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AND RELOCATION FOR EXPATS

MADRID PROPERTY SEARCH

The 5 Key Questions when

Buying in Madrid

After reading this book, you will be ready to take the right decision and set the right expectations: budget, properties you can afford, location, and also how to find your dream home.

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What’s inside this book?

Introduction

 

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Chapter 1: What are the prices in Madrid?

 

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Chapter 2: What are the best neighborhoods?

 

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Chapter 3: What is the final total cost of buying, all included?

 

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Chapter 4: How much can I expect to negotiate?

 

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Chapter 5: How to avoid traps when buying ?

 

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Conclusion

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  12 Chapter 5: How to avoid traps when buying ?   14 Conclusion 16 www.moving2madrid.com

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Introduction

First steps ?

Do you feel overwhelmed with all the information available, and do not know where to start ?

I am Pierre Waters, founder of Moving2Madrid, and in this ebook, I will answer the 5 essential questions all readers and clients ask us at the start:

Prices: What are the prices for real estate in Madrid ? Neighborhoods: What are the best neighborhoods ? Total Costs: What is the final total cost of buying, all included ? Negotiation: How much can I expect to negotiate ? Risks: How to avoid traps when buying ?

I keep it as simple and realistic as possible. If you need more details or have qu-

estions along the way, follow the links or just send me an email at email@moving-

2madrid.com with your questions.

What you’ll get out of this ebook

5 chapters, each covering the main questions, with direct simple answers, followed by more detailed explanation so you can also get the complete picture.

Our articles and newsletter also cover similar questions, but this ebook includes

After reading this book, you will be ready to take the right decision and set the right expectations: budget, properties you can afford, location, and also how to find your dream home.

expectations: budget, properties you can afford, location, and also how to find your dream home. www.moving2madrid.com

www.moving2madrid.com

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Chapter 1

What are the prices in Madrid?

The first step of all, before even answering this question, is the less romantic: ensure that you will have the money to support you dream. Planning and preparation are key to a successful purchase.

If you need a mortgage, you can either request one from a bank in your country of origin with branches in Spain, or request a non-resident mortgage to a Spanish bank.

For such a purchase, I recommend you go safe and standard: a 20 to 30% down pay- ment, 30 years, and a housing-to-gross-income ratio of around 25%.

Ok, now back to prices

The first check is to divide your maximum property price by the number of m2 you need. If you do not know how many m2 you need, a first guess is 40 m2 + 20m2 per bedroom. For instance, for a 2 bedroom apartment, 80 m2 is a good start.

You will then get a price per m2. This will allow us to see what kind of neighborhoods you can afford:

6000 € / m2 and above: the sky is your limit. The most exclusive neighborhoods like Salamanca, newly built apartments in the centre and penthouses are within your budget.

3500 – 6000 € / m2 : you can afford quality apartments in the centre of Madrid, in Chamberi, but not the most modern, and it might be harder to buy in the most exclusive neighborhoods. You can afford new build several stops from the centre, with terraces for instance.

neighborhoods. You can afford new build several stops from the centre, with terraces for instance. www.moving2madrid.com

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3000 € / m2 is the average in Madrid Capital, which is the zone where you have metro stops more or less .

2000 – 3500 € / m2: the only solution in the centre of Madrid is Lavapies

and you will need to search and negotiate very well. You can afford nice

modern apartments a few metro stops from the “centro” district of Ma- drid.

1500 – 2000 € / m2: the suburbs of Madrid, with less character but more

modern apartments.

You will need to optimize the budget and prioritize price over other needs.

Which leads us to our next question - where should you buy given these prices ?

over other needs. Which leads us to our next question - where should you buy given

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Chapter 2

Where is the best neighborhood to buy a property in Madrid?

The question we get most is: „Where is the best neighborhood to buy a property in Ma- drid?”

Well, in fact, the exact question I get many times is „What are the best neighborhoods in Madrid ?”

The answer is: It depends on your budget and criteria.

However, I know what foreign buyers expect, what surprises them, and what kind of neighborhoods they like to purcha- se in.

Therefore, we created a first overview and summary.

• 3-words to describe each neighborhood

• links to detailed presentation of each

„barrio”, with photos and even videos, all

home-made or hand-picked

• link to my interactive map of the best neighborhoods for foreigners

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The Most Exclusive

Salamanca – Luxury, Shopping, History

Justicia / Almagro - Classy, parisian-like, designers

Opera el Madrid de los Austrias - Historic, authentic, cultural

Las Letras / Cortes – Cultural, Historic, Gastronomy

Austrias - Historic, authentic, cultural Las Letras / Cortes – Cultural, Historic, Gastronomy www.moving2madrid.com

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This list, along with our interactive map, will give you an overview of the personality of all the best neighborhoods in Madrid in 3 words for each neighborhood, with a link to the detailed article, all of them distribu- ted in 4 groups to make it easier for you to approach:

