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Properties Spain The ultimate guide to BUYING BARGAIN SPANISH PROPERTY

Viva España

We test drive Turkey, Bulgaria, Cape Verde & Spain!

How to analyse a property deal

Non Completions

-A no deposit purchase opportunity Buy direct &

Save a fortune

Magazine

PLUS Five top

Golf courses in Andalucia

Shopping

in Puerto Banús

Come taste the wine

Make €146.300

before the month end

Homes • Lifestyle • Food • Wine • Golf • Property


Introduction Buying a property is normally the most expensive purchase a person makes in their life time. Yet it seems that it is a decision many people take too lightly, often not spending enough time or consideration on their purchase. In fact, research has shown that most people only spend between 30 to 60 minutes looking at a property before parting with thousands of pounds of their hard earned cash. This situation is taken to new extremes when we consider off-plan purchasing, where many people agree to spend thousands of pounds based on a rough artist impression, a floor plan and glossy brochure. It’s no surprise then that it can go horribly wrong. This guide is designed to help you though the maze of Spanish property purchasing, with the aim of how to spot a bargain, or to be blunt about it how to benefit from someone else’s mistakes and to ensure you don’t make the same ones. Furthermore, the guide has a whole section on the history of international property investment which will give you the inside track on how it began, why it went wrong and how to avoid the same pitfalls as countless thousands before. This is not for the faint hearted or for those that have already fallen…



© Bargain Properties Spain 2009. www.bargainpropertiesspain.com

Tel: 952 88 00 66


Contents Why Spain?

4

Set your objectives

5

Old style investment objectives

6-7

Off-plan investing

8-9

Modern property investment strategies

10-11

Non completions, a buying opportunity

12-13

Budget

14

Location, location, location

15

Investment analysis

16-17

How to analyse a deal

18-19

Finance

20-21

Currency exchange The history of international property investment and where it all went wrong So where is the future?

22 23-24 25

The five ‘must play’ golf courses

26-27

Come and taste the wine

28-29

Tapas from Spain

30-31

Shopping in Puerto Banús

32

Contact

33

© Bargain Properties Spain 2009. www.bargainpropertiesspain.com

Tel: 952 88 00 66




Why Spain? It is predicted that about a quarter of a million Brits will move abroad this year bringing the figure up to about 1.5 million. By the year 2014 this figure is expected to be in the region of 3.2 million. In Spain alone – the most popular overseas purchase destination - more than 800,000 Britons now own property. Spain was the original international holiday destination for British travellers. From the start of the package holiday in the sixties it has grown into the largest destination for holiday makers from the UK with over 40 million visitors per year. This is supported by a vast number of flights allowing access to Southern Spain from almost any UK International airport - Heathrow or Bournemouth - you can get to Spain quickly and easily any day of the year, whether it’s for a few weeks, the weekend or even a day trip! The stunningly beautiful coastal regions, such as the Costa del Sol, Costa Almeria and Costa Blanca, are home to a diverse array of established resorts popular with the Spanish, expatriates and tourists alike. However, the coasts are most famous for the miles of sandy beaches with inviting waters and over 300 days of sunshine each year. Southern Spain is characterised by a rich history and natural landscape. The Alhambra in Granada is considered to be one of the new seven wonders of the world; the historic town of Ronda, built on the edge of a sheer 200 plus meter drop, is home to the original art of Spanish bullfighting whilst the stunning mountains and National Parks of Sierra Nevada, are home to Andalucía’s own ski resort. Whether playing golf or polo in Sotogrande, clubbing in Benalmadena or enjoying a drink in the world-famous marina at Puerto Banús, there is something to suit every taste. As the table below shows no other European destination ticks the boxes like Southern Spain. So it should come as no surprise that the Spanish holiday property market is most likely to recover before other international markets.

