Buying real estate in Tenerife is an excellent investment.
Some pretty important stuff here, so if you are a serious buyer, please continue on this page.
Read this Tenerife Property Buyers Guide before buying an apartment, villa or property in
The following tips on buying property and real estate are important to you,
and to anyone buying property in Spain.
Your Tenerife property purchase should
represent a wise, satisfying and problem free investment and the aim of this property buyers
guide is to help you achieve just that.
Below, I have divided the key purchasing information into four parts,
1. First Principles.
Its worth reassuring ourselves that Tenerife is the right location to invest in a holiday home.
I don't have any doubt, and having lived in several other countries, most have only a few of the
advantages of Tenerife.
- Property Investment - secure return on capital.
- Property Letting - good opportunities and profits.
- Enviable all year round warmth and sunny climate.
- Incredible contrasts in natural beauty and scenery.
- Cosmopolitan atmosphere, modern attractions.
- Continuous and stable property demand.
- Favourable taxation/costs for property owners.
- Accessibility - low cost flights from most continents.
- Discreetly controlled, carefree and gentle culture.
- Effective property management for foreign owners.
- Multi-national culture, food, facilities and lifestyle.
- I bet you have another good reason of your own
Selecting a property you really like is the simplest part - we all love shopping.
Generally, you will know what sort of property your are considering,
Make sure you are absolutely clear in your mind how you want to use the apartment.
- Apartment or Villa in or close to one of the major tourist resorts and amenities,
- A more Rural Property, in a village or away from the general buzz of tourist activity
- Un-important because your only concern is the return on the financial investment.
This 'intended usage'
should be a crucial factor in your decision making. A 3rd floor apartment with 30 steps up and an incredible
view may be perfect for letting, and quick holiday breaks, but 'semi-residential' long-term visits will be
far more satisfying if you opt for less view, more space and car parking etc. So think through some of the
issues, proximity to the airport, general tourism, beaches, amenities etc, and determine where you can be are
flexible and where you need to be more rigid in your selection procedure. Read more on this in
'3. Finding your property' section below
2. Financing the Property
Getting the finance pre-arranged is vital to negotiating a good real estate deal.
For instance, you may see your dream property, feel the price is high, and wish to make
the seller an offer. Few sellers are going to seriously respond to an offer without asking
exactly how the buyer intends follow up the offer, should the seller accept. So, buyers that
indicate they will immediately follow acceptance of the offer with
(a) 10% deposit, lodged with the seller or sellers agent and,
(b) signing of a private purchase contract, are far more likely to negotiate a price reduction.
(c) The purchase agreement will normally require the balance of the purchase price and
completion within 4 weeks.
(d) If a mortgage will be required, consult your banker/lender and try to arrange most of it first.
This will ensure that once you have chosen a property, you are ready to make a serious offer to
the seller. Few sellers will take the property off the market and wait the time it takes to start
arranging a mortgage through a bank.
(a) What will be the total cost by the time the Purchase is complete?
You need to allow 10% of the purchase price for the fees and costs of acquiring the property.
Note that this 10% is 'over and above' the purchase price and will be needed to pay the 6% land
taxes etc. If the purchase price is agreed at 60,000 Euro's (about 45,000 sterling) then the
final cost will become ( Purchase price + 10%)
a total of 6,000 Euro's. This 10% covers
the conveyance, costs, which include the 6% of the purchase price payable to the Land Registry
and other associated professional fees and duties for drawing up of new title deeds
(the 'Escritura'), appointments at the notary office, a translator if you are not Spanish,
search and various other conveyancing fees. Any moneys remaining will be returned to you,
along with all of the various receipts and invoices for the work involved.
(b) When and how is my money paid out?
Noting that the conveyancer or solicitor will normally require the 10% acquisition fees before
any work proceeds, and, the purchase option agreement will place a limit on how long you have
to complete, you will want things to move fairly quickly. Thus, in our example, following
signing of the agreement you would -
- Pay the 10% deposit of 6,000 Euro's to the seller or the sellers agent.
- Pay the 10% conveyance fee of 6,000 Euro's in our example to the conveyancer
- Confer with the coveyancer and your bank to arrange the appropriate certified cheques.
- The balance of 54,000 Euro's will be handed over on the day of signing at the notary office.
