Which is better, buy or rent a second residence for our vacations? Buy for personal use or for investment? Advantages and disadvantages of buying a second home.
The desire to have a second home to go on vacation grows in Spain, but we have to take into account the pros and cons of buying a different home from the usual one.
Six million Spanish households have a second residence, of which 3.6 million are located in the coastal zone, specifically 65% according to the ECB. The average profile of buyers of holiday homes is that of couples between 35 and 49 years old, with children and with stable incomes above 3,500 euros per month.
We could say that in recent years, the sector of the second residences experiences a gradual growth due to the general recovery of the economy and the greater flow of credit. The market for the sale of holiday homes experiences its peak in the summer months and is when formalize more leases.
The most demanded area is the Mediterranean coast, where the average price is around 200,000 euros, Murcia being the most economical city with an average of 150,000 euros, followed by Tarragona (180,000), Alicante (220,000) and the Costa Brava (250,000). The Costa del Sol is the most expensive area (360,000 euros).
Specifically, in Catalonia, the purchase of homes for second home use, compared to the purchase operations of a habitual residence, has risen to 15%. But doesn’t everyone take into account the advantages and disadvantages of buying a second home?
Buy a second residence for investment or for personal use?
Before buying a second home we have to be very clear and define the purpose of this second home. That is to say: Do you want to allocate it to the holiday rental? Do you want to do business with the farm and get a capital gain? Or do you prefer to enjoy with your family? They are completely opposite visions that will mark the destiny of this second home. Which one of them fits what you are looking for?
In the event that we want to buy a second home for our own and our family's, really, economically speaking, is it a better option than temporary holiday rental?
The key is the maintenance of housing
For all the options, the most important thing is to know what the annual maintenance of the house we want to buy will cost us, since we have to remember that we will only use it, at best, a couple of months a year.
The following expenses must be taken into account:
- The share of the community in these types of farms is usually between the amounts of € 800 to € 1,500 per year. In the case of single-family farms without community, they must take into account the expenses of the farm, such as the exterior fences, the garden area of the house, the exterior facades, among many other things.
- Housing supplies. Although the property is unoccupied most of the year, to be able to enjoy the connection of electricity, gas and water services, they have to pay a minimum, in addition to the consumption we have at the time of living during our vacation. In this case the amounts move between 750 and 2,000 € per year.
- Taxes levied on the farm. Like any other farm within any municipality, we have to face the Property Tax (IBI) and also the garbage rate. According to the dimensions of the house, if we speak of floors between 50 m2 and 100 m2, the cost of this tax would be between 500 and 1,000 € per year.
- Home insurance. Between € 100 and € 300 a year.
- The spills or extraordinary expenses destined to face expenses of urgent character or works of improvement that require an extraordinary contribution independently to the ordinary quota of the community.
If we take into account these expenses (without being able to account for the extraordinary expenses of the community) we will move with a range of expenses for homes between 50 and 100 m2, between € 2,250 and € 4,800 per year.
What is the cost of a holiday rental home?
Currently, the use of holiday apartments has increased considerably in recent years, bringing rental prices upwards. If we talk about rental housing for vacations we have to distinguish those that are first line, second and third. In the case of the coast, we would speak of the first line of the sea, in the case of ski resorts, we would talk about the foot of the slopes, etc.
How much does a week cost on the first line, if we consider that it is high season? We could move between € 750 and € 1500 a week. A second line about 150 € less and third line approximately 300 or 400 € less.
Therefore, if we can only enjoy housing during the period of one month per year, the rent would cost between € 1,500 and € 4,500 per month, depending on the situation we have chosen. The question we have to ask ourselves is the following:
Will we really use the home for more than 30 days a year? If the answer is no, then buying is not a good option. Otherwise, we should delve into other aspects and take into account the cost of financing and extraordinary expenses, among other things.
Is buying a second home for investment a good option?
If we buy in a good moment of the real estate cycle, a cycle of low prices, we can obtain capital gains. This allows you to enjoy a home at the same time, without the risk of having to look for a rental and, if you do not use it for your own use, you can obtain an attractive return by renting a vacation.
But at the same time, the purchase of a second home has its disadvantages, for example, the requirement of a large outlay or resort to financing. In the same way, at the time of purchase we will have to face the taxes and the added expenses, which in a certain way, we could say that this money is completely lost.
Do you plan to buy a second home? Before, analyze the pros and cons of acquiring a second home and take care of your personal finances in a special way.
Do you need a helping hand? In Fincabia we can advise you.