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The Contenders

Lavapies / Anton Martin – For value right in the centre – Multicultural, Alternative

Chamberi – For larger apartments just north of the centre – Authentic, small- town feeling, practical

Chamartin – For staying closer to your office north of Madrid – Business, Eating Out, Residential

Moncloa / Arguelles– For living the student lifestyle or to be close to Madrid’s Northwest gate – Students, Party, Green

Retiro – For larger apartments for families close to the park: Green, posh, family-focused

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The Hip & Trendy

Chueca - Trendy, mixed with traditional and gay

Malasaña - Hipster, Bars, History

La Latina - Tapas, Historical, Traditional

Sol & Gran Vía - The city’s meeting point, shopping&eating out, entertainment

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The Suburbs

North-West, from the closest to the furthest: Pozuelo, Majadahonda, Boadilla, Las Rozas

North-East, from the closest to the furthest: Arturo Soria, La Moraleja

Boadilla, Las Rozas North-East, from the closest to the furthest: Arturo Soria, La Moraleja www.moving2madrid.com

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My conclusion is that most opportunities are found not by betting on some neighborho- ods, but on exhausting all options within your selection of these top neighborhoods, and keeping an open mind of “frontier” zones, where mainstream buyers would not go, and finally we find a great opportunity after negotiating.

Because indeed, it’s only after negotiating and optimizing all costs that you are sure to get the return you were expecting

after negotiating and optimizing all costs that you are sure to get the return you were

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Chapter 3

What is the final total cost of buying, all included?

The total cost of buying a property in Madrid is the purchase cost of the property + 10 %.

This is all included, a conservative average based on years of purchasing properties for foreign buyers.

What is the final cost of buying an apart- ment for sale in Madrid? How much money will you need to complete the purchase of this apartment? Did you include commis- sions, legal and administrative fees as well as taxes ?

As a relocation entrepreneur working on the buyer’s side, I will give you the facts simply and clearly:

Add minimum 7-10 % on top of the pur- chase price.

The total cost of buying a property in Madrid is the purchase cost of the property + 10%.

There are 2 kinds of costs when buying an apartment in Madrid:

1. Taxes for the purchase

2. Legal and administrative fees

when buying an apartment in Madrid: 1. Taxes for the purchase 2. Legal and administrative fees

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6 % for second hand apartment in Madrid, around 10 % in total for a new build apart- ment.

Taxes

6–10%

This is mainly for VAT: 10 % for new build, or ITP, its equivalent for second hand, 6% in

This is mainly for VAT: 10 % for new build, or ITP, its equivalent for second

Madrid only, the lowest in Spain (7 to 11% in other regions such as Valencia or Barcelona) starting in 2014.

Then there is a stamp tax (IAJD, Impuestos de Actos Juridicos Documentados) to cover the legal work to be done by the local government for the apartment registry: between 0,3 to 0,7 %. If you want more of a specific estimate for your case, ask for your free con- sultation.

Because indeed, it’s only after negotiating and optimizing all costs that you are sure to get the return you were expecting

This covers the work to be done by (decre- asing order of budget spent):

• the “gestoría”, or accounting and

administrative office: 1000 – 2000 €

the notary: 800 – 1500 €

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Legal and Administrative 2000€ to 4500€

the lawyer: 200 – 800 € (not mandatory but very strongly recommended).

the surveyor: 300 – 500 € (optional, usually requested by your bank).

In a nutshell, the tasks they have to complete are:

€ (optional, usually requested by your bank). In a nutshell, the tasks they have to complete

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obtaining you the NIE quickly, required Spanish identification to be the owner of an apartment in Madrid.

• checking the legal background and eventually estimating the real value of the apartment for sale.

• reviewing the offer and sales contract for the sale of the apartment

conducting the legal and administrative procedures to officialize the purchase of the apartment.

Finally, with all these costs, there are many margins of improvement, to optimize on each item, which is what we do for our clients.

But really, how much can we gain from negotiation - the elephant in the room ?

do for our clients. But really, how much can we gain from negotiation - the elephant

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Chapter 4

How much can I expect to negotiate?

„Madrid is full of distressed sellers ready to listen to whatever offer”

Wrong

It’s in fact one of the key preconceived ideas about Madrid real estate market.

Another one is:

„Finding a good property is easy, and they will receive me with open arms.”

Wrong again

Why ? Because you want the best in the category you are interested in. You have good taste, have experience and know you can get the best of the market.

And right now, the best of the market, this top 10%, even in the crisis, has demand.

Can you get an apartment for a fraction of its price ?

Obviously, the market has now changed from a seller’s market to a buyer’s market. You have the power. But not the power to buy anything at a -70% price.

However, the stories on the news are always the most dramatic, and should not be taken as an example of the entire market.

