The business of buying and selling real estate in Spain

Getting involved in buying and selling real estate can be a great idea, if you have enough information and do it professionally and with a good strategy.

Is it a good idea to dedicate oneself to buying and selling real estate?

The business dedicated to the purchase of housing has as its main activity the purchase, sale and management of real estate, mainly houses, premises and land.

This sector contains different types of activities, including real estate agents or buying to renovate and sell.

To succeed in these types of businesses, it is essential to have a certain level of education and rigorously manage finances. Also, having a good network of contacts helps a great deal.

It is a business sector that is quite profitable if done well, and each transaction translates into significant amounts of money.

What options are there for getting involved in buying and selling real estate?

If you are sure that you want to dedicate yourself to buying and selling real estate, you have the following options:

Working as a real estate agent

To work as a real estate agent, you only need basic training and a specialized course, in addition to obtaining a real estate agent’s license in the Comunidad Valenciana and Catalunya.

Once you have your license, create your own resume by starting to work for an existing real estate agency or set up your own. At this point, it’s very important to build a network of contacts and gain in-depth knowledge of the real estate market.

Your main responsibilities include:

Acquire properties to sell.
Find buyers.
Show properties.
Manage visits to the properties.
Answer questions.
Manage the documentation.
Mediate in negotiations.

Investing in real estate

House flipping, also known as property investment, involves acquiring properties in need of renovation that are priced below market value. The renovations are then carried out, increasing their value, and they are sold for a higher price.

If this is the option you want to pursue, you’ll need to create a business plan with objectives, marketing strategies, a budget, and timelines. You’ll also need to define your target audience.

It is important to consider the execution of the renovation, as the benefit obtained is directly related to the purchase price, the renovation price, and the sale price.

One way to sell in this type of transaction is to create renderings of what the finished property would look like, generating interest among potential buyers.

Another possibility is tourist rentals. If the goal of your investment is holiday rentals rather than an immediate sale, remember that in the Valencian Community, it is mandatory to apply for a tourist accommodation license from the Generalitat. Compliance with local regulations is essential to avoid penalties.

Legal and tax requirements

To start any business, it is necessary to comply with certain legal and tax requirements:

Obtain a NIE. This document is essential for foreign investors who want to buy a property or start a company in Spain.
Business registration. Decide on the legal structure it will have: limited liability company, corporation, or sole proprietorship. After that, register the business.
Deeds and contracts. Purchase and sale agreements must be clear and detailed. The best option is to sign the deeds before a notary. However, before formalizing the sale in a public deed, it is essential to sign a deposit agreement (contrato de arras). This private document allows the property to be reserved through the payment of a deposit and establishes penalties in case of a breach of contract by either party.
Taxes. You will need to register with the Tax Agency for the Economic Activities Tax (IAE) if you set up a company.
Closing costs. It is essential to budget an additional 10% to 15% on top of the purchase price to cover transaction costs. This includes Property Transfer Tax (ITP) or VAT, as well as notary fees and Property Registry filing fees.
Documentation. Having all the legal documentation prepared is one of the most important aspects of this business. Therefore, you must have deeds, energy efficiency certificates, and tax receipts such as property tax (IBI). Remember that the Energy Efficiency Certificate is mandatory not only for the sale but also for advertising the property; its absence can lead to administrative fines.
Notary and registry. It is mandatory to present the notarial deeds at the Property Registry to register the change of ownership.

For all these procedures and requirements, it is highly recommended to hire professionals to manage the processing of documents and the payment of taxes. At Firmalex, we offer these services to both self-employed individuals and companies.

Aspects to consider in the business of buying and selling real estate

Before launching your real estate buying and selling business, you should consider the following:

Training and licensing. Find out in detail about local requirements and licenses, and assess whether specialized training in the sector is necessary.
Business plan. Develop a plan that includes goals, marketing strategies, budget, and a timeline with deadlines to be met.
Networking. You need to build relationships with other professionals in the sector, investors, and potential clients.
Market analysis. To succeed you must have in-depth knowledge of how the local real estate market works and its upward or downward trends.
Funding and resources. Make sure you have the necessary financial resources for initial expenses and some savings for times of lower earnings.
Property renovation management:
- Budget. Make a detailed calculation of the repair costs to have a clear and realistic profit.
- Professionals. Look for qualified professionals for the renovation to avoid mistakes and ensure quality in the final result. Ensure the renovation company has Liability Insurance and provides written guarantees.
- Control. Be strict with the project schedule and budget.
Profitability. To make a profit, you need a good strategy.
Commissions. Keep in mind that the most common practice is to charge a percentage of the sale price, which can vary depending on the location and value of the property. In addition to purchase taxes, the seller must pay the Plusvalía Municipal (Municipal Capital Gains Tax), which taxes the increase in the value of the land during the years of ownership.
Long-term investment. As it is real estate, selling a property can take time and the invested capital remains ‘tied up’ in the property until the sale.

As we’ve seen, the real estate business is very profitable if done right. You can become a real estate agent or buy, renovate, and sell properties. To do this, you need to consider the legal and formal requirements, as well as other aspects. If you have any questions, you can contact us.

Further information

This article is part of our service Real Estate Lawyer in Spain. Visit this section where you will find all the useful information on this topic, including a complete guide on How to buy a house in Spain.

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