Buyer’s guide

“Every person who invests in well-selected real estate in a growing section of a prosperous community adopts the surest and safest method of becoming independent, for real estate is the basis of wealth." Teddy Roosevelt

  1. Introduction
  2. Reasons for purchase
  3. Purchase procedure
  4. Taxes and closing cost
  5. Mortgages and finance
  6. Legal procedure
  7. Additional information
  8. After-sales – our services to you

1. Introduction :

Many people find the prospect of purchasing property abroad very daunting, but with the help of experienced and competent professionals, the actual purchase process is straightforward.
At Island Real Estate International our team of dedicated professionals have put together a comprehensive buyer’s guide for you to explain every aspect involved in purchasing an investment property or holiday home in fuerteventura.
We are here every step of the way to ensure that your purchase is a pleasant experience and one you’ll never look back on. Our aims are to exceed your expectations and be at hand throughout the whole process. However our service do not stop there. We offer a comprehensive range of after-sales services and we will always be at hand to offer you good advice or deal with any issues that may arise from your property purchase.

At IRE International our professional team has 12 years experience selling properties across the Canary Islands. We have a support network of offices across Ireland and the U.K. to service our clients whilst at home. We are confident that with our comprehensive listing of the finest properties on the market and superior local knowledge that we can help you choose the right property and take you step by step effortlessly through the buying process. (See Testimonials)

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2. Reasons for Purchase :

It is a very good idea to establish and clearly define your motives for purchasing a foreign or second property. Is it a pure investment or a holiday home? In general every buyer on a budget has to prioritize and decide whether they’re buying primarily as an investment with a view to maximum capital appreciation and/or rental potential, or mainly for personal use.
Look at the categories below to see the various options:

Investment

Off plan :

Once the reserve of the wealthy investor, increasingly more home owners are buying property at the off-plan stage. This allows the buyer the right to reserve a new property from the drawings at the initial launch price with only a small down payment to be made - typically an initial 10% , with a further 20% required in stage payments before completion. Thus the new owner reaps the rewards of the increasing capital appreciation during the construction process – as much as 30% (over 2 years).
For the investor seeking the highest percentage % return on his/her investment in a short time period, this option can be very attractive as the investor can choose to resell the property for the new and increased valuation before completion and signing of the title deeds in the notary.
We recommend that you contact us for further consultation if you are considering this option. Our team will step by step explain the various factors to be taken into consideration to minimize any elements of risk and maximize your financial return.

Rental :

Many peoples ideal scenario is to buy a second holiday home in the sun for their own personal use and rent it out the remainder of the time. There are the various rental possibilities available:

Short-term rental :

This is the letting out of your property on a weekly or fortnightly basis to holidaymaker's. The financial rewards to be made in this way can be quite high, if the right guidelines are followed, i.e. the property is of a high standard in its class and it meets the requirements of the average holiday maker – close to the beach, town center, shops, bars etc. There are a number of local property management companies in each resort on the island who will assist in the renting, management and maintenance of your property.

Long-term rental :

Due to the rapidly increasing local population and the rise in the migrating foreign community, there is a very strong market for long term renting in the resorts of Corralejo and Caleta de Fuste. Whilst not as financially lucrative as the short-term weekly rentals, long- term rentals involve less property management and can offer higher occupancy rates. Long-let contracts are normally signed between landlord and tenant for 3, 6 or 12 month periods. This allows you to forecast your advance earnings to cover any mortgage or loan repayments etc. The disadvantage with this type of rental is that the owners will be restricted from using the property themselves for the duration of any rental contract.

Guaranteed rental :

This option is becoming increasingly more popular with many people as it alleviates any involvement in the ongoing management of the property and it yields a high financial return to the investor. Initially guaranteed for a specified timescale, e.g. 3 years, you will receive a fixed income paid monthly into your bank account, regardless of occupancy. The buyer in this instance has the option to undertake a full 12-month per year rental contract or one with a built-in allowance for personal usage (typically 1 month per year). Yearly rental returns in excess of 6% net are achievable.

Personal use

Residential :

So you’ve made a lifestyle choice and decided to move abroad to enjoy year round sunshine and a finer quality of life!! Well, the prime objective in this instance is to find the right property in your budget that suits your requirements and new lifestyle routine. Beginning with location, we will look to find a property that tailor fits every wish and expectation of your new home in the sun in terms of size, space, facilities and proximity to local amenities.

Holiday home :

If rental return is not an issue, then it’s about finding that dream holiday home. We take pride in having the finest selection of new and resale properties available throughout the island and thus are confident that we can show you the best and latest properties available on the market.

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3. Purchase Procedure :

Reservation contract/deposit :

Once you have decided on the property you like, the next step is to put down a reservation deposit. This ensures the property is taken off the market and reserved in your name. Usually a deposit of 6000 euros is required but amounts can vary between 3000 euros and 10% of the purchase price of the property. The contract lays out the terms of the ‘option to buy’, the terms of the sale and the price.

Purchase contract :

This contract is drawn up after a reservation deposit has been placed on a property. It sets out all the terms and conditions of the purchase including :

Both parties usually sign this contract within one month after the initial reservation contract/deposit.
It is important that your lawyer checks this contract for you, which is binding by law. The Spanish version of any contract is the binding contract.