Spain Compared Comparison between Turkey, Bulgaria, Spain and Cape Verde TURKEY

BULGARIA

SPAIN

CAPE VERDE

EU Member

Affiliated

Joined 01/07

Full

Est. 07/08

Wealth of country (world ranking)

17th

66th

12th

158th

(GDP)

$612b

$71b

$1000b

$3b

Population

70m

7.7m

44m

0.5m

Good

Poor

Very good

Est future price recovery Access



Poor

Summer good, rest of year ok Ok to poor, mostly charter flights Excellent every day of the year at most UK airports

Few direct flights

UK flight time

3.5 hours

3.5 hours

2.5 hours

Over 7 hours via Lisbon

Infrastructure

Cities good, resorts poor

Cities good, resorts poor

Cities good, resorts good

Poor

Tourist Season

Potential 12 months

4 months

12 months

Potential 12 months

Cost of living

Cheap

Cheap

In line with the UK

Cheap

Summers

Very hot

Hot

Very hot

Very hot, wet

Mid Season

Hot

Cool

Hot

Very hot, dry Hot, dry

Winter

Warm

Very cold

Warm

Golf

Very little, good potential

Very little, fair potential

Very high

Little

Beaches

Good

Ok - good

Good - very good

Very good

Int. Tourism

Over 25m tourists p.a.

Few million from western Europe, high levels from Romania

Very high, no one holiday spot. Over 40 million visitors p.a.

Small, too far for short breaks

© Bargain Properties Spain 2009. www.bargainpropertiesspain.com

Tel: 952 88 00 66


Set your Objectives

‘‘

‘‘

It’s a well known fact that the more specific you are with your goals, the easier it will be to achieve them

Which objective describes you best... a holiday dream property that provides warmth, relaxation • Toandown a true home away from home. your property in the UK and find a place in the sun to retire • Toto, sell or to start a new life in your new country of choice. a holiday home which will also be a solid investment and • Togiveown you good capital appreciation over the long term. own a holiday home and get extra monthly cash flow from • Toletting it out to renters when you’re not there. own property overseas for pure investment potential, for • Tocapital and/or monthly cash flow (i.e. buy off-plan and sell once completed or buy-to-let)

© Bargain Properties Spain 2009. www.bargainpropertiesspain.com

Tel: 952 88 00 66




Old Style Investment Objectives Buy-to-let The buy-to-let market has become very popular in the UK over the last five years with the number of people becoming landlords multiplying hugely. This concept of buy-to-let was funded by soft mortgages from lenders, where high loan-to-value mortgages were given with little risk assessment.

The key points to understand with an investment of this type are as follows: i) Financing and running costs v Rental income. It is of the utmost importance that you are aware of the rental debt ratio, i.e. is the rental income greater than the finance costs and running costs, and if so by how much. You should consider potential future changes to the financing mortgage interest rates and the effect it will have on this ratio. Remember, interest rates vary significantly and rents tend to remain stable. For example a 100,000 interest only loan at 5% is 5,000 per annum - Increase this to 6% and your debt cost increases by 1,000. It would be unlikely you could increase the rent to match, even if it happened to be the same month as the rent review! Remember your expenses can change month by month but your rent probably only once a year. Thus movements in interest rates could easily cause costs to exceed the rental income, and give you a negative rental yield.



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3 factors that will affect rental yield: 1. Interest rate changes 2. Exchange rate changes – especially if the loan and the rent are in different currencies! 3. Increasing costs and taxes The key here is to keep any initial surplus and to save it as a cushion for the future. Importantly, if interest rates or exchange rates do change in your favour, then save the difference rather than spend it. It is also important to think long and hard about whether to use any rental surplus to repay the capital sum of any mortgage on the property. This on the face of things seems a good idea due to the interest saving, however money repaid to the capital sum is not easily returned if interest rates move against you and you have a monthly shortfall. Banks do not consider you a good customer if you have not made your monthly interest payment, even if you have already reduced the capital debt significantly. ii). Loan to value ratio. Many ‘buy-to-let’ buyers borrow the maximum on property in the expectation that the property price will increase. This high risk strategy was totally dependant on a continually increasing property market. This strategy is filled with danger; firstly mortgages at this level may not be covered by the rental income and even when using interest only mortgages a small interest rate move could quickly mean negative rental coverage. Furthermore, a downward move in the property market can, and mostly recently has, put properties into negative equity. There are now many properties in negative equity and with monthly rental shortfalls, a double whammy.

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Tel: 952 88 00 66




Off-plan Investing

Buy to Sell (Flipping)

The off-plan phenomena of recent years was based on a simple strategy, property prices will increase over time and an off-plan property is not worth as much as a finished property. Then by using a small deposit these off-plan benefits could be multiplied to provide some amazing returns.

