purchase option, which is usually a percentage of the purchase price of the property
-Higher rent than a traditional rental
-Legal and notarial commissions
-Financial services fees such as the fees of a lawyer or real estate broker.

Acquiring a property through auctions

Acquiring a property through auctions can be an attractive option for those looking for a buying opportunity in the real estate market. However, it is a complex process that requires good research and planning before the auction.

It is important to mention that auctions can be an opportunity to obtain lower purchase prices due to competition between buyers. It is important to be prepared for the challenges and risks involved in the process of acquiring a property through auctions, since in these, in most cases, mortgaging the property is not allowed, which implies having the total amount available in cash or savings, since there is no financing option. Below are the pros, cons and costs of acquiring property through auctions

Pros of buying a property through auctions:

-It can provide lower purchase prices due to competition between buyers.
-It is possible to make a good investment in the future, since the purchase price may be lower than the market value.

Cons of buying property through auctions:

-It may be more difficult to find information about the properties being auctioned and the auction processes.
-You need to do some good research before the auction to ensure that the property is in good condition and you have no outstanding debts.
-There can be fierce competition at auctions and it's possible to not get the desired property despite offering a high price.
-In many auctions it is not allowed to request a mortgage loan on the property
-The buyer is responsible for the charges that the property has

Costs associated with acquiring a property through auctions:

-Auction fees, which can be high
-Legal and notarial fees to register the property.
-Maintenance expenses and property improvements if necessary.

How to invest in real estate projects in Spain

Investing in real estate does not only involve the direct purchase of houses, flats or land in different markets. There are many types of real estate transactions and investment methods available, which do not require investment capital as high as other investments.

Real Estate Tokenization (Renental)

To date, the Tokenization in the real estate sector is understood as the conversion of economic rights generated by real estate assets into tokens. Tokens symbolize investments in real estate and are also used to digitally map properties on the blockchain.

With the Real estate investment platform Renental you can easily start investing in real estate from just 100€ and with all the guarantees included. Thanks to Reental's tokenization of real estate assets, entering the real estate market is now easier than ever.

Reental has a team of professionals specialized in property management, allowing investors to invest in the real estate market without having to worry about administrative and maintenance tasks related to the property.

Reental adopts a philosophy of”Skin in the Game“in its work,which means that they only win if investors also win. This is because Reental owns the homes, meaning that if at least one of the properties is unsuccessful, both the investor and Reental will be affected.

Another advantage is that by investing in a company like Reental, you can obtain a higher return compared to investing in an individual property, in addition to the ability to invest in international real estate outside the investor's residence.

In short, investing in a rental company like Reental can provide a steady flow of income, stability in the market, management professionals, and higher returns compared to investing in an individual property.

Crowdfunding platforms

Real estate crowdfunding, also known as collective project investment, consists of investing in the real estate sector jointly with other investors, without the need to make a large investment of money. It brings together different investors to face an adventure that would be impossible alone for each of them.

Investors will be able to diversify their investments and own multiple properties while taking on less risk than if they did it alone. In addition, the process also allows individual investors to access the real estate market without having to own, finance or manage properties.

This fundraising technique has a number of benefits for investors, but there are also some aspects that need to be considered.

For example, the return on investment is usually not realized until the end of the investment process. This means that there is no secondary market to sell the assets, so the investor will have to wait until the project comes to an end to obtain a return on investment.

The cost of entry tickets limits access to some crowdfunding platforms to those who have enough resources to buy them. This prevents some projects from receiving adequate funding, limiting their growth potential. In addition, the participation of intermediaries in the crowdfunding process complicates the process for the promoter of the work. This is because intermediaries often charge their own fees for their services, which decreases the promoter's return on investment. This, in turn, reduces the amount of funds that investors can receive, reducing the incentive to invest. Finally, intermediaries often have little or no control over projects, meaning that investors have no guarantees about the return of their investments.

Therefore, we must consider the pros and cons of crowdfunding before investing in a project. In this article, we provide you with more information about advantages and disadvantages of real estate crowwfounding

Participate in a housing cooperative

Investing in real estate projects in Spain through a housing cooperative can be a cost-effective way to gain exposure to the Spanish real estate market. A housing cooperative is a non-profit organization comprised of people who are looking to purchase their own home. These cooperatives usually aim to build or buy homes and then rent or sell them to their members.

To invest in a real estate project through a housing cooperative, it is necessary to become a member of the cooperative. Membership requirements may vary depending on the cooperative, but usually include an entry fee, a time commitment and a financial contribution. Once you are a member of the cooperative, you can choose to invest in a specific real estate project.

Once the project is underway, members of the cooperative can receive a return through rentals or the sale of homes once they are built. It is important to note that, being a cooperative, members also have some responsibility for managing and administering the project.

In addition to potential financial gains, investing in a real estate project through a housing cooperative can also provide a sense of personal accomplishment and contribution to the community. By helping to build affordable housing, you are helping to improve people's quality of life. However, it is important to mention that housing cooperatives can be a less conventional form of real estate investment and there may be associated risks, such as the risk of not recovering the investment if the project is not successful.

Invest in a real estate investment fund

Real estate investment funds, also known as SOCIMIS (Listed Real Estate Investment Companies) are a popular way to invest in the real estate market, as they provide an easy and accessible way to acquire a share in a diversified portfolio of real estate properties.

By investing in a real estate investment fund, investors can gain exposure to a variety of properties and real estate sectors, and benefit from the return of the property portfolio as a whole, without having to worry about managing and maintaining individual properties. One of the great advantages of publicly traded SOCIMIS is that they offer more liquidity than other real estate investments: If you suddenly need cash, you can sell your shares on the stock exchange.

Some of the cons of SOCIMIS (Listed Real Estate Investment Companies) may be that they have a more volatile return than other forms of real estate investment since they are exposed to fluctuations in the real estate market.
Having a high level of indebtedness, which may increase investment risk or have commissions and expenses associated with investment, such as management and subscription fees, that can reduce investment return. One of the aspects considered a disadvantage is not having direct control over the selection of the assets in which they are investing, since, in a SOCIMI, the choice of the property in which to invest is decided by the management of the SOCIMI, not by the individual investor.

Investing in a Listed Real Estate Investment Company (SOCIMI) requires meeting certain specific requirements. One of the main ones is to have a minimum capital established by the company in question, which may vary depending on the company, but in general a significant minimum capital is required to be able to invest, for example, an average of 10,000 euros or more. It is important to check with the company in question before investing to know the minimum capital required. In addition, it is necessary to meet the requirements for access to the stock exchange, such as being of legal age, having a bank account and meeting certain identity verification requirements to be able to buy and sell shares of a SOCIMI on the stock exchange.

Another requirement is to have a high net worth or a high annual income, since investing in a SOCIMI requires large capital and sufficient income to cover expenses. Finally, it is important to comply with tax and legal regulations and laws in your country or in the country where the listed company is located to avoid any legal or fiscal problems.

In order not to miss any of the opportunities we present, we recommend that you join our Discord or Telegram group to meet others Reentels and the whole team. Of course, we invite you to take a look at our blog articles to keep you informed.

Welcome to the new way of doing finance, welcome to Reental.