Posts in Category Real estate investment

New Law of entrepenurs and its internacionalization- Spain

10 October, 2013 No Comments

Spain… a country at your fingertips.

As previously did Portugal and Greece, Spain invites foreigners to invest in the country, providing a number of advantages.

real estate in Spain

photo: T.B.Channel

We will do an analysis of the measures that autorize the grant of a residence permit in Spain to foreign investors upon request.

Following the adoption of the new law on entrepeneurs, last September (law 14/2013 ) appears among others, measures to encourage foreign and domestic investment. The aim of the law is to facilitate international mobility, as well as the entrance and stay of foreigners in Spain for economic reasons, by making a significant capital investment.

Non resident foreigners, buying real estate in Spain, with an investment same or higher than € 500.000 each, may apply for a residence visa ( which allows them to live in Spain for a year ). This period of residence may be extended, upon application for a residence permission for two years more. Being this last period of two years renewable for two more years, subject to maintain the same conditions  that allowed grant authorization.

This investment will be verified by one or more certificates evidencing the domain, issued by Real Estate Register, belonging tho this property. Must prove that they have the ownership of the property by continued certified information domain  and loads of the real estate Register that belongs to the property. The certification will include a verification e-code for the enquire on line.

If at the time of visa application, the acquisition of the property was still in process of registration in Real Estate Register, will be enough to submit the certification, stating current seat submission of the acquisition documentation, acompanied by taxes payment certification.

The applicant shall prove in this way, his investment of 500.000€ or more in real estate, free of charges. In the event that the investment exceeds € 500.000, the portion of this exceed may be subject to taxes.

There are several limitations to the grant of a residence permission for real estate investment:

* The person who does the investment must not be ilegally in Spain, or had any criminal record  in the country, or any other countries where he head lived for the last five years.

*Must have public or private health insurance, as well as enough personal economic resources.

* the property acquired by investor must be free of charges. In case it has a mortgage, the investor loses it’s right to have the residence.

In addition to the information concerned to real estate market, the purpose of this new regulation also includes stimulating foreign investment in several areas, while promoting business entrepeneurship development in the country, scientific and technological innovation, seeking to create employment .

 

(III) Mipim2011 the World’s property market: analyzing topics

14 September, 2012 No Comments

In this second post I limit myself to make a synthesis of ideas presented in Dr. N.Roubini’s conference at MIPIM 2011.  Due to the length of the presentation, I focused on what might be more relevant for the real estate investor. Nonetheless, for those who want full details about the presentation, I included the full video in its original version in my previous post.

Core Observations:

1-The question that Dr. Nouriel Roubini arises: Can countries such as China and other emerging countries tighten their monetary policy and their exchange rate to reduce inflation and maintain economic growth in order to get a soft landing of the economy rather than a hard one?

The strength of the economies of the growing emerging markets encourages the risk of a higher inflation. In these markets, there is a clear economic overheating, excessive credit growth, and note that about two thirds of their consumption basket is: oil, energy, food and transportation

2 – A vivid example would be the current situation in the Middle East: What’s happening right now in the Middle East? Nobody could foresee the political movement that took place in early 2011. We don’t know if this is going to stabilize soon, or if it will spread to other countries. This can have an effect on oil and energy prices … In such case, what would be the consequences of higher oil prices?

* There will be a severe problem of inflation of the overheated emerging markets.

* A lower risk of inflation in developed economies since the recovery from the financial crisis is very slow

* It also has an impact on economic growth. Specifically a destabilizing effect in the investor and consumer’s confidence in particular…

3 – In recent years there has been a massive injection of liquidity into the global economy. There were massive fiscal stimulus in the US, Japan, Europe, and other emerging markets, but if we take a look at the current market (as of 2011) we realize that we are in the opposite side: there is less monetary stimulus and more fiscal austerity (countries in Europe and the UK started to cut on spending and tax incentives, as well as the US, who began to cut costs ….. The question is: Will the private market have the possibility to consume in order to have economic growth when some of the fiscal and monetary stimuli are gone?

Areas with potential growth: the U.S. at a 3%, some parts of Europe at a 1.5 to 2%, and emerging markets, eastern countries and South America at a 5-8% growth rate.

