Deliver a guaranteed rental income
Our client asked us to find a large, detached house in a prime location, a property with virtually guaranteed rental potential throughout the year and which the family would only use when it wasn’t let. We’ve noticed an increase in this requirement in recent years, younger buyers wanting to get into the Spanish property market now, buying for ten years ahead when they plan to spend a large part of the year in Spain. In the meantime, they have busy working lives with children still in school and university with limited opportunities to use their properties
- A detached house with a minimum of 4 bedrooms
- Year-round rental potential
- Sea view
- Walking distance to a beach and lots of amenities, such as bars, restaurants and shops.
- Preferably no work needed, ready to move into
- Preference for a contemporary look
Our client wanted what everyone else wanted, a beachside detached house within walking distance of everything. Our biggest challenge would be to find that property and a seriously motivated seller in a market where the supply side was becoming a serious issue.
I wasn’t confident that I would have more than a handful of properties at most to shortlist and it can be difficult for a client to understand that. Most people spend months looking at thumbnail images online and everything looks suitable so they think there are thousands of possibilities. The problem is they don’t know exactly where they are, we do and can rule most of them out.
The key issue in this brief meant I would target only the most prime locations with the highest rental potential. Therefore, I would be focusing on beachside or a prime golf course on the west side of Marbella, between the town itself and Guadalmina, with a particular focus on the town of San Pedro de Alcántara, something of a hidden jewel of the Costa del Sol. However, it also meant that a sea view was unlikely unless a compromise was made on the requirement to be walking distance to the beach and other amenities. To get the sea view would mean going a few kms back into the hills as the land closest to the sea in this area is flat, pancake flat. Doing that means a car is essential for everything. So, compromise time had arrived and the requirement for a sea view lost out, walking to lots of stuff preferred.
When discussing the brief I made it very clear that the shortlist for viewing would probably be very short indeed, and such was the competition for what my client wanted he had to be willing to jump on a plane at very short notice.
I started my research in November 2019, by which time the market had been in growth for several years. High demand and lack of supply of quality property in the most prime locations had pushed prices higher and meant there was competition for the best properties. I looked at the area of Nueva Andalucía, otherwise known as Golf Valley, as in the lower part it is possible to walk to lots of great restaurants, bars and shops just behind Puerto Banús in about 10 minutes and the beach in 20. In the case of beachside San Pedro, although I thought it was the location that ticked all the boxes on the criteria list, I expected to really struggle to find anything.
However, there’s an element of luck in many searches, just being in the right place at the right time. Fortunately for our client I run almost daily along the San Pedro promenade when I am in the area and one Friday evening I spotted a private For Sale sign on a house about 200m back from the sea and 500m from the town. It would be impossible to find a house with better ‘walking to’ options; shops, bars, restaurants, Puerto Banús, etc., or with better rental potential. It was too dark to make out the telephone number so I took the same route during the next day and made an appointment to view it on the following Monday morning. The asking price had already been reduced from its original €1,8m and although it was still above budget the seller was in a big hole and it was time to stop digging. However, there was interest from a couple from Madrid who had driven down over the weekend for a second viewing. In fact they were parked outside waiting for me to finish my inspection.
So no time to lose and no time for a written report. I was on the phone to my client immediately, he flew out the next day and we viewed on the Wednesday morning with a second viewing on Thursday afternoon. We made a cheeky offer which was rejected but negotiations were successfully concluded over the holidays, completion set for February 2020.
For many years, this house had stood as a concrete shell, unfinished since the local builder went bust in the 2008 meltdown. As there were so many I had barely noticed it. It was eventually bought and completed in 2012. The trend towards the contemporary look was just getting going and this house had it; modern Andaluz externally and clean, bright interiors. It faces south, 200m from the paseo marítimo and 500m from the town. I has 5 bedrooms, a large open plan living and dining room, wonderful terraces on two floors plus a chill-out terrace at roof level, all facing south. If the sun is out this house has it, all day, winter and summer. In addition, there is a 200m2 basement with natural light which will be configured to an additional bedroom suite, office and gym.
As I predicted, being so close to the sea on flat land means there is no sea view, not even from the top terrace, However, compromising on the view in exchange for the ability to walk everywhere paid off. Puerto Banús is 15 minutes away along the promenade. and it takes less than 10 minutes to be in the heart of San Pedro.
And the rental potential? Amazing. Although our client completed the purchase just as Covid-19 appeared in February 2020 an interior designer worked through the toughest lockdown conditions to produce exactly what the luxury end of the rental markets wants. High season weeks have been 100% sold to both Spanish and overseas visitors. It has been rented as somewhere to sit out lockdowns and right now it is let until September 2023 while the tenants look for somewhere to buy. On this long-term tenancy the gross yield, taking all buying and furnishings costs into account, is in the region of 6%. If the house is returned to the short term rental sector once this current tenancy is finished then I would expect the gross yield to be a couple of points higher. And given the continued high demand for this type of property, our client’s capital growth potential is spectacular.
From our client’s point of view the only downside is that they don’t currently have somewhere to stay in Spain. If the property is returned to the short term market I will post the link to the owners website so anyone interest can make direct contact.
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