How to buy a property in Mallorca?
Before you start looking, it is important to make sure you have the funding ready. If you need information about this, you are welcome to email us and we will help.
Once you have found a property that you want to move on with, it is recommended to hire a reliable lawyer who can, along with your real estate agent, help you through the process.
The first step is always to place an offer. Once the offer has been approved, a “purchase agreement” is being prepared. In connection with the signing of this agreement, it usually requires you to pay 10% of the entire purchase price in a down payment and thereby commits you to the sale.
If the buyer does not complete the sale the deposit will normally not be refunded. If the seller backs out, they must normally repay the down payment plus an additional 10% off the purchase price. Usually, it is the buyer’s lawyer who prepares the contract for the purchase agreement and at the same time ensures that all documents are in order and that there are no loans, fees and taxes that are unpaid.
- Note, when buying a new construction “off plan” it often requires payment in stages.
Before taking over the apartment, all paperwork and documentation must be ready. You will need the following to complete the purchase of the property:
- Apply for a so-called NIE / tax number as a foreign buyer. (Contact us for more information about this)
- A Spanish bank account. The final transaction is made in Spain by a notary. The money must therefore be transferred to your Spanish bank account in good time before the completion of the property.
- All documents to be represented must be in order before access otherwise the sale will not go through.
- If you are unsure that you can attend the of completion, you can, for example, give your lawyer a power of attorney to act in your name.
Costs when buying a property
A buyers closing costs are going to be approximately 10-14% of the purchase price. This number will vary depending on whether or not you are buying a new construction, the purchase price of the property and If you are using a lawyer. We always recommend our clients to use a lawyer and we can provide you a good option on these.
What are the taxes and fees I am paying for?
- Real Estate Transfer Tax. (This Tax is on the sale of second-hand properties) The tax rate will change according to the purchase price that appears in the deeds. Its between 8% and 11%.
- If a garage place is not attached to the property it will be taxed separately.
- VAT – Value added Tax. Only applied when buying a new construction. Right now its 10% on the purchase price.
- Stamps Duty tax. Generally 1,2% of the purchase price.
- Lawyers´ fees. Are normally 1% + VAT of the purchase price.
- Some lawyers might have a minimum fee of 2500-3000 euro +VAT.
- A property inspection. Is not required but is highly recommended if you are buying a villa. The cost is approximately 1000-2000 euros depending on what kind of inspection and the size of the property.
Taxes when owning a property
- Property tax (IBI). Annual property tax to the Town Hall. The amount depends on the municipality and is based on the cadastral value of the property. Tax rate is issued by the Town Hall.
- Rubbish collection (Basura). Costs vill vary but normally between 100 and 200 euros per year depending on the size of the property.
- Wealth Tax. Rate depends on the value of your assets.
- Income tax for non-residents. A tax declaration need to be presented each year by all non-residents in Mallorca.
Sell a property
If you wish to sell your property you are in good hands. We have almost 10 years experience of selling properties in Mallorca.
How do we work?
- Marketing, using our own website, international websites, newsletter and social media.
- Viewings, scheduled or / and spontaneous viewings. We are happy to hold a key set for you.
- Documentation. We are happy to guide you to sort out your documentation you will need to complete the sale. Contact us for more information regarding these important documents.
- Exclusive sales contracts. You can choose whether you would like to work with one agency or more. However, We don’t advice to work with too many as you could overexpose your property.
- Selling a property is not straight forward but we make the whole process seamless and effortless. Before taking on a new property, we advice you on the market situation and what a realistic asking price would be for you. It’s important both parties agree on price and are aware of the time it can take to sell the property.
What taxes do you need to pay when selling your property?
- Plusvalía Municipal; This tax is varying according to size, length of ownership etc. Contact us for more information.
- Capital Gains Tax (CGT); Varying depending whether you are a resident or not. Contact us for more information.
- If a second hand property is sold by a non resident, 3% of the purchase price must be held by, for example, the lawyer representing the buyer. The amount must be paid to the Spanish tax authority in the seller’s name. This tax is for a possible capital gain tax. If you have not made any profit, you can request the money back.