4 – TURKEY

Turkey’s growth prospect is very optimistic for the medium to the long term. There is still growth in its population and as a consequence there is a significant domestic market (As a contrary, China’s population is decreasing). It can be a fast-growing economy although structural reforms need to be done. If these reforms are made at a regular pace, the forecast of growth for the future is very positive (real estate growth comes along).
5-RUSSIA

Prices will increase reasonably which will improve Russia’s fiscal balance, and consequently its economic growth. However, the fact that Russia is not a very well-diversified economy prevents growth of being even greater. For example, in 2010 where there was a global economic recovery countries such as India or China grew at a 9% rate or Brazil at a 7.5%, but Russia instead, grew at a 4.5% rate.

Its current situation (as of 2011) is slow growth and a 2 digit inflation, and unless structural reforms are put in place to accelerate growth, the former will be slowed down. Even though Russia has great potential for growth given its vast natural resources, a good education system, and good scientists, there will be a direct relationship between what happens to oil prices and the growth of Russia. If oil prices rise the Russian economy will be stronger because it will improve the country’s economic balance. But, what should really be a concern is the long-term growth of their economy, and foreign investors are aware of it, and with it, aware of the risk of expropriation.

6-USA

Currently there is an oversupply of existing houses. Home sales fell up to 80% of its highs, even though now are gradually increasing. However, home prices are still adjusted downward, inflation is present in the economy, unemployment is still high and people who are forced to leave their homes because they can’t pay their mortgages. Prices have adjusted by a 30%, but may have not bottomed out, and it might require a longer period of time for these adjustments to run out.

7 – EUROZONE

Fiscal austerity is urgently needed in the Euro zone, the UK and Japan. Even though a period of austerity is a “must”, it will have in the short term a negative effect on economic growth. Austerity means to cut on government spending, to fire public officials… but it will make the economic recovery more effective in the long run.

(I) MIPIM 2011 Cannes & Asia “the world’s property market”

23 May, 2012 No Comments

This fair is among the most important real estate forums in the world for anyone to present projects and attract foreign investors. The fair it’s a showcase of cities and regions to acquire popularity among international companies.

MIPIM 2011, in Cannes on March 8-11 of 2011, had 18,600 visits, of which 5,000 were investors from all over the world, and 6,400 were companies. Even though the majority of the show stands was represented by European countries, especially France (hosting the fair) and the UK (guest country), a total of 90 countries participated in the event, here is a short list: Belgium, Luxembourg, Spain (Barcelona, ​​Catalonia), Italy, Germany , Nordic countries, as well as delegations from Russia, Baltics, Turkey, South Africa, Brazil, Uruguay, China, Japan, Singapore, Arab Emirates, Qatar and Egypt.

This fair gathered a vast amount of useful information that could help you determine where to invest and help you identify investment opportunities. It helped the investor understand the real estate market in a comprehensive manner, along with its trends for the short to the medium term. This, in part, was possible thanks to all of the international experts that conducted more than 40 presentations about to the housing market as well as “Investment Labs” or networking sessions that performed an in-depth analysis of the hot investment markets of the moment, such as Turkey, Brazil, Egypt and South Africa . Each workshop had an approximate duration of about 45 minutes, led by 3 experts and concluded with a debate or discussion from 5 key personalities.

A different format was the closed-door investor power meeting, that offered the opportunity to 30 investors (buyers or sellers) to find, through their network of contacts, potential business partners.

Another interesting kind of workshop was held as a competition game. Taking the British market as a referent, since it is one of the most dynamic real estate markets in Europe, all English promoters exhibited and presented their projects to a jury of potential investors, as if they were participating in a ‘competition’.
Urban debates were also offered in front of the different delegations of all the cities around the world, with topics such as the different measures adopted from the rapid population growth, carrying out with  an analysis of issues related to sustainability and quality of life.

The fair has gathered the most influential executives from the real estate sector of this time; Property Advisors, Investors, Bankers, Commercial Investment Advisors, Architects, Designers, International Real Estate Attorneys, Construction companies, Development Corporations, as well as local and regional authorities. Thus, a place to meet and exchange the supply and demand of all the real estate segments (commercial, industrial, infrastructure and development, engineering, residential, offices… and the largest projects worldwide).

It might be interesting to analyze in upcoming posts some of the highlights of the exhibition.
** Given that the number of Asian investors seeking new investment opportunities far from their borders had been increasing considerably, MIPIMASIA fair (www.mipimasia.com) was held in Hong Kong on November 15-17, 2011. * *

(II) CONDO-HOTEL, THE ADVANTAGES AND DISADVANTAGES OF THIS NEW FORM OF STRUCTURING OWNERSHIP

20 May, 2012 No Comments

The owner of a condo hotel shares the benefits from renting the property with the company managing the hotel.

