The global economic crisis popped Spain‘s real estate bubble. That’s why today you could buy a spacious condo in a high-end community on one of the nicest stretches of the Costa del Sol with monthly payments from $483. That’s a low sticker price. And, this is a stunning place to visit and spend time. You have dramatic views along the coast. Long winding sandy beaches you can walk for miles. Quirky Gibraltar. Plush marinas, local fishing villages, and ancient whitewashed Andalusian hill towns. World-class golf courses.
For that $483 monthly payment, you get a two-bedroom, two-bathroom condo on a stunning coast. To put that into perspective, in 10 days I make a return visit. My weekly rental rate is $561. That’s right…in February, one week’s rental covers your monthly mortgage—and that’s in the low season.
It’s a big bang for your buck. But that’s not what’s so special about this condo. What is special about it is its massive profit potential. This is a place where you could more than treble your money in seven years. But you need to act now. The window is set to close.
These condos are in a mature and established community 70 minutes west of Malaga’s international airport and 15 minutes from Gibraltar. Surrounded by high-end homes they are perched above one of the finest oceanfront golf courses on the Costa del Sol—an area that is exceptionally popular with tourists and expats alike. Germans and Scandinavians especially come here to vacation and to buy second homes.
A developer built high-end condos just steps from the luxury ocean-view clubhouse. List prices ranged from €240,000 – €400,000 when the condos were completed—an easy sell in a place like this in 2007. Not so in 2010 when the condos were delivered. By then, Spain and Europe was in crisis. The developer went under…the bank took over. Then the bank went insolvent…and the government (via bad bank SAREB) took over.
The bureaucrats tried to attract sales by increasing prices. Clever, right? Unsurprisingly, that backfired. Now they’ve been forced to slash prices to avoid the embarrassment of a failed marketing effort. That’s why these two-bedroom, two-bathroom, 1,136-square-foot (including terrace) condos are available now from €86,900.
Let’s look at some numbers.
High season here runs to 20 weeks of the year. Occupancy is very strong and you can easily charge €600 ($810) a week for a short-term rental. That’s a potential gross income of more than €12,000 ($16,000) in high season alone, In other words, you stand to gain a potential gross yield of 13.8%. Figure rental management costs and condo fees, insurance etc. and you’ll be looking at a potential 10% net yield just from high season.
You also have 32 weeks of beautiful spring-like weather to use and kick back here. Besides your mortgage payment, your full cost of ownership each month (including taxes, trash collection and insurance) is just $95.
I love buying real estate priced below replacement cost. This €86,900 condo will have cost somewhere in the region of €120,000 in bricks and mortar. Then you have the kitchen and luxury fittings. The garage. The land it’s built on in a prime site in a luxurious community. Add in the cost of money during construction, and sales and marketing costs, and I figure the sum of the inputs to this condo are worth $180,000. That’s the price a developer would need to sell for before doing more condos here would get his attention. This means that prices can more than double before more supply comes to the market.
This price of €180,000 is also comfortably bearable for the German or Scandinavian retiree or second home buyers, so there will be interest at that price.
I expect values will head to that figure of €180,000 over the next five to seven years. This stretch of coast is on the up as more visitors follow the excellent new coast road. This is already an internationalized place where northern Europeans come to vacation, as snow birds, or to live. The cost of real estate and living here is a steal for a German. For a Norwegian it’s almost free. They will keep coming. With aging populations more will come.
I have watched the situation on Spain’s Costa del Sol, waited for years, for an opportunity like this. It might be the last. You see…while the bad bank SAREB is fire-selling this community condo by condo to little guys like us, the vultures are circling. Major investors are swarming over communities like this. SAREB is talking turkey and doing deals with them. These institutions are buying up communities to rent. They’ll sit on the inventory and drip it out over time at much higher prices. I can’t blame them. This is what I’d do if I had a few hundred million at my disposal.
Here’s how I expect this one will play out:
- You can buy one of these condos with a €26,070 (30%) down payment and monthly mortgage payments of €353 ($483).
- These condos will sell out fast. There will be a bounce in prices of up to 30% by this time next year as more buyers chase a small number of resales.
- Rent your condo out and you could show positive cash flow in year one.
- In seven years’ time I expect your condo could list for €180,000. That’s €93,100 more than you paid for it. Remember though you are only into it for €26,070. Ignoring any positive cash flow, and buying/selling costs you have turned your €26,070 into €93,100.
Better than a treble in seven years—and youget to spend plenty of time here along the way. Who said business and pleasure can’t mix?
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