Real Estate Expert Advice: to buy or to rent
By Salma Hwedi on - 7m. reading time
Many people face it while choosing their new place to live. There are many factors to consider when tackling this question, and we hope to be useful here. There are different types of clients according to their financial abilities, intended duration of staying in the country, family situation: kids-schools-dogs and so on. Let’s talk about a potential average customer who comes from Russia or any other country to Marbella.
For many people, their own home has always been one of the key elements of happiness. Until recently, Russian mentality encouraged people to buy property. Probably, it comes from the time when we had nothing, then suddenly were allowed to have property, and since then we feel immense pleasure in being an owner. Have you heard this old joke? A client of a bank signs up a loan agreement with high interest rates. Some mask-wearing armed robber breaks into the bank shouting “This is a robbery!” “I know.” The fully concentrated on papers property buyer replies. “But I’m craving for my own apartment!”
However, in recent years, when the crisis hit many families in the pocket we can see a tendency for increase of rentals. We are not talking about an ordinary short-term tourist season rent but the long-term rentals.
"Pro and contra of both cases - renting and purchasing"
While renting a property in Marbella, we are able to look around, meet the neighbours, get to know the climate, choose what type of area we want to live in - a city, a suburb, somewhere more rural, at the sea or in the mountains, at the golf course or in a happening place with lots of social life, e.g. by fashionable port.
When buying a property, as they say, we only get one shot, one single bullet... and a hope that all our friends’ tips and real estate agents’ recommendations are correct and, therefore, our choice is right. Buying a property is a serious event, it’s not as easy as pie. It requires investment of a large sum of money and people who are good with money are very careful with it. Actually, these days everybody tries to get into good financial habits.
When buying, psychologically we are able to lower our costs by taking out a bank loan. Let’s say a conventional price of your house is 100 euro, a bank loan is 50% of the cost, i.e.50 euro. Thus, we are paying for our excellent property only 50 euro + related expenses*. Those 50 euro that we have borrowed we will be paying during 15-25 years, a fairly reasonable amount every month, and we believe that in case we rent we would have been paying about the same amount of money, but to the landlord, not to the bank. Psychologically, we stay calm - it turns out that we bought the property for 50% and the money that we pay to the bank at the end goes to same pocket of ours - paying the full amount for the property we capitalize our investments.
When renting, our monthly payment goes to the property owner and seems to be thrown away money. In addition, rented accommodation does not provide guarantees for the future, the rental agreement is usually made for one year, and nobody is secured from the increase of the rental price or changes of the landlords’ plans. On the other hand, while renting we get rewarding experience of living in the particular area, it gives chance to avoid mistakes. And experience, as they say, is always worth the money and costs money.
Your property can always be sold and you will get your money back. You can sell it even at a higher price if the real estate market grows or you have a property in the areas of high liquidity, and Marbella is definitely one of them. If you rent you, do not have this opportunity. If you spend thousands or tens of thousands of euro per month renting an expensive property the amount of “thrown away” money hits the pocket and, psychologically, the heart. On the other hand, renting helps to avoid certain expenses related to property purchase we have mentioned above, which can reach about 10% or more of the price of the property. Of course, this money will be included in the cost but practically you do not use it. Whether we like it or not, as a property owner you have to pay property tax and monthly utility fees.** Forget about this payments if you rent; tenants usually pay only fixed charges for water, electricity, Internet, telephone bills and similar services. Living in our own home or apartment, we also pay for all these services out of our pocket. This way the terms for those who have bought property and those who prefer renting are equal.
Apart from the economic factors, there are the other ones. Mentioning that we live in some luxury area rather often gives us a certain social status and respectability. Admit that it is true! Of course, we do not necessarily clarify if we have bought a house in a prestigious location or rented.) When choosing that perfect place that you and your family will call home remember - the house is something that cannot be measured only in money, it is not only 4 walls, but a place where we feel comfortable and where our children are raised. The majority of Russians are not keen on moving and changing places, especially family people. They like their Lares and Penates.
Your personal plans affect the decision to buy or to rent. If your stay in Marbella has a fixed time schedule, such as your children’s school year, health improvement, business meeting, holidays, playing golf, etc., renting is definitely preferable. If you feel this is the place where you want to live permanently, spend your retirement years, or just regularly enjoy all the wonderful opportunities that the Mediterranean coast can offer, then I would certainly recommend you to buy a property.
Marbella real estate market is a good guarantee for investment. At the moment, the real estate market is in its right moment – it’s no longer in its lower phase, has begun to rise, prices are stabilized and the rise is obviously predictable – continues, steady and smooth increase, with no dramatic price jump as it happened more than 10 years ago when the prices could grow up to 50% within a couple of years. This stability shows that it’s a good time to invest in real estate. In addition, one more thought that should be taken into account when you choose between buying and renting.
Buying a plot, we buy our future home and the opportunity to make it exactly the way we want taking into consideration all the family needs and special details. It is impossible to find a property for rent that will suits us perfectly. The rental market is quite limited, there are not enough offers and we have to be prepared to compromise, to accept the absence of something you find important for living, to agree to a location available at the current moment, etc.
That is why we recommend buying for permanent residence and renting when on holiday or having a shortterm stay. The choice is all yours, check out our Marbella property portfolio and we are always ready to help whatever you decide.
* Once-Only Payments: Lawyers, notary & registration fees, transfer tax on resale properties (ITP – Impuesto sobre Transmisiones Patrimoniales), on new buildings a VAT, stamp duty
** Recurring Taxes and Fees: IBI (Property tax), Garbage collection tax, Community fees, Non-resident income tax, Wealth tax