An example of a well known condo hotel is the PLAZA Hotel in New York.

In Spain, half of the offer of condo hotels is located in the region of Andalusia, particularly in the province of Malaga.

In order for this model to be successful, it must be profitable for all three parties:

  • the promoter
  • the hotel operator
  • owner / investor

The advantages would be:

* The PROMOTER derives part of its costs to the OWNER by selling him the suites, and therefore the amount of external financing decreases. The PROMOTER is still the owner of the common areas (meeting rooms, spa, local ..) from which he will also get a return. This business model allows the promoter to develop the hotel in areas where land is very expensive, where otherwise the project wouldn’t be viable. It will be easier for the PROMOTER to achieve an agreement with a hotel operator since the risk is spread over 3 different figures.

* The HOTEL OPERATOR will be able to manage 5***** hotels in areas where land is expensive, most of the time in “prime” tourist locations of big cities or exceptional locations for vacation on the coast or in the mountains. This allows OPERATORS to attract once again  high class tourism that in recent years has chosen other ways of spending their vacation rather than in hotels. The OPERATOR will set the terms and conditions (time and season) in which the owner will be able to enjoy his unit, making the most out of the peak season. The PROMOTER will also decide the design and decoration of the rooms and units.

* The OWNER / INVESTOR will have an interesting return from the property over the medium or long term based on the proceeds from renting it.  The property can also increase in value, since a “prime” location is often requested by investors (it is sold as any other real estate property with the advantage that some hotel customers may be interested in purchasing one of the units).

The OWNER will be able to use the complex facilities at a discount. In comparison to regular second residences, the OWNER will also have a second home in an attractive area that will always be in its best condition, exempt of problems and issues. The owners can take advantage of the hotel’s name recognition, advertising, management experience, that will get them a higher rent than they would otherwise get by renting a regular second house.

Rent generates benefits that outweigh its costs, and it is reasonable to assume that the investor will get an increase in the property’s value (as long as the purchasing decision was well made). It also allows the OWNER to enter the hotel business, with a small investment.

The potential disadvantages, especially for the OWNER:

1. The OWNER buying the unit takes a risk since he ignores the terms and conditions that will be set by the PROMOTER, nor has prior information of the future incomes that this investment will generate, and therefore cannot calculate his ROI over the medium or long term.
2. The OWNER might not know when and how long he will be able to use it.
3. The OWNER will not be allowed to decorate the room or customize it in any way.
4. The OWNER should try to know in advance who the OPERATOR will be, because if it’s not a high-end chain, the investment will most likely be unprofitable and may not be as appealing to do. Among the chains with more experience I would include: Hyatt, Intercontinental, Abba Hotels, Crowne Plaza, Sol Melia, Kempinski hotels, Vasari, Ritz-Carlton, Marriot, Hilton, Le Meridien ….
The market suggests that the safest investment are held in downtown areas of certain capitals, since it involves a minor risk to the future sale of the property and a safer appreciation of it.

 

(I) CONDO-HOTEL: Real estate ownership + hotel services!!!

19 September, 2011 No Comments

We are talking about a hotel in which every room belongs to a different owner, but the entire hotel establishment is managed jointly …. also referred to as the perfect second home.

Its operation is similar to the one of a normal hotel with the difference that the rooms are owned by an investor. The investor will be able to enjoy the room for a certain period of time, and the rest of the time it will be exploited by the hotel managing company, producing a nice return to the investor.
This kind of business surged in the 80’s in South Florida, which then spread to other states as New York, Los Angeles, Las Vegas, or golf resorts and mountain resorts such as Aspen in Colorado. After a while, it became a very common figure in other countries such as Panama, Canada, Philippines, and many more.

Many second home owners consider the possibility to rent their home for as long as they don’t use it to take some profits out of it. However, in many cases they are not successful because it is not always easy to find tenants.

In this particular case, the “condo-hotel” investor owns a piece of real estate within a large hotel resort ans is aware that will be able to enjoy it one month out of a year. The remaining 11 months he will not have to pay expenses that a second home usually carries, and will be getting a return for his investment from the management company.

It is obvious that the management company, in order to maximize profitability, will put a restrain on specific dates in which the owner will not be able to use the home, for example in some countries, the months of July and August which are the busiest of the year. This type of investment would be more convenient for people who have flexible schedules, and are able to pick their vacation days with no restrains.

