Overseas property investment in the Costa del Sol

How to get the most for your money

Fancy making a 4-6% return on your overseas property investment?

It may be time to buy a property in the Costa del Sol.

Nine times out of ten, investing in property abroad – wherever it is in the world – is a financially savvy move; far more lucrative than leaving your savings in the bank! But Spain’s Sunshine Coast is a particularly good choice. A property investor’s paradise, where your money will work much harder.

Known for its stunning beaches, excellent weather and vibrant culture, the Costa del Sol is a magnet for tourists. In fact, last year it had its biggest ‘summer season’ yet – welcoming over 12.5 million visitors. In addition to this,  Málaga was named the no. 1 travel destination for 2023 by Airbnb.

Which means? There’s certainly a demand for holiday rental properties.

The latest data has also revealed that rental rates have skyrocketed over the last 12 months. The average rental price at the end of 2023 in the province of Málaga was €13.8 per square metre, which represents an increase of 13.6% since the end of 2022 and a new all-time high.

Add in affordable property prices and a stable property market, and it’s easy to see how purchasing bricks-and-mortar in the Costa del Sol – particularly buying to let – is a fantastic (likely very profitable!) opportunity for international investors.

It is, however, important to do your homework.

Despite all of the above being in your favour, caveat emptor still applies. As is often the case, the key to finding and securing a viable investment property in the Costa del Sol is research which is where the help of our specialist real estate agents, here at Bromley Estates Marbella comes in.

Read on to learn more.

A reliable way to make a return, providing you do your homework

For anyone interested in international property investment – specifically, in the Costa del Sol – there are a few things to keep in mind to maximize your returns.

1. Location, location, location

This is the cardinal rule of real estate that applies globally – location matters.

Before investing in a property abroad, you should thoroughly research different areas, taking note of their atmosphere, proximity to amenities, the local infrastructure (i.e. medical and educational facilities), transportation links, neighbourhood safety, the potential for future development etc.

To maximise your rental yields, it’s important to find a location that suits your clientele’s needs.

For example, if you’re targeting holidaymakers looking for a short-term summer let, a property near the beach – with bars, shops and restaurants all within walking distance – is likely to be ideal. Whereas, if you’re planning to offer long-term rentals (e.g. for expats or retirees eager to spend the winter months in the sun), a house in a traditional mountainside village may be better.

In the Costa del Sol, some of the most popular areas for property investors include Marbella, Puerto Banús, Estepona, Benalmadena and Mijas. But to make a fully informed decision, it’s usually worth visiting the region – to gain valuable insight and get a firsthand feel for the different areas.

2. Keep your eye on the profit

Buying a rental property in the Costa del Sol is a huge outlay. A lot of money is on the line. So when it comes to profits, don’t rely on rough estimations or accept the seller’s opinion on the property’s likely rental income.

It’s important to determine its realistic return, before you sign on the dotted line.

Start by taking a look at current rental prices in the area – but keep in mind, the advertised rate is often higher than the final agreed price. Sometimes it can be worth arranging a feasibility study on the property, which calculates a predicted rental yield based on similar properties nearby. Or, if the property is a resale – already used as a rental – request a verified income history.

The key is to do a little digging. Build a realistic picture of how much you’re likely to take home and find an investment property that not only suits your budget, but will also meet your long-term profit goals.

3. Consider your tax status

One crucial thing to keep in mind – taxes.

For a start, anyone who purchases a property in the Costa del Sol is required to pay a property transfer tax (Impuesto sobre Transaccions Patrimoniales). This can range from 7-10% of the purchase price, depending on whether it’s a new build or resale and the value of the property itself.

Going forward, you’ll then be required to pay annual real estate tax and community fees.

Any rental income made from your investment property will be subject to tax too.

If you’re currently a tax resident in Spain, you’re obligated to declare any earnings on your annual declaration of income tax. The exact amount you’ll need to pay will depend on the total amount earned during the fiscal year. However, a number of deductions can be offset against your gross rental income – such as maintenance costs, community fees, refuse collection payments etc.

For anyone who isn’t a tax resident in Spain, the amount of tax due depends on where you habitually pay tax. At present, this stands at 19% for EU citizens and 24% for non-residents outside the EU.

Collectively, these taxes will of course impact on your annual rental income. This is why, before making a commitment to purchase an investment property in the Costa del Sol (or deciding to rent it), it’s important to seek advice from a financial expert and consider your bottom line carefully.

The easiest way to invest wisely?

Recruit the help of our real estate specialists, here at Bromley Estates Marbella.

Overseas property investment in the Costa del Sol can be a highly lucrative endeavour, providing you choose the right property – in the right location – and do your research on that property’s expected rental income. We’re here to offer our expertise and experience in this area.

• Proudly located in Marbella, we understand the nuances of the local market and can provide unparalleled insight into the best (most profitable) locations for your investment.
• We’re well-versed in the latest market trends and can provide realistic rental forecasts.
• Our comprehensive portfolio is a treasure trove of fantastic investment options. We list a diverse selection of residential and commercial properties – as well as development opportunities – in a wide range of areas throughout the Costa del Sol. We also excel in finding the right match for every investor, with something to suit all needs, preferences and budgets.
• We continuously search the market for the best homes in tourist hotspots, including investment properties in Marbella, Puerto Banús, Estepona, Benalmadena, Mijas, Cabopino, Elviria and more.
• We also have an established network of professionals and collaborators at our disposal, and can connect you with everything from top-tier lawyers and mortgage brokers to interior designers and property management companies.

As a leading real estate agency, we’ve assisted countless property investors over the years – and we could do the same for you. Whether you’d like to offer short-term summer holiday lets or a long-term rental, we can help to find the ideal investment property to attract interest and maximise your returns. So why not take a look through our online listings?

If a property catches your eye or you have any questions about overseas properties for sale in the Costa del Sol, please feel free to get in touch with our specialists. You can call us at any time on +34 952 939 460 (+44 208 068 7606) or send an email to info@bromleyestatesmarbella.com and we’ll respond to your enquiry as soon as possible.