What are the risks of investing in Real Estate on the Costa del Sol?

Investing in real estate can be a great way to secure your financial future, but it’s essential to understand the risks involved, especially when it comes to investing in a foreign market like Costa del Sol.

Luckily for you, we know two gentlemen who know quite a lot about the real estate market and how to make successful real estate investments. They have just bought a fantastic apartment in the beautiful green urbanisation Miraflores on behalf of the investors in our alternative investment fund, Mojo Capitals.

Property investment on the Costa del Sol

The Costa del Sol is a popular tourist destination known for its beautiful beaches, warm climate, and vibrant nightlife. As a result, many people are attracted to the idea of investing in real estate in this region, hoping to benefit from the potential for high rental yields and capital appreciation. However, before you invest, it’s important to understand the risks involved.

Investing in real estate on the Costa del Sol can provide many benefits, but it also comes with a number of risks. One of the biggest risks is the possibility of overpaying for a property. Property prices in the area have risen significantly in recent years, and many investors have been caught out by paying more than the property is worth. This can be a significant financial burden, especially if you plan to rent out the property or sell it in the future.

To minimise the risks associated with investing in real estate on the Costa del Sol, it’s important to do your due diligence before making any investment decisions. This includes researching the local property market, seeking professional advice from real estate agents and lawyers, and thoroughly analysing the property you’re interested in to ensure it’s a good investment.

How to manage the risks related to real estate investments

You must make some clever decisions in the following four phases to achieve your investment goals! If you want to achieve the highest possible profit and ROI (Return-On-Investment) when investing in real estate on Costa del Sol, this is now you must pay attention. You can also watch the video above to get all the tips and details directly from the two experts and co-founders of Mojo, Jacob and Per.

Phase 1: Buy the property cheap!

Make sure you buy the property at a fair price! On the Costa del Sol, it is not only the professionals who decide the price of a property. Often, the seller informs the real estate agent of the price they want to sell for, after which some agent enlists the property for the price set by the homeowner, not the professionals. This means you have to bargain if the property price is too high – just as we did with the apartment, we bought in Miraflores in Mijas on behalf of Mojo Capitals I A/S. The property was for sale for 295.000 €, but we ended up purchasing it for just 227.000 €.

Don’t get scared of losing the property! Be patient, and make sure you get the right price.

See an example of a property for sale for a reasonable price in Miraflores below. This is a completely redesigned penthouse apartment with a terrace, two bedrooms, two bathrooms, and beautiful green surroundings in Miraflores within walking distance of the beach.

Phase 2: Get the reform price right and control time spend!

Working with the right providers and getting a reasonable price is important. However, you want to maintain the quality of the work. To give you an idea of a fair reform price, we can reveal that we have got an offer from our trusted partner to renovate the apartment in Miraflores for 39.555 €.

The clock starts ticking as soon as you buy a property as an investment. You naturally want the best possible ROI, and this is where “time spend” comes into the picture. We recommend you plan when it is the best time to buy and how long it will take for the builders to do the reform, when the interior designer can do the staging, and how soon you can get the property on the market for resale.

Let us take a concrete example: If we invest 500.000 € in a property and make a profit of 50.000 € within a year, our ROI is 10%. However, if it takes us two years to make that money, our annual ROI gets cut in half to only 5%.

“It is every investor’s fear … time”

Now, this number is not acceptable for our investors in Mojo Capitals, who trust us to invest in properties on the Costa del Sol on their behalf. We are aiming for an ROI of 10% after Spanish tax! And this is why it is decisive to control how much time we spend on purchasing, reforming, staging, and selling the home.

Phase 3: Staging and furnishing

The first impression can make all the difference when it comes to selling properties. Therefore, staging and furnishing are inevitable parts of the selling process. According to the Spanish property portal Idealista, this can help sell your property up to eight times faster!

Everyone thinks they are the best at staging, but that is rarely the case. You will need a professional to pick the right furniture and stage the property in the best light to appeal to the buyer. This will increase your chance of selling the property faster and at the best possible price.

Remember to include professional staging and furnishing in your budget when investing in a property on the Costa del Sol! To give you an example, we expect to spend around 24.157 € on phase 3 in the apartment we bought in Miraflores, which is 110 square metres with two bedrooms, two bathrooms, a living room, an open kitchen, and a terrace.

Phase 4: Sell at the highest possible price!

Now to the most exciting part: Selling the property at the best possible price to ensure you get the highest potential profit and an excellent ROI. Let us be honest, you will need professional help to sell your property on the Spanish market. It can be challenging to navigate the real estate market and understand how things work on the Costa del Sol, so to make the most money, you will need help from a professional real estate company (hey! Why not reach out to Mojo Estates?).

To give you a peek into our expectations for the sales price of the Miraflores apartment we have bought to reform and furnish, we count on having it available on the market in the summer of 2023 for around 399.000 € plus furniture.

In conclusion, while investing in real estate on the Costa del Sol can provide many benefits, it’s crucial to understand the risks involved and to take steps to minimise them. By doing your due diligence and seeking professional advice, you can increase your chances of making a successful investment in this exciting Spanish housing market.

Make sure you get the right help when investing in the real estate market on the Costa del Sol. One way of doing this is by becoming one of the 25 exclusive investors in Mojo Capitals with a minimum investment of 100.000 €. Our new fund, Mojo Capitals II A/S, is opening up this summer, so get on our pre-launch list by contacting our CEO, Joachim Schiødtz – as you may recall, our goal is an ROI of a minimum 10% after Spanish tax!

05 Feb 2023

Per Moensted