Condo-hotels” are usually located in the best destinations around the globe. C-h are high quality places where every little detail is taken into account, and its clientele is in the upper class. All this leads to a high turnover in room rentals. Thus, when investing in this specific product, it is recommended to do it on a hotel whose management company is prestigious and has good reputation.

It is a relatively new system in Spain, and it seems that in the urban aspect there is legal uncertainty. But in legal terms, the condo-hotel may be regulated within some of these figures: 1 – The hotel’s horizontal division, which would be the most common way to do it. In this case the owner would have the property and a registration notice proving them owners of a room. 2 – It might also be considered as a group of assets, which would mean to buy a % of the entire property without specifically dividing the parts (not the common way). 3 – A corporation, that is to acquire part of the hotel by the purchase of shares. In this corporation, the ownership of the hotel belongs to a company whose investors participate as shareholders.

Regarding the community services that the hotel offers (pools, spa, gym, golf, etc..), they will be available to the owner during his stay, with the possibility to pay them at a discount (depending on the agreement established with the management company).

The managing company is responsible for the rent, as well as for maintenance and repairs of both the property and the common areas. The portion of the income derived from the rental is allocated to finance, if any, repairs or possible damages in the property.

In a later post, I will present you with a list about the strengths and weaknesses of this type of investment, which differ from both timeshare or fractional properties.

NEW BVLGARI 6****** HOTEL IN LONDON!

16 September, 2011 1 Comment

Brick recovery in London? ….. people look for the safest investment, and  the lvxury hotel segment came to mind.

This new bvilding that attempts to arrange a hotel plvs six lvxury apartments, is located in the neighborhood of Knightsbridge, a very exclvsive area in the city of London with amazing views to Hyde Park (nearby Harrods). A few meters away from the hotel, you can find the most expensive apartments from the city, the One Hyde Park complex. The project is lead by Inditex co-founder Rosalia Mera, svpported by other investors such as Prime Capital Investors with an estimated capital outlay close to 350 million €. (Expansión 30/01/11)

The hotel project under the name of the Italian jewelry firm BVLGARI, which currently has hotels in Milan and Bali, will be managed by the Ritz Carlton family, the company that currently manages the other hotels from the chain.

Rosalia Mera has previous experience in the hotel indvstry, with a stake in the Room Mate chain, as well as a number of hotels in the US. In this case, it is a rather conservative project, and a way to diversify her real estate investments. London is also considered to be a stable market, and the hotel would become the first 6****** hotel in the city, which I am sure they will not have too many empty rooms.

The project’s site is where the old Normandie Hotel was established. The investment group bought the site in 2008, but it was not until over half a year ago that the necessary permits and licenses were finally approved.

Its opening is planned to be at the same time as the 2012 London Olympic Games.



(II) Real Estate Investment in Punta del Este – URUGUAY

15 September, 2011 No Comments

Uruguay is a tourist destination where people who went once, usually like to repeat. This makes a positive effect on the return of any real estate investment, especially of vacation properties.

Uruguay finds itself in a full expansion that has allowed, after a period of growth, to achieve economic stability. It focuses on low public spending policies, competitive tax rates, in addition to an improved tax collection, and a relatively open trade regime.

Besides the economic stability and the country’s strong legal system, the Uruguayan government has an open attitude towards foreign direct investment (FDI), by eliminating unnecessary paperwork such as previous registrations and authorizations, as well as restrictions that discriminate against local or foreign investors. This allows foreign capital to have no restrains in case they desired to participate in local companies. The legal and mercantile procedures to establish a corporation in Uruguay are simple, and the initial capital invested can benefit from tax exemptions, or VAT.

Punta del Este is emerging as one of the best business opportunities in the country. It is the most attractive real estate investment due to its location, like a “VIP real estate destination”. Despite Montevideo, Punta del Este has registered the highest number of transactions of second hand/vacation homes, whose main buyers come from Brazil, Argentina, United States or Europe, with an increasing number of Uruguayans as  their society gains purchasing power.

This part of the country offers virgin landscapes, combines nature and a very well designed modern city, with  its commercial and residential neighborhoods while respecting the area’s coastline natural beauty, which enables you to enjoy countless “first line views to the beach”, adding value to the property. Usually, properties acquired in Punta del Este are occupied most of the time, fostered by a climate that has an average temperature of 30 º C in January, which compared to Barcelona or Madrid, is “a bit warmer”.

As a relevant fact, I would like to highlight some investment figures that attempt to develop different markets with less conventional structures. They base their functioning in ways that are more secure in contrast to the potential risks, promoting a more efficient development:

* Building Trust at cost, which would be associated to the market of residential housing.

