As I wrote about recently on this website, I’m closely following the opportunity to buy homes in Ireland through fire sales and distress auctions. Ireland isn’t the only distressed market I’m investigating.
Today I’m writing to you from Granada, Spain.
Times are tough in Spain. Half her young are unemployed—if they haven’t emigrated. Her economy, banks and real estate industry is in tatters.
Like in Ireland, they built too many homes. Homes that nobody would ever want. Speculators snapped them up, betting that prices would go even higher. Then the party ended in 2007. By 2008, all activity stopped completely.
Estimates put the total of Spain’s excess supply and distressed inventory as high as 2 million units. Much of this inventory (50% is a reasonable guess) is along the touristy costas.
No genuine efforts have been made to sell this inventory. Until now.
Last week a banking contact called me with an opportunity that grabbed my attention: Newly completed condos in an historic area minutes from Granada’s old town. A bank has foreclosed on the developer. Prices start from under $100,000 and up to 95% financing is available. Five minutes later my flight was booked.
Sitting here in bright warm sunshine looking at the snow-covered Sierra Nevada mountain, things don’t feel so bad. Bright blooming flowers line the streets. Cured meats hang from the ceilings of tavernas.
Home to three UNESCO world heritage sites (the Alhambra, Generalife and Albayzin), Granada is steeped in history and attracts visitors from across the world.
Its international airport has flights from most major European cities, and it’s within a two-hour flight range of Northern Europe’s major population centers. I flew into Malaga on the coast, less than 90 minutes away.
Culture, beaches, world-class golf and other outdoor activities are easily accessible. This area appeals to visitors on a weekend break, golfers, history buffs and even as a wedding destination.
Domestic visitors and North Americans come in large numbers. It’s a beautiful place to retire.
Granada escaped the major development seen on Spain’s costas. This means that development has been tasteful, and there isn’t the major oversupply problem that we see elsewhere. This part of Spain has intrinsic value that will always hold appeal.
This also means that distressed completed condos in the right part of town are almost non-existent. That’s why I booked my flight within minutes of hearing about this opportunity.
This area where these condos are is peaceful, quiet and classy. It’s surrounded by high-end villas with pools. Except for this building, it’s all high-end, single family homes. The area is known as “Little Vatican” because of the churches and convents dotted around the neighborhood. Granada’s historic center is seven minutes away.
Construction of the condos is complete (to a very high standard). When scouting for distressed opportunities, I’m only interested in construction that is complete, with a functioning HOA. I’m looking for somewhere that doesn’t have a supply overhang. This is a stunningly beautiful place that ticks these boxes.
With prices for an 800-square-foot condo starting at less than $100,000, this is a killer deal. Real estate here is priced in euros. So, you have a currency risk. But your mortgage of up to 95% is also in euros. So by financing your property, you hedge most of your currency risk. Your monthly payments could be as low as $600.
The bank who has foreclosed on the developer is offering this finance deal…even to Americans and Canadians. Put simply: They are trying to turn a non-performing loan to the developer…into many smaller performing loans to people like you.
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