After four years of economic crisis, there are already signs that the housing sector is stabilizing. Many experts say this is the right time to invest in a property, but caution is in order.
If you don’t know the steps to buy a property in Mallorca, it is likely that you will miss some deadlines, pay more than you should (due to lack of knowledge) or have to hire and pay an agency, which you trust, to take care of everything, with the consequent extra expense and loss of control…
Supposing you have just reached an agreement to buy a property, whether it is a house or an office or premises or any other real estate asset, you are faced with a series of steps that you can do alone or through an agency, although there is also an intermediate modality that consists of doing it yourself, but with the help of a “real estate consultant”.
If you are thinking of buying a home, these 10 recommendations can help you make the best decision:
1. Make a financial self-evaluation. Before you buy, it is important to analyze your financial situation. The most important thing is to determine our income and the capital we have available as a downpayment. Although interest rates for loans are currently low, obtaining a mortgage is difficult. Banks are increasingly demanding verification of your income and credit history.
2. Set realistic expectations. If you’re buying your first home, it’s important that you have realistic expectations about the increase in property value.
3. Think like an investor. Think about the expected return on your investment, the risk, and the time frame. The return if you buy to lease the property will be what you get from the rental income, minus maintenance expenses and taxes. Along with the annual property appreciation, this becomes your return.
If you buy a property in Mallorca to live in, one of your goals will also be to make the best possible investment. The best way to achieve this is to look for areas with the best schools because those areas tend to be poles of attraction for families.
4. Consider continuing to pay rent. Compare the costs of buying and maintaining a home with the cost of renting. Zillow.com just did this buy versus rent analysis for about 200 metropolitan areas and 7,500 cities in the United States. The study concludes that in 75% of the areas analyzed, buying is better than renting.
However, each buyer must do his or her own analysis. You can use AARP’s calculator.
5. Location, Location, Location. A house gains in value if it is located in an area with high-quality schools and good roads and transportation to major urban centers.
6. Become an expert. Gather information about the area you chose and the properties you are interested in. It’s important to know what price homes similar to yours have recently sold for. You will only need to enter the address to find out which properties are for sale and rent, as well as those recently sold.
7. Seek pre-approval for credit. By seeking approval from a bank, the buyer will know his credit score and the interest rate at which he would get a mortgage. “It’s very important that you look at many options from different banks to make a better decision,” says Ilyce Glink, a personal finance expert and author of books on home buying.
8. The house can be a retirement plan. Moving house can pay dividends. It’s an increasingly common strategy among people approaching retirement age or in retirement. They move into a smaller house or sell and use the equity as a source of income.
9. Consider improvements. Calculate the cost of the additional investment required by the home. No property is perfect and even newer ones require changes and modifications. It’s key that the changes you make are geared toward increasing its value.
10. Think long term. Buying a home is a long-term investment. It is recommended that you buy with the perspective of maintaining it for five years or more. This time allows you to get more out of having a property if you live in it or if you bought it as an investment for rent.