(c) If the seller is a foreign non-resident,
he must pay a retention of 5% of the purchase price to the Hacienda (Tax Office). But, the
Hacienda make it the buyers responsibility
to ensure the 5% retention is paid. So, you
will actually hand over the balance of the purchase price MINUS the retention, the retention
will be a separate cheque made out for the hacienda. The seller will normally already know and
(d) If there are any debts, outstanding mortgages, unpaid Community fees
etc, then you should make sure that these are paid directly to the debtors, the seller gets his
purchase price balance MINUS the sums you pay out to those others who have interests in the
(e) The conveyancer will help you ensure that all of the various
bank certified cheques
required for the different parties are drawn up by the buyers bankers - ready to hand over at
the notary office on the day of completion.
If you have sufficient
funds to purchase the property, without raising loans, then take advantage of this.
Avoid being drawn into any 'decide on the spot' situations or impromptu purchases. Because you
are able to quickly follow up any offer you make, be careful not to rush anything and lose this
negotiating advantage. Use the Property Finder page, be patient and find the right property.
Once you think you have found the property - verify everything is OK - and then drive the best
bargain you can, sensibly, and without losing the property. If, like many others, you have any
specific worries about tax implications, or confidentiality, feel free to email me for the more
Generally, these are the four options open to most of us -
- 1. Mortgage from an offshore holiday home loan specialist Bank/Building Society
- 2. Mortgage/Loan from a bank in your country of origin
- 3. Spanish Bank Mortgage, much easier if you are a foreign 'resident' of Spain.
- 4. Builders Mortgage, offered by some developers to increase sales on new complexes.
1. If you own property in your country of origin, you should be able to find an appropriate
offshore bank that will make you a loan for purchasing a holiday home, using your existing
property as security/collateral.
2. Your own bankers may be able to assist you in making a loan for this purpose.
3. Mainly for residents, offering low interest rates for residents who can demonstrate their ability
to repay the loan, usually by submitting business accounts or nominas (payslips). They will normally lend
up to 80% of the banks valuation of the property. Non-residents who can offer the appropriate financial
evidence can be offered a foreigners loan, but at a higher interest rate.
4. Simply a matter of
checking that the purchase price is realistic and that your deposit and other payments go to the principal
lender (usually a bank) and not to the builder. Several mechanisms exist to secure your payments from the
builders construction company 'going bust' before you have ownership of a completed property on a completed
'Introductions' to banks and other lenders by people with 'connections' are usually meaningless.
We all carry brochures for CitiBank and others. Contact the banks yourself - at the end of the day,
no matter who you know, you will be asked by the lender, to reasonably demonstrate how you will meet
the repayments and reduce the lenders risks to virtually zero - that will never change - and its
usually the difficult part of property purchase for most of us.
3. Finding your property.
Hopefully, if you have taken the advice and arranged your finance - you know what your real budget is. You can now start to
seriously look for a property that meets your initial requirements. How can you be sure your requirements are what they should
be? Lets analyse a typical requirement
A one bedroomed apartment, on the flat, near the beach, shops and facilities, with a sea view.
This requirement is one of the commonest we receive. Yet, for any coastline, how many properties can be built that meet
that criteria. In reality, only a tiny fraction of properties meeting that description, and they usually command unprecedented prices.
This is true for virtually anywhere in the world.
It's useful to remember, that properties close to resort fronts, may also enjoy higher noise levels, higher running costs
(eg, community fees), and are often smaller and less desirable to stay in than many other 'non-front' properties.
Ground level may be important if a family member is disabled, but it rarely offers a real 'sea view' and may be noisy
if there are many floors above. So its useful to be flexible and 'open to some compromise' unless your budget is unlimited,
you found your ideal existed, and it was not affected by any of the points above.
Some facts to consider, which may help to broaden your horizons.
Get the best compromise for you!
- Maximum sun is between Los Cristianos and Callao Salvaje.
- Maximum breezes are between Candelaria and Golf del Sur
- Temperature drops with altitude, below 1000 m for warmest winters
- Quietest, most peaceful areas are about 500-1000m back from coastline.
- Superb views normally come from top of hills, not on the front.
- North - wetter, greener, cooler, tranquil, South is drier, sunnier, warmer, lively.
- You need to have south facing terraces for sun all day.
- As many people want to rent quieter areas as there are wanting the front.
- Community fees - higher priced property may be cheaper over 5 year period.
- Garages and parking spaces close to properties are fairly scarce.
- Close to front properties in busy resorts can obviously be lively at night.
- Residential 'apartment block' buildings are often noisier than holiday complexes.
- People who enjoy tranquillity, should not buy next door Club 18-30 complexes.
- Young, lively people may find higher noise and activity preferable to tranquillity.
We purchased our villa for its views. For us, the pleasure of wining and dining
outside, with a valley and sea view, outweigh any minor'baddies' such as walking up slopes ,that
are to be expected with any property offering superb views.
