Interview with Baltasar Covas, managing director of the law and tax consultancy firm Omnia Consulting in Palma, about the advantages and pitfalls of buying a home in Mallorca.
Baltasar Covas is clearly one of the experts when it comes to buying property in Mallorca. His company, the law and tax consultancy Omnia Consulting in Palma, has been advising foreign investors on the purchase of residential property on the island for over 20 years.
Is Mallorca still interesting territory for real estate investors from abroad? In my opinion, the island is currently an ideal place for real estate investors. Supply and demand are still growing and will continue to do so in the coming years. Profitability is therefore also guaranteed in the future. However, there are a few things to bear in mind when buying residential property in Mallorca.
How big are the differences to buying real estate in Germany?The purchase procedure is no different to that in other regions of Spain or other European countries. You can compare it very well with buying a car.In what way?
When you buy a car, you certainly also make sure that everything about the vehicle is in order, that it has T&V, that all taxes have been paid and that there are no unpaid fines on it. The same applies when buying real estate.
What are the most common mistakes made by foreigners when buying property in Mallorca?
First of all, real estate on the island can be divided into two types: Properties in urban areas and properties in rural areas. In the case of city apartments in Palma, for example, in many cases no attention is paid to how high the ancillary costs are, for example for the maintenance of the communal garden or the communal pool. It is only afterwards that many foreign owners realize that the supposed bargain price for the property was not so cheap after all. Apartments on the island are often sold with encumbrances, which means, for example, that no council tax has been paid on the property for years. Or the balcony was extended into living space - without the appropriate permission from the town hall.
Illegal buildings or extensions should also be a source of danger for investors in rural properties? .
Exactly. Here, too, foreign investors often fall into the trap because they are not sufficiently informed about possible illegalities in or around their vacation home. And it can get even worse. Even worse? Imagine you discover a beautiful finca in the countryside at a really bargain price. After the purchase, it turns out that the municipality already has plans in the drawer to extend a country road or build a new bypass. And this road runs across your property. In this case too, it is therefore important to have the property checked for existing or future problems. So a lawyer or tax advisor is essential when buying a property in Mallorca? Yes, especially for foreigners who do not speak Spanish. But just as you would look for a suitable car mechanic, you should also exercise caution when choosing a lawyer. After all, there are quite a few lawyers on the island. One of the most important selection criteria should be the experience a law firm has in real estate law. We have been advising foreigners on all real estate matters for 20 years. Ultimately, this is a question of trust. And the trust of our clients is of the utmost importance to us. Many foreigners have bought properties in Mallorca in recent years in order to subsequently rent them out to holidaymakers
and thus amortize part of their investment. Is this model still interesting at all?
From my own experience, the answer is clearly yes. Private vacation rental is still a business model with an annual profitability of 8 to 10 percent. However, there are a few things to bear in mind.
Tourist rental is a business. Many investors underestimate the work involved. The minimum services include being available 24 hours a day, keeping the house clean at all times, etc. In most cases, it is therefore worth hiring an agency to manage the letting of the property. And to have a tax expert at your side. This is because the regulations for tourist rentals in the Balearic Islands will be changed again in 2019.
Andreas John
