Worked example

Costa del Sol (Andalucía) · New build

Estepona

Net return, cash flow and equity build-up for this Spanish coastal investment. Below is the full calculation, assumptions and all.

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Financing60%

mortgage vs price

Occupancy100%

vs base assumption

Mortgage rate2.5%

per year

Capital growth3.0%

per year

Net return on cash invested

9.30%

What you keep from rent, measured against the cash you put in. Includes the leverage effect of the mortgage.

Cash flow per month

£1,009.76

Net rent per year

£19,381

Purchase and investment

Purchase price£384,615

VAT + stamp duty (IVA + AJD) (11,2%)¹£43,077

Notary (0,75%)£2,885

Land registry (0,75%)£2,885

Legal / gestor (1,5%)£5,769

Total investment£439,231

Mortgage£230,769

Cash invested£208,462

Income³

Season	Nights	Occupancy	Per night	Income
HoogseizoenJul, Aug	62	80%	£233	£11,573
MiddenseizoenApr, May, Jun, Sep	121	68%	£185	£15,190
LaagseizoenJan, Feb, Mar, Oct, Nov, Dec	182	54%	£145	£14,280
Totaal	230 nights booked			£41,043

Costs and charges

Fixed annual costs

Community fees£1,468

Electricity£1,207

Water£129

Maintenance£1,346

IBI (council property tax)£538

Refuse charge£111

Insurance£250

Internet£256

Alarm£513

Subtotal fixed costs£5,818

Variable and financing

Letting management (20% of rent)£8,209

Mortgage interest (avg. 7 yr)£5,160

Tax (after interest relief)²£2,476

Total costs and charges per year£21,663

Return

Net rental income per year£19,381

Gross yield on total investment9.34%

Net yield on total investment5.31%

Gross return on cash invested19.69%

Net return on cash invested9.30%

Mortgage payment p/m (repayment 2.5%)£1,035.27

of which interest (avg. 7 yr)£429.98 p/m

of which capital (avg. 7 yr)£605.29 p/m

Cash flow per month£1,009.76

Notes on the assumptions

1. Purchase tax and associated costs (notary, land registry, legal) are indicative and vary by region and property. Check the current rates with your gestor.
2. Tax is 24% on rent less costs, mortgage interest and depreciation (3% of the purchase price), via Modelo 210 for non-resident landlords. Costs remain deductible for UK owners following case law on free movement of capital. At a loss the tax is nil. To be confirmed by your tax adviser.
3. Rental income is an estimate based on seasonal occupancy. Actual income depends on location, management and market.

Equity over 10 years

Assuming 3.0% annual capital growth, 2.0% rent indexation and sale in year 10. On sale, 5% selling costs and 19% capital gains tax on the profit are deducted (exit tax £9,845). Plusvalía municipal is not included.

Total return

123.5%

on cash invested, 10 yr

Annualised return (IRR)

10.1%

incl. sale

Equity at end

£361,629

value less debt

Cumulative cash flow

£139,982

over 10 years

Built through repayment: £75,507Through capital growth: £132,276

Year	Property value	Debt	Equity	Cash flow
1	£396,154	£224,038	£172,115	£12,245
2	£408,038	£217,137	£190,901	£12,615
3	£420,280	£210,062	£210,218	£12,992
4	£432,888	£202,808	£230,080	£13,376
5	£445,875	£195,370	£250,505	£13,768
6	£459,251	£187,744	£271,507	£14,167
7	£473,028	£179,925	£293,104	£14,574
8	£487,219	£171,908	£315,311	£14,989
9	£501,836	£163,689	£338,147	£15,412
10	£516,891	£155,262	£361,629	£15,844

This calculation is an indication, not tax, legal or financial advice. Purchase tax, interest, rental income, capital growth and tax may differ. Always consult a qualified adviser.

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