So if you have managed to sort your finances, and read the above,
you will already be far better prepared and more knowledgeable than most
potential buyers. Go to the Finding
page and see what's going.
4. Verifying you have a good deal.
Ok - the finance is sorted and you have found the property - what next?
Simply pause - its imperative to verify if there are hidden problems
BEFORE offers, deposits or agreements.
For example, when we are selling or simply conveyancing a property - we will
only transfer the buyer's deposit to the seller once all of the checks are
complete, and we are satisfied there are no problems. In this way, the
seller then knows you have lodged the deposit, and will take the property
off the market, and will consider it sold - but subject to all of the
checks and safeguards being satisfactory.
If a problem arises, what is it most likely to be?
Usually, it will either (1) a financial debt, (2) a dispute in
ownership or (3) disagreement over what was included in the sale.
The checks that need to be made may seem very obvious, yet it amazing
how often they are overlooked. When we conveyance properties, the
documents are obtained and important steps are taken are.
Get these documents
These documents and checks will immediately reveal -
(a) True ownership and right to sell.
- Copy of Escritura - This will show who the true owner/s are and define exactly what is being purchased.
- Nota Simple - Confirms current ownership and shows any mortgages or embargoes on the property.
- Community Administrator - We check for any outstanding fees that need to be taken into account.
- Hacienda - Checks there are no outstanding taxes and that previous wealth tax submissions were made.
- Town Hall - Check that the annual Municipal rates have been paid up to date.
- Contract of Sale - Check 'completion time', Escritura value, Furniture inclusion and other conditions of the sale.
Who actually owns the property, and all permissions to sell have been
obtained from those with an interest in the property (note that if a
mortgage exists, the owner is the bank or lender of the money, so
they need to Ok the sale and be settled at the Notary office signing.)
(b) Legal Definition of the property.
Exactly what is being sold - (bit embarrassing to buy a villa, and then
find the deeds don't include the land it stands on)
(c) Liabilities and debts.
The extent of any borrowings or liabilities, if any, guaranteed by the
property and any outstanding debts on the property.
(d) Running Costs.
The value of Community fees, rates and wealth tax submissions.
There is more information on our free information site
Other details of interest.
By now, we are
(i) exactly sure what we are buying, (whether includes furniture, etc),
(ii) certain that the seller has the right to sell and with the
agreement of any interested party, and
(iii) know what the liabilities of purchase and running of the property
are. Here are a few further explanatory points that may or may not
be relevant to the purchase. Escritura Value. As the buyer must
ensure that 5% of the purchase price is paid to the Hacienda, it is
clearly in the interests of the seller to have this value as low as
possible. The seller's accountant will endeavour to recover as much
as possible of the 5% held by the Hacienda, after the sale. If the
seller's original Escritura value shows he purchased the property
at 36,000 Euro's, and your Escritura is drawn up to show that you
paid 60,000 Euro's - the buyer will show a profit of 24,000 Euro's,
which is taxable. So the seller may suggest that you pay 60,000 Euro's,
but 18,000 Euro's was for the furniture, giving an Escritura value of
42,000 Euro's. This has three main effects
- The buyer now only has to retain 2,100, not 3,000 Euro's for the Hacienda retention.
- The seller's taxable 'profit' is now 6,000 Euro's, not 24,000 Euro's
- It will be the same when the buyer sells, a low Escritura 'buy' price will become more 'profit' later.
It is obviously in the seller's interest to show less than the real
purchase price. It is the buyers interest to show as much as possible
of the purchase price on the Escritura. A sensible compromise is
usually reached by mutual agreement. Escritura values that are clearly
below any reasonable market value may be penalised by the Hacienda at
a later date. It is fairly reasonable to allow 6,000 Euro's for
the furniture, thus, the Escritura value will be 6,000 Euro's below
the actual price paid.
If the buyer wants a foreign currency, it is simply a matter of fixing
an exchange rate on the private purchase agreement. This rate is used
(i) the Escritura value, which must be in euros, and
(ii) the 5% retention, which must be paid to the Hacienda in euros.
After any other parties with an interest in the property have been paid,
the buyer can pay the seller's balance in any currency the seller/buyer
Bank Certified Cheques.
This is the normal method of exchanging money at the Notary office,
on the day of signing. A bank certified cheque is as good as cash.
The bank has specially stamped the cheque, which guarantees the bank
will honour it when it is issued to the recipient. Allow 2 working
days for your bank to arrange the cheque. They simply require the
name of the recipient and the amount. There will usually be a charge
for the service.
form when searching for your ideal island property.