The center of Madrid is still a prime location with economic growth: 2011 was a growth year still for Madrid, and May 2012 was the best year ever for tourism, with the largest

a growth year still for Madrid, and May 2012 was the best year ever for tourism,

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number of visitors ever seen. As realtors say, “Location, location and location.”

So if you go for modern apartments in the most attractive neighborhoods of the centre of Madrid, do not expect any big discount. Expect quality properties with great environment, shops and entertainment around it, and buyers fighting to get the best priced properties. Expect to find a quality property you like at a price never seen since 2004 and work to get an even better price.

The average negotiation discount is slightly under 20% on the overall market. What we are seeing for the properties that are the best in their category, with the right price, the ones foreigners want to buy: the average negotiation discount is 10%.

with the right price, the ones foreigners want to buy: the average negotiation discount is 10%.

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Chapter 5

How do I avoid traps when buying?

Imagine this situation: you are in the middle of the negotiation, and you see by its dyna- mic that we are going to get a good deal most likely, we should start our due diligence.

What’s our objective ? To make sure there isn’t anything undermining the value of the property. There are two kinds of risks :

1. Is the property safe at a legal level ?

2. Is the property safe at an architectural level ?

In both cases, we recommend to get an expert (an architect and a lawyer) to produce an analysis certifying with their professional insurance that the property is safe.

For the lawyer, this means you ask to request the basic due diligence, but not any investi- gation. The lawyer will do the basic checks with the seller, with the registry, catastro and checking debts.

As for the architect, he will check these papers, and check permits and licenses if ne- eded, the official structural audit (ITE), and then view the property for potential defects.

If anything comes up, then it will give us leverage for the negotiation. However, it also shows our interest. It has to be introduced in the right way.

The seller has to be warned then that we will complete the due diligence, and that if any defect appears, which decreases the value of the asset, there will be more negotiation or

a retention until it is solved.

decreases the value of the asset, there will be more negotiation or a retention until it

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When organizing the signing, there are lots of details, and all you need to know is the following:

Has the lawyer certified the purchase ?

Has the architect certified the property ?

Has the notary reviewed everything beforehand ?

The closing part is financial and legal.

On the financial side, you need to go to your bank to confirm the final details of your mortgage.

With your “contrato de arras” (pre-agreement), the bank will then issue the final papers and make the routine checks on their side.

Once the bank has given you the final signed agreement for the mortgage, you can then proceed to sign the final sale contract, or “contrato de compra venta”. Again, get the lawyer you have from the start to check the contract and all legal aspects linked to the property.

This final sale agreement will be signed in front of a certified Spanish notary (“notario”). This will be the moment the transfer of property and money will be completed. So pre- pare before with your bank well in advance that they will be able to issue a bank-backed check 48 hours before. Take this very seriously since banks are not always well mana- ged, and this can postpone the sale.

After this contract is signed in front of the notary, you should go directly to register offi- cially the sales agreement at the Spanish Registry. Your bank will be behind you anyway to make sure you do this step, since legally the contract is not valid in court until registe- red.

The apartment is now yours

since legally the contract is not valid in court until registe - red. The apartment is

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Conclusion

How to get the most out of your move to Madrid?

With our budget, we want to get the best property, which can mean different things:

Our favorite based on our personal taste.

The property with the highest rental return.

The property with the safest rental return.

The property with the most flexibility to rent short-term and use for personal reasons.

the property with highest potential for capital appreciation.

And in the end, asking the right question is the first step to giving the right answer. My experience tells me that the way to get the most out of the property, is to optimize each step and expertise linked to buying:

search professionally, leveraging local network and exhausting the sources,

view methodically, to identify value where most don’t.

• evaluate location at a micro level, down to the block, not based on neighborhood,

• know what the mainstream market wants and go for what has value and the classic basic buyers don’t want.

negotiate with a sound financial valuation as foundation, professional negotiation training and a deep understanding of Madrid sellers’ idiosyncrasies.

• refurbish with creativity and an attention to details most local providers don’t have,

rent out with no preconceived idea, and every time test and measure to optimize.

don’t have, • rent out with no preconceived idea, and every time test and measure to

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Yes, in the end, there is no magic bullet.

However, there are key questions you have to ask, and a method you have to follow to get the most out of your move here.

My team and myself will be delighted to discuss in detail, answer your specific doubts, by any of the following means:

1. Send us your questions directly at email@moving2madrid,

so you can reach the entire team and get the most relevant expert to

answer.

2. Send me directly a question via twitter @pierrewaters if you

have a personal comment or feedback on this ebook or its content.

3. Call us directly at +34 911 980 685 and we will answer your

questions right away.

4. Book a free 1-on-1 consultation with our Buying Expert Arash, by

choosing the most convenient time and day for you on this page: http://

www.meetme.so/arashmoving2madrid.

Thank you for reading, and we are looking forward to answering live your questions ! All the best,

Pierre-Alban Waters & the Moving2Madrid team

MADRID PROPERTY SEARCH AND RELOCATION FOR EXPATS

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