SOCIMIs and Alternate Spanish Real Estate Investments

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Up until 2009 the only way to invest in Spanish Real Estate was by actually owning property. Not everyone is crazy about the idea of buying, renting and managing properties, especially if you live abroad and your investment is in Spain. For large investors owning property in distant locations is not an issue but for small investors there is an element of risk if you don’t have a reliable management company to take care of your investment.

Fortunately for the smaller investor, new opportunities have popped up. Investing in Real Estate Investment Trusts has become standard in the United States for those who search for the opportunity to own Real Estate without having to manage it.

A REIT is a company that owns commercial real estate including but not limited to offices, apartment buildings, warehouses, hotels, shopping centers and hospitals. REITS are bought and sold on the stock market. The high yields of REITS are attractive to investors, often times paying dividends up to 10%, although they are also taxed at a higher rate than other portfolio income.

Investing in SOCIMIs

The REIT model arrived to Spain under the name Sociedades Anónimas Cotizadas de Inversión en el Mercado Inmobiliario (“SOCIMI”) and in 2012 the law was changed to make SOCIMIs no longer subject to taxation to make them as attractive as REITs.

SOCIMI’s must fulfill the following regulations:

  • Minimum share capital of 5 million euros
  • Must own at least one real estate property
  • Must trade publicly on the Spanish stock market
  • Must earn at least 80% from leases or on dividends from subsidiary SOCIMIs
  • Must distribute 80% of overall earnings
  • Property assets must be leased for a minimum of 3 years

As of 2017 there are dozens of SOCIMIs in Spain to choose from. One well know SOCIMI is Merlin. Merlin owns over 1150 assets with a gross asset value of 10,027,000,000 euros and a gross rental income of 463,000,000 euros. Merlin is currently paying a dividend yield of 3.3% which is relatively low as compared to equivalent companies in the US. Nevertheless, companies like Merlin can be a way in to investing in the improving real estate market and overall economy in Spain.

Crowdfunding Real Estate Investment in Spain

Another alternate to traditional real estate investing is the crowdfunding platform. With crowdfunding real estate investments in Spain you first choose a platform where they offer a selection of properties. Instead of buying the whole property yourself you invest any amount you can or feel inclined to. The platform gives you all the information available on each investment opportunity with important numbers like price, estimated market value, previous year’s net yield, information on the local market, etc. Your portion of the investment along with all the other investors pay for the property purchase and ownership.

For most of the crowdfunding investment opportunities you receive a monthly yield payment from your investment just as you would as a traditional real estate investor, proportionate to the amount you invested and you can exit at any time, selling your portion of the investment to someone else. The yield on these investments are in the 6-8% range.

The advantages of this type of real estate investment in Spain are clear: accessibility and liquidity. It’s inexpensive to get into the real estate investment and relatively easy to get out. The downside is that you don’t have the benefit of having the renters pay off your asset if you mortgage it as your own investment, so your return is always limited. One very popular crowdfunding real estate platform in Spain is Housers.

With the now recovering, yet still low priced real estate market in Spain these 2 investment alternatives are a great way to put some money into the Spanish market without putting up the same capital or risk as with traditional real estate investments.