* Condo Hotels, associated to the development of second homes in tourist areas and for selling purposes.

In a future post I will make a deep analysis of these figures that are increasingly becoming more powerful in this housing market.

(I) Real Estate Investment in Punta del Este – URUGUAY

15 September, 2011 No Comments

If you are interested in brand new real estate such as homes, flats or other new properties around the world, check out the international portal www.obranueva-newhomes.com. You will be able to contact directly developers and promoters who offer these properties in each particular country. It is a simple and easy way to get to know the international market.

In this case, it’s a narrow strip of land that divides the waters of “el Rio de la Plata” and the Atlantic Ocean. Thus, its extensive crystalline water coasts.

Uruguay is among the international tourist destinations that offer the possibility to take a summer vacation in January.

Let me mention the reasons for which one should consider investing in Real Estate in this area of the world:

1 – Political stability: Uruguay is considered the most peaceful country is South America, followed by Costa Rica.

2-New constructions are luxurious, with great designs, and integrated in the landscape. Punta del Este has made an effort to achieve a sustainable development, with growth that respects the environment.

3-Paradisiac beaches, lacunas, wildlife, and caves, are what surrounds the peninsula (so appreciated around the world).

4 – Here you can acquire a home and a higher standard of living at a considerably lower price than in Europe.

5 – Real estate is expected to increase significantly in value

6 – As a foreigner, when buying a property, you will be treated equally in terms of taxation.

BLACK SEA GARDENS RESORT in BULGARIA, A FOSTER + PARTNERS PROJECT

13 September, 2011 No Comments

SUSTAINABLE ARCHITECTURE PROJECT
Norman Foster Black Sea Resort master plan

Among the impressive collection of projects that Norman Foster’s studio has designed, we find this master plan for the development of a tourist complex in the coast of Bulgaria’s Black Sea. This project tries to minimize the impact on the environment, and its possible gas emissions.

It will be located near the Bulgarian town of Byala divided in five neighborhoods that make up the complex that will be located on top of small hills covered with forest. The neighborhoods are: Sky Village, Wilderness Village, Meadow Village, Cape Village, and Sea Village, all of them by the sea. Its streets will be filled with trees and vegetation, but cars will not be allowed to circulate which is one of the ways to avoid gases. Residents will have to leave their car in underground garages located at the entrance of each of the neighborhoods, and in order to move around there will be electric shuttles or the possibility to have electric carts, and bicycles. The project was designed so that the entire community, 15,400 residents, could live the entire year and enjoy the area’s great climate.

This project is currently on standby as the developer Madara Bulgarian Property Fund ltd. (a company that was listed on the London Stock Exchange ) needs to find partners / investors to help them finance a portion of this development in order to finish it.

Some advice when purchasing in the foreign market so that YOU DON´T…

6 September, 2011 No Comments

1 – Overestimate the budget itself:
It is dangerous to rely solely on the income received from renting the property to cover  mortgage payments. One must always have reserve funds.


2 Sign a contract without the appropriate legal counseling such as an attorney:
It is crucial to have a lawyer check any document that you need to sign. When you purchase a property off the architectural plans, or when you make a trip to the region to check out the promotions, there may be some pressure to sign documents, or make payments. Thus, you must count with an efficient lawyer that is available either by email or fax at any time.

3-Rely on something, unless otherwise specified in the contract:
In most cases the developer selling the property is the one that will be responsible to rent and manage it during the months the owner does not use it, which will be specified in advance. The concepts that should be clearly identified are: the months available for rent, total amount charged for rent, and how will be divided between the owner and the agency. The guarantees for rentals, in particular, are always based on verbal promises, but often are not specified in the contract clauses. Make sure that the contract has no cracks in this matter.

4-Ignore additional costs
 In some countries, fees and taxes can add another 15% of the purchase price. It must me added to the total.

5-Ignore the effect of currency fluctuations
 The value of Euro € may vary, increasing or decreasing based on the fluctuation with repect to other currencies like the US dollar $.

 6-Ignore the local tax system:
You must be aware of the tax obligations instead of assuming a similar system as in our country.

7 -Use a lawyer who works or has a close relationship with the promoter:
To avoid conflict of interests between the promoter or agent to whom you are buying the property.

8- Purchase with your heart instead of using your head: Most purchases abroad work quite well … …… But it may happen that the property of your dreams becomes a nightmare if you have not done the appropriate market research before deciding to purchase the property.