Real estate investment opportunities are experiencing significant growth. With the potential to deliver double-digit returns, the real estate market in Spain has become a highly attractive option for investors. However, to ensure the success of each transaction, it is essential to carry out a rigorous financial analysis that enables informed decision-making. This article outlines some of the main criteria that should be evaluated to make strategic decisions and maximise real estate ROI in Spain.
Criteria for assessing real estate investment opportunities
Demand
Analysing demand is the starting point for identifying solid real estate investment opportunities. This analysis determines whether there is genuine interest in the type of property being offered in a specific location.
Relationship between actual supply and demand
Detect structural imbalances that put pressure on prices at both the national level and the specific locality and asset type.
Buyer or tenant profile
Individuals, couples, families, investors, expatriates?
Product preferences
Distribuciones, número de habitaciones, terrazas, garajes, espacios comunes, ascensor, etc.
Socio-demographic factors
Layouts, number of rooms, terraces, garages, communal areas, lift, etc.
Consumption trends
Changes in tenure habits (rent vs. buy), residential flexibility, etc.
Acquisition price
Correctly assessing the acquisition price is key to evaluating the financial feasibility of a real estate investment opportunity.
Determining the property’s value
Estimate market value using techniques such as comparable analysis—both for properties currently listed and for recently closed transactions in the same area.
Potential for improvement
Assess the possibilities for repositioning, redistribution or refurbishment to fully realise the property’s value.
Safety margin
Incorporate alternative scenarios considering possible deviations in costs and execution timelines to protect real estate ROI against unforeseen events.
Property renovation
It is essential to factor in renovation costs before investing. Often, low-priced properties may conceal significant expenses due to their condition.
Assess the property’s condition
Conduct a detailed technical inspection to identify potential structural, plumbing or electrical issues.
Permits
Consult experts on the administrative permits required to carry out the planned works, along with fees and timelines.
Estimate renovation cost
Obtain an accurate projection of refurbishment expenses.
Taxation
Taxes associated with the acquisition, ownership and sale of a property can directly affect the profitability of real estate investment.
Transfer Tax (ITP)
Applies to the purchase of second-hand homes; varies by region and buyer type.
VAT
Applicable to new-build properties or change of use (e.g., from commercial to residential.
Stamp Duty (AJD)
Relevant for horizontal divisions, mergers, segregations, new-build declarations or mortgages.
Municipal capital gains tax
Levied on the increase in land value at the time of sale, usually around 1%.
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Other costs
Beyond taxation, other costs must be considered when analysing real estate investment opportunities, as they directly influence the returns of each investment.
Notary and registry fees
Generally around 0.4% of the property price, though they can be higher for horizontal divisions, mergers or segregations (also usually subject to AJD).
Operating costs
Include Property Tax (IBI), utilities, maintenance, insurance, alarms and other management-related expenses.
Real estate agency commissions
Typically between 2% and 5% of the sale price, depending on asset type, location and agreed terms.
Decoration and home staging
particularly relevant to speed up sales or rentals by improving market presentation.
Area growth projections
This complements the demand study by focusing on the future urban and social outlook. While emerging areas may hold potential, prime locations remain a key segment of real estate investment opportunities in Spain due to their high demand, stability and long-term appreciation potential.
Demographic growth
Arrival of new, affluent profiles.
Economic dynamism
Emergence of services, businesses, jobs or attractions.
Infrastructure projects
Public or private infrastructure projects with an impact on the area.
Historical price behaviour
Indicator of stability and growth potential.
Property liquidity
The ability to sell or rent a property within a reasonable timeframe depends on its fit with active market demand.
Market alignment
Liquidity depends on whether the property matches real demand in the area for that type of asset. Turnover and solvent buyers or tenants are key.
Average turnover time
Average turnover time for similar properties in the area.
Level of competition
Risk of oversupply in the market.
Conclusion
When evaluating real estate investment opportunities in Spain, it is essential to consider factors that go beyond the initial acquisition price. From additional costs to assessing property liquidity, every step should be carefully analysed to maximise real estate ROI.
At balize, we understand that identifying the best real estate investment opportunities is a complex process that requires an in-depth review of multiple factors. We simplify this process for investors through a solid, data-driven financial analysis, ensuring every decision is backed by clear, relevant insights. This approach has led to projects achieving over 20% profitability of real estate investment in Madrid and Barcelona. Explore more of our projects.