What documents do you need when selling a property and what are the costs?
- Passport copies and copy of NIE number. (DNI for Spanish clients)
- Copy of all the bills for running costs (water, electricity, gas etc)
- Copy on latest property tax paid (IBI)
- Copy of last garbage bill (Basura)
- The final work certificate
- Construction permit
- A final inspection certificate.
- Estate Agency fee; normally 5% + VAT (IVA)
- Lawyer fee; normally about 1% + VAT (IVA)
- Energy Certificate; about 80 -300 euros depending on the property
- Living certificate (Cedula de Habitabilidad); about 100-200 euros depending on the property
- Mortgage cancellation costs; contact your bank
Please contact us on [email protected] if you have any further questions.
How to rent a property in Mallorca
Once you have found a property that you want to rent, you need to provide a copy of your passport and your NIE (if you have one) and your registered adress.
It is also important that you are able to provide proof that you have the sufficient funds to pay the rent. This can be a working contract or a bank extract where you can prove that you have the sufficient funds.
It is also helpful for us to know a little bit about yourself, such as your profession, the motive of your move, how many people will live in the property, if you have pets, etc. The more you can tell the easier it is for us to find a home that best suits your needs.
Do I need a NIE number?
You don’t need a NIE number to rent a property but you will need to get it eventually to open a Spanish bank account, which is necessary for contracting internet and other local services.
We happily recommend people to help you with this if you wish.
What costs am I looking at?
Apart from the rent you will need to pay a deposit, this is usually equivalent to two months rent but can vary depending on what the property owner states. The deposit can never be used as prepayment for the rent and serves as a security to cover the reparations of any damages that might have been caused by the tenant or pending bills for electricity, water etc.
Given that you have not caused any damages on the property, the deposit will be given back to you within one month of ending the contract.
If you go through an agency you also have to pay the honoraries of the agency. This amount depends on which agency you use but are normally between one and one and a half months rent + VAT.
Some rental prices already include costs for internet, insurance, community fees, garbage tax, property tax, water etc, but usually, the norm is that you pay for what you consume on top of the rent.
In some cases, owners will ask for upfront payments of the rent for up to one year. This is common for properties in the upper segment, but much less common for the more economic options.
How long is the rental period?
The law is revised quite often lately, but at the moment, when you rent a property as your primary home (long term contract), the duration is of one year, which is prolonged automatically for a maximum of five years.
If you need to move out before the first year is completed, it is important that you follow your agreed time of notice, or you could risk to loose your deposit.
This is usually one to two months, although the minimum time you must stay, according to the law, is six months.
If you wish to rent shorter than one year, you will have a temporary contract instead.
In this case it is extremely important that the purpose of your stay is not touristic. The law is strict here and you will need to have some kind of proof of your reason for a temporary lease such as a temporary work assignment, studies or similar.
It is also possible to rent properties for touristic purpose but those need to have a tourist license and are generally promoted on tourist rental sites.
Renting out your property
If you want to rent out your property you are in good hands. We have almost 10 years of real estate experience on the island.
We will make sure that your property gets the maximum exposure through marketing on our website, international websites, newsletters and social media.
We are always ready to show your property to potential new tenants and happily hold a set of keys for you so that you don’t need to be bothered every time there is a viewing.
If you have questions regarding the rental law, which is constantly updated lately, we can give you some clarity to the matter.
Renting out your property, if its at the right price and conditions, can happen fairly quickly, so it is good if you have your documents ready for the contract.
On our hand, we always filter our clients and check their economy before proceeding to contract so that you, as a landlord, can feel as safe as possible.
If you want to use your own contract or lawyer that is fine, although if you prefer, we can do it for you as a service on our behalf.
Once we have found you a nice tenant, we will ask you for the following documents before preparing the contract:
- Copy of passport and NIE (DNI for Spanish owners)
- Your fiscal address
- Copy of the title deeds
- The bank account where you wish to receive the rent
- Energy certificate
Renting out your property with us won’t cost you anything, as the norm in Mallorca is that the tenant pays the agency fee. It is a service that is completely free for property owners.
If you have further questions regarding renting out your property, then please contact us on [email protected].