Buying Investment Property On Lanzarote
Thousands of holidaymakers dream about owning their own place in the sun. And there are lots of obvious advantages to investing in property on Lanzarote .
Not least the year round climate – which means that your holiday home or apartment can also be rented out for twelve months of the year.
The tourist market on Lanzarote is also both sizeable and stable. During 2006 for example the island received over 1 million isitors from the UK and Ireland alone. Which is a lot of potential rental clients.
So it’s little surprise to find that the buy to let market on Lanzarote is thriving.
Many investors are attracted by the prospect of capital growth – and property prices are currently appreciating here at around 8.5% a year. Mortgage costs are also cheaper – as typical mortgage interest rates are nearly 2% points lower than in the UK. And non-residents can normally borrow up to 85% of the value of a property.
So how much does it cost to get on the ladder? How easy is it to purchase property on Lanzarote? And what sort of rental returns can you expect to make?
Starting Out
The cheapest entry level for would be investors is obviously going to be on smaller properties. Which means studios and one-bedroom apartments. Typically, these start from as little as €90,000 – which at current exchange rates equates to around £60,000. You can view a selection of these properties here .
Purchase on an 85% mortgage and that means you can secure your first property on Lanzarote for as little as £9,000. There are, of course, mortgage payments to be met – which would typically amount to around
€400 (around £270) per month on a borrowing of €77,000 (around £51,000).
And there are also ancillary costs that must be accounted for when purchasing – just as there are in the UK or Ireland. These costs can add around 10% to the purchase price – see our comprehensive Buyers Guide here for more details.
But studio and apartment properties still represent good value for money on Lanzarote – especially if buyers take care to purchase units which are located in busy parts of a resort and on popular complexes with tourist licenses. Which is obviously an important caveat if you plan to rent your property out to other holidaymakers.
Island estate agents are well versed in the type of properties that are ideal for this type of investment and reputable operators – such as those found in our directory of island estate agents here – can steer investors in the right direction.
How Much Can You Charge?
Typically, a one-bedroom apartment on a complex with pool can be rented out from around £180 (€270) per week. So owners don’t need to achieve much more than 30% occupancy across the course of a year in order to start realizing a return on their investment. And many apartments are rented out for much longer periods.
One way to generate bookings, especially if you are a first time investor, is to advertise your property via a holiday rental website. It is easy to research these companies – simply see which rank in the top three of Google for obvious search terms such as Holiday Apartments Lanzarote. Take a look at their advertising packages and you’ll then be able to gauge the costs of using these services and can build this into your budgeting.
Some companies charge a commission per booking. Others a flat fee for featuring your property. Either way, over time, many owners start to build up their own portfolio of repeat guests which lessens dependence on these services and reduces this marketing outlay.
Many island estate agents also have holiday lettings arms, which means that they can handle the entire process – from purchase to rental – on your behalf.
A further option worthy of consideration is to rent the property privately on a long-term basis. This provides a degree of certainty about rental returns over time – but there is a trade-off as owners can charge more per week for holiday rentals than they can typically for a long-term agreement. You can see a selection of long-term rentals here in order to get an idea about rents.
Costs and Taxes
There are a number of ongoing costs that any investor should be aware of. Firstly, most complexes levy community charges on each individual unit owner-which go towards the upkeep of the complex and the cleaning and maintenance of communal areas such as pools and gardens.
This is not a flat standard fee and there is a great deal of variation
between different complexes – so always ensure that you are aware of this overhead before making a purchase.
Importantly, any income generated is subject to tax. Which, if you spend less than 183 days per year in Spain, would be your responsibility to declare and pay in your home country. The amount payable would be dependent upon personal circumstances and the level of income generated.