The Title Deeds (Escritura de Compraventa) :

The last or remaining payment due to complete the purchase of the property is paid in front of the ‘Notary’. This is done simultaneously on signing the title deed. This deed is similar to the purchase contract but with public faith given by the Notary under Spanish law regulations. It is signed by both the buyer and the seller.
The ‘Notario’ is a public Notary and state official who ensures that the contract (title deed) and land searches correctly correspond to the description of the property and the statements made in the contract. The Notario is a neutral party whose obligation is to give full faith that all procedures have been carried out legally and correctly.

Land Registry (Registro de la Propiedad) :

Once the title deed (escritura) has been signed in front of the notary, it is then presented to the appropriate land registry office in order to amend the ownership details. Registration may take between one and two months.

Power of attorney :

If you are not likely to be in Fuerteventura for the signing of the title deeds, we can arrange for a specific power of attorney to be granted to a lawyer to complete the property purchase on your behalf.
If obtained in Ireland or the U.K. the process normally takes around three weeks. Alternatively whilst in Fuerteventura an appointment can be made at the Notary public one morning at your convenience.

Stamp duty/Transfer tax :

At the time the title deed (escritura) is presented to the land registry, your lawyer will arrange for the payment of any tax due in relation to the transaction, namely Stamp duty – I.G.I.C. (Impuesto General Indirecto Canario), Documentation Tax - Actos Juridicos Documentados or Transfer tax – I.T.P. (Impuesto de Transmisiones Patrimoniales).

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4. Taxes & Closing costs :

Throughout the whole purchasing process there are a number of taxes and other costs associated with the purchase of property that have to be paid. These vary depending on whether you are buying a new or resale property and are as follows:

For new build :

Plus in both cases :

By Spanish law the Plus Valia is to be paid by the seller but often in practice is paid by the buyer as a condition of sale. It is generally requested a few months after the land registration.

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5. Mortgages/Finance :

Spanish mortgage :

The process of applying for a foreign mortgage is relatively straightforward and similar to that in Ireland or the UK. Most major banks on the island provide this facility for overseas buyers and in general non-residents can achieve 70% of the valuation price of the property. Residents can achieve 80% and upwards. Mortgages are granted on the strength of your application and not with any equity you may nave in Ireland or the UK used as security.
Provided you fill out the mortgage questionnaire and supply the necessary documentation, a mortgage can be approved within two weeks.

The banks have various types of mortgages available offering :

Here at Island Real Estate International we work with a number of major banks to help you find the most competitive mortgage to best suit your needs.

Financing :

For investment purposes financing plays a very important role when one considers the whole idea of investment is to make as much as possible from as little as possible, i.e. to achieve a high percentage return on your initial capital outlay. Shrewd financing leads to good investment potential as your property should be appreciating at a percentage far in excess of the interest on repayments of your mortgage.
Your sales consultant at IRE will be happy to show you worked examples to highlight this fact and explore all potential financing possibilities to maximize your investment potential.

Currency conversion :

A very important consideration for UK buyers is the currency conversion rate from pounds sterling into euros. Due to the large sums of money involved it is always advisable to seek the best pounds to euros conversion rate. This simple procedure can save you thousands of pounds. We can assist by putting you in touch with specialist currency exchange companies who will advise you on the best time to exchange your money, the latest market information and competitive currency exchange rates. Your IRE International Sales Consultant will provide you with full details.

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6. Legal procedures :

Lawyer: One of the most important aspects of property purchase both at home and abroad is to enlist the services of a fully qualified lawyer (known as an Abogado here in Spain). Your Island Real Estate International Sales Consultant can recommend a choice of approved firms who will act independently on your behalf to ensure the correct procedures are followed and in turn guarantee peace of mind.

Your lawyer will take care of the following :

Power of attorney :

In addition if you grant power of attorney to the lawyer, he/she will act as your representative and sign the title deeds on your behalf.

Tax retention :

It is also required by law that if the seller of the property is a non-resident (in Spain), then the buyer or buyer’s representative, i.e.the lawyer, must retain 5% of the purchase price in order to account for the seller’s liability to pay tax on the sale of the property. This retention is presented to the tax revenue office (Hacienda) within 30 days after the signing of the title deeds of the property.

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7. Additional information :

Insurance :

Property :

The same as at home, it is advisable to take out an insurance policy against any potential damage to your property. This can be issued on the same day as the signing of the title deeds. Your IRE Sales Consultant will advise you on this matter and a suitable policy for your property.

Life :

Life assurance policies are available to cover mortgage repayments in the eventuality that the titleholder is unable to do so. Many banks offer improved mortgage interest rates if such a policy is taken out.

Spanish Wills :

It is important that after the signing of the title deeds of the property that you make a Spanish Will to determine who has inheritance rights to the property should the worst happen. By having a Spanish Will, it removes any doubt or dispute as to the ownership of the property.

Community of Owners :

Each development or complex with communal facilities such as gardens or swimming pools has a community of owners whose job is to see that the complex is well maintained. Each homeowner is obliged to contribute their share of the cost of the maintenance as set out by the community. The amount varies depending on the complex and its amenities but in general it is in all of the owners interests to ensure that the complex is kept in a clean and tidy state for the cheapest price possible. This fee is usually paid monthly directly to the community.

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8. After-sales – our services to you :

Our service to you does not stop after the purchase of your property. We will be at hand to assist you however you may need us. Our clients can feel free to drop into any of our offices both here in Fuerteventura and in Ireland for any advice or assistance regarding their property, or drop us an e-mail or letter to which we will send a swift reply. Our after-sales service is second to none and the reason many of our clients recommend us to their friends and family.

Our list of services include :

We look forward to meeting your acquaintance and are at your disposal
The IRE International Team

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