The Costa Blanca is undoubtedly one of the most attractive regions for property investment in Spain. With its Mediterranean climate, more than 300 days of sunshine a year, a consolidated international demand and a property market in constant growth, buying a property in this area can be a very profitable decision. However, it is not all advantages if you do not act with caution. As with any investment, there are frequent risks and mistakes that can significantly affect the profitability or the legal security of the operation.
Here we look at the 5 most common mistakes when investing in property on the Costa Blanca and how to avoid them.
Failure to research the location well
One of the biggest mistakes investors make is to base their decision solely on the beauty of an area or its tourist popularity, without considering key factors such as urban development, the type of public that frequents the area or rental profitability.
For example, although Benidorm has a high tourist demand, not all areas offer the same profitability. On the other hand, areas such as Finestrat or Villajoyosa are in full growth and can offer better capital gains.
Ignore additional purchase costs
Many investors focus only on the purchase price of the property and do not correctly calculate the associated costs, which can affect their actual budget and expected return.
In the Valencian Community, the purchase costs (taxes, notary, registry, agency, etc.) can be between 10% and 13% of the price of the property.
Example: if you buy a €200,000 property, you should plan for between €20,000 and €26,000 in additional expenses. To this must be added tourist taxes, licenses if rented out, maintenance, community fees, IBI, insurance, etc.
Failure to check the legal and town planning status of the property
This is a critical mistake, especially in coastal areas where there have been historical cases of unlicensed construction or undeveloped land.
According to the Association of Registrars, more than 10% of property sales on the coast have some kind of urban planning incident or lack of complete documentation.
Frequent errors:
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Buying a property without a licence of first occupation
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Failure to check for mortgages and liens
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Investing in non-consolidated land
Tip: before signing anything, request a nota simple from the registry, verify that the property is legally registered, with all permits in order, and hire a lawyer specialised in Spanish real estate law.
Underestimating local and international taxation
Foreign buyers in particular are often unaware of the tax implications of owning property in Spain. Even if you are not resident in the country, you must still declare certain taxes as a property owner.
Some key taxes:
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Non-Resident Income Tax (IRNR)
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Impuesto de Bienes Inmuebles (IBI)
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Municipal capital gain on sale
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Capital gains if you resell at a profit
In addition, some countries such as France and Germany have double taxation agreements with Spain, which may affect your personal taxation.
Investing without a clear plan for returns
Buying a property without being clear about the purpose of the investment – second home, holiday rental, long-term appreciation – can lead to decisions that are unprofitable or difficult to maintain.
According to data from Fotocasa, 41% of buyers in coastal areas have not defined whether they will rent their property, which makes it difficult to calculate the real profitability.
Common mistakes:
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Failure to calculate actual rental income and expenses
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Failure to analyse the seasonality of tourism
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Failure to define a time horizon for investment (5, 10, 20 years?)
To do this, it is important to establish a plan from the outset with clear objectives, a time horizon and an exit strategy. Make profitability simulations with different scenarios: short term rental, long term rental, personal use or resale.
Investing on the Costa Blanca can be an excellent financial decision, but it also requires preparation, analysis and proper advice. Avoiding these common mistakes will make the difference between a successful investment and a frustrating experience. Inform yourself, surround yourself with professionals, crunch the numbers and take the long view.
