Hello everyone,

My name is Dean and I am from the UK.

I moved to Madrid 3 years ago, and my girlfriend's parents gave us a plot of land (South Madrid).

We build our dream house. We came into a bit of cash, so we paid off 90,000 euros of the construction costs, thus leaving us with a mortgage of around 140,000 euros.

Bear in mind the plot of land was valued at 180,000

Anyway, we now have our mortgage of 140,000 euros, and by early 08 we will have around 30,000 in cash in the bank account.

Now, here is where I need the expertise of you guys and gals to guide me. Bear in mind I know very little about this, so any complex jargon will go straight over my head.

My initial plan was to pay off our mortgage as soon as possible. The mortgage free lifestyle is everyone's dream.... or so I though. Then I met a woman who was worth 30 million+ due to property investment, and she said "Dean, if you get a bit of money, then get another mortgage on another house and rent it out, build a portfolio of property"

Ok, sounds great.

The way I see it, I have 4 distinct paths that I could take (correct me if I am wrong). Today I am asking you experts to tell me what you would do if you were me.

PATH 1 - Use the 30k to buy another property. I don't know the mortgage rules, but I am pretty sure I have to pay xx% of the mortgage and they pay the rest. Would 30k get me very far? Would having an existing valuable property help?

PATH 2 - Sell the current house and buy a smaller home outright, thus leaving me with the working class dream of no mortgage.

PATH 3 - Sell the current house, and buy numerous houses (with mortgages) around the UK and Spain.

PATH 4 - Rent my current home as a luxury rental, then use that money to travel the world, and once I am finished travelling, perhaps get another property.

Now, you guys are going to need some more info, so here goes.

We have not had our house valued. However, we have looked at houses in the area, and we believe around 600,000 euros would be the valuation.

In terms of renting our property - we are 45 mins from Madrid City Centre, this is a bit of an issue, as the business people and expats will likely want to live close by. That said, 600-800 euros in Madrid centre gets you very little, so perhaps I can tempt people to come further away? That said, I would expect at least 2,500 per month as a longterm rental, and 1,000 per week as a holiday one.

* I can't see people wanting to stay here on holiday, not many people speak english, and all the attractions are in the centre. That said, they are building a direct train route to the city from our town, that should be done in 2 years, and should make a huge difference.

It is 4 bedrooms, but we converted one to a huge walk in closet style room, and one into an office.

Anyway, sorry for the long post.

What would you do if you were me?

Dean

Hi Dean,

You don´t actually specify which part of Southern Madrid your house is in, but one of my students seems to think most of this area, including Getafe is a bit rough as a lot of the South Americans end up living there.

From my experience of living in Spain and not being able to sell a secondary residence here, I would advise you to follow your 'path 2' taking the best price you can get as soon as possible for the following reasons:-

1, There is an over supply of property in virtually all parts of Spain at the moment, and forced sellers will eventually bring prices down. Even good quality property in good locations can take time to sell.

2, Renting here is a complete nightmare as it's almost impossible to find an honest agent and even if you do manage to get tenants with Western European standards, you can almost guarantee that you'll have some sort of expense at the end of the tenancy.

3, Probably the most important thing you need to know if you are considering renting is the 5 year rule. If you rent your property long term, the tenant has a right to stay in the property for 5 years as long as they pay the rent, even if you agree a rental contract for a shorter period of time.

4, Short term lets can also be a pain due to the above agent problem, organising change overs, and general wear and tear from prople who'll treat your home as a hotel.

I hope this gives you something to think about. If you have any doubts go and see a (an English speaking if you don't speak Spanish well enough) solictor.

MIS

Hello Dean
I thought I would jump in before all the estate agents see this post.
You admit your lack of knowledge in this area and I would advise you to leave property investments to the professionals, especially at this time.
Why? Well only an estate agent / developer would advise you to buy now as an investment.
The Bank of Spain recently said that property is 30% overvalued.
An IMF report that was in the newspapers yesterday echoed the sentiment that property is overvalued.
Jean Claude Trichet, President of the European Central Bank has has mentioned the spanish housing bubble in a number of the recent ECB press conferences.
That is what the experts are saying; prices are too high and a crash/ correction is a highly plausible scenario.
Don't gamble on house prices going higher in the next five years, unless you are prepared to risk going into negative equity.
Anyone who tells you to buy another house has a vested interest, and that most likely is to make 5% selling you a property.
(MarkinSpain's advise looked sensible to me.)
Good luck.

if you are living in your dream house then you must pay off your debt
then you will be happy: good house + good place + no worry of money

ignore the mad woman with her magic beans

Do you not actually realise that property prices are falling in both the UK and especially in Spain?

Thanks for the advice everyone.

The area I am in is actually a nice area, a long way from Getafe. But I see your point.

I guess I either stay in the house, or sell it. I think I will pass on the investing.

Many thanks,

Dean