7 keys to investing in real estate in Spain as a foreigner

Foreign investment in real estate, especially in Madrid, has soared in recent years. The traditional European buyers have given way to a very dynamic Latin American investor that has made the Spanish capital the center of its real estate operations.

With more than 14,000 properties legally managed, Thomás de Carranza Abogados has become a specialist in advising foreign investors throughout the entire purchase process, including the incorporation of companies or even the management of the golden visa.

The law firm has identified at least seven aspects that should be taken into account by the investor who is going to buy a property in Spain:

  1. Due diligence of the property. The first step is to analyze the asset to be purchased from a legal point of view: type of property, access to the registry, simple note request, certifications, state of encumbrances.
  2. NIE: Foreign Identity Number. A unique and exclusive document assigned to foreigners who, due to their economic, professional or social interests, are related to Spain, for identification purposes. It is essential to incorporate a company, sign the deed or open a current account. The possession of a Spanish passport is neither valid nor sufficient for this type of operation.
  3. Deposit contract: type of contract in which the buyer and seller respectively undertake to carry out the transaction and where the conditions of the sale are fixed. The buyer delivers an amount to the seller as a guarantee of performance of the final contract, which will normally be completed in two or three months.
    If the seller defaults, he must return to the buyer double the amount delivered; if the defaulting party is the buyer, he will forfeit it.
  4. Mortgage loan: Banks grant up to 60% of the property value to non-residents. Although this is the most common percentage, it may vary depending on the guarantees provided, usually the mortgage guarantee of the apartment itself.
    The bank will request financial information to ensure that the applicant has sufficient resources to repay the loan. The ability to pay must be evidenced in euros or dollars. Normally, the bank does not want to assume the change of currency, so outside of both currencies, the bank will usually deny the loan as an individual. The most common solution is to incorporate a company in Spain to purchase the property and take out the mortgage loan.
  5. Deed of sale. This is a key procedure that is carried out before the notary and involves a multitude of elements that must be controlled: validity of the participants’ documentation; bank check; possible errors in the text, etc.
  6. Settlement of taxes and registration of the new holders in the Land Registry.
  7. Length of stay: Ideally, the buyer should be in Spain one or two weeks before the signing. It is not unusual for any kind of setback to arise that can be easily solved if you are in the country.

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