It is hard to know these days what would constitute a safe investment. Real estate markets have taken a battering since 2007, when the housing markets in Ireland, Greece, Italy, Portugal and Spain last peaked.
Share prices are down, the outlook for most Eurozone economies is gloomier than ever and those with money to invest and the wish to retire early are rather flummoxed by the conflicting reports that flicker daily across our TV screens.
For small scale investors in particular the choices are bewildering. While most people will probably agree that buying real estate will always pay off in the long run, how long exactly this “long run” is going to be and where one should buy, when at home in the United Kingdom house prices are said to plummet soon, is quite another question.
Perhaps the approach to investment in real estate has to be a compromise for the time being. The question is no longer, should one invest EUR 250,000 into a property to be let out to holidaymakers or long-term tenants for the best possible yield - but rather how can one get the most value out of a EUR 250,000 investment?
Buying an investment property in countries like Spain for example, when prices are at their lowest for a decade or more, is a great choice. Although there may not be any capital gains on the holiday home in Marbella, Mijas or Malaga for a few years, rental yields are very satisfactory thanks to increased tourist numbers and the fact that holidaymakers are more discerning when it comes to choosing their self-catering holiday accommodation.
With airport taxes and petrol prices at a record high, many people are asking for quality not quantity, since they are flying abroad less than they used to. Asking for a little more luxury during the one and only annual holiday spent abroad means for many holidaymakers choosing a brand-new, well equipped luxury apartment, townhouse or villa.
A savvy investor who chooses the location of their property well can find some real bargains that will either be suitable for long-term tenants or holidaymakers - either way it can result in great rental returns.
In the past, small scale investors were often swayed by their own idea of a dream home in the sun. Without doing sufficient research people bought overseas homes, because credit was cheap and easy to obtain. Seaside, apartments, duplexes, terraced townhouses and villas in safe, gated communities where swimming pools and landscaped gardens are at hand will always outweigh a rural property in terms of demand for holiday rentals. Letting out for part of the year, the remainder of the year holiday dream homes were used by the investor and their family until the property began to look a little old-fashioned and the rental yields dried up.
Now a small scale investor will have to compromise on the type of property they purchase for their “dual purpose” investment. It can no longer be a dream home that will eventually be used by one’s own family when the rental yields dry up. It may not sell for a number of years and if it is in the wrong location, it may not be suitable for long-term tenants either. With some research and patience it is sometimes possible to get the best of both worlds!
Prime locations like Puerto Cabopino and Elviria in Marbella for example will fall easily into the EUR 250,000 investment bracket. It is possible to find apartments and townhouses for less than EUR 190,000 in Puerto Cabopino, a stunning resort in its own right that boasts a great port and marina with shops, bars and restaurants. This leaves a chunk of investment money that could be spent on a resale rural property in need of some refurbishment?
Or why not use the remainder for a studio apartment at the Costa Blanca, where prices are far lower thanks to the surplus of new built housing stock?
If the smaller property is used as a holiday home for family vacations and the Marbella property is used for holiday letting, the costs for the smaller home are offset completely. Rental income per week starts at around GBP 250.00 in Elviria, GBP 350.00 in Puerto Banus and around GBP 350.00 to GBP 450.00 for golf properties in San Pedro near Puerto Banus.