For example; Property valuation finished

100,000 euros (A)

Property price off-plan

80,000 euros (B)

Deposit of 30%

24,000 euros (Bx30%=C)

Build period 24 mths

10% p.a market growth (D)

Property value when finished in 24mths 121,000 euros (AxD=E)



Profit

41,000 euros (E-B= F)

Overall return on Investment

70% (F/C)

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All sounds great

...however there are risks:

1. Strength of final re-sell market. This type of investment only works when there is a strong demand for the finished unit. If not the investor will find he has to complete on the property and the many advantages of this type of investment are lost. 2. Legal issues. Investors need to be sure that it is possible to sell before or at completion. Many contracts do not allow this, and often the taxes and costs involved eat heavily into the profit. 3. Ability of development company to complete project. When buying off-plan an investor is making an investment into the development company not a property. Should the company fail the investor could lose his deposit. It pays to make sure the development company is strong and secure and that suitable guarantees are in place for your deposit.

Important questions that many off-plan investors never ask. How many of the sold units are also sold to resell investors, will you be in competition with these people when you come to sell your unit? Is there an oversupply of units being built? That will mean the market will move from an over demand to over supply situation very quickly at a point in the future, thus future values could well decrease What are the costs to sell before completion? What is the likelihood you will be able to sell in the short window of opportunity before completion? I.e. how long does it normally take to sell a finished property?

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Modern Property Investment Strategies Property investing has had its ups and downs, mainly because people have a habit of buying high and selling low. In these times of recession or downturn cash is king. As prices reach the bottom, now is the time to invest and make sensational gains.

Investment methods...

There are 3 main ways to invest at super low prices 1. Foreclosed stock. This is where the property has already been taken back by the bank due to default on a mortgage or other secured debt. You buy the property directly from the bank, generally at the mortgage debt level, although it may be slightly more to cover arrears and costs. This is generally a straight forward sale. It may even be possible to mortgage the unit at the point of purchase. The advantage of this type of purchase is that it can happen quickly. The main disadvantage is that the property may not be in the best state of repair, although in Spain where this has happened on many new properties the condition is generally good. Most of the defaulting owners are non residents from the UK and generally just give the keys back to the bank. Specialized bank agents have lists of repossessed stock and working with them will give you to access to these bargain properties.

2. Property in the process of being foreclosed. This is a growing market in Spain where it is possible to purchase bad debt from the lender. For example: A property worth 300k, has a mortgage of €120k unpaid for three months. The bank sells you the debt for €120k, plus arrears and expenses, say €135k in total. You pay this in cash, no mortgage. You then foreclose on the property from the owner. This can take up to 12 months. Once repossession has taken place, you can remortgage the property. You can not access the property until the final repossession has taken place. Great for pure investors. This is the most complicated and long winded process but the rewards can be substantial for those willing to wait. Generally, in Spain most of the units are vacant repossessions where the overseas owner has literally just forgotten about it. These properties are generally in tip top condition. Most of the best deals can be had this way, although good deals can be found from already foreclosed stock, the best units are snapped up before the bank completes the full repossession process.

10

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3. Buy from a Developer in Distress. Many developers in Spain have suffered enormously and are now left with units which either clients have failed to complete upon, or they cannot sell quickly enough at the market price. These developers are struggling to pay construction loan finance on their properties and these costs are crippling them. As a result they are willing to let the units go just to clear the debt and maybe make a small gain. They hope that by reducing the level of bank debt to a more manageable amount they can survive the downturn, which could otherwise mean they lose everything. These developers are very motivated sellers, offering great deals to help sell their units. Generally they do not want to market these deals to the public as this could cause further problems with existing purchasers. So these deals are generally only offered via selected channels.

Whichever method used, these deals can be as much as 50% off current market valuation, so they are real bargains. But like all bargains they do not stay around for long. You need to be ready to move and know what you want. As I said before, and it is worth saying again, cash is king and the ability to move quickly will result in the best deals.

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Non completions, a buying opportunity Why this has happened. Investors purchased off-plan stock on the basis it would increase in value and they would be able to sell it prior to completion. The investor entered into a legal contract with the development company to buy the unit, nothing else. The belief they would be able to sell on and make a profit had nothing to do with the legal purchase. Due to the reasons covered elsewhere in the magazine resale never happened and the investors were requested to complete, many did, but a huge amount did not. By failing to complete they breached a legal contract which is valid throughout the EU. Many of these investors now realise that they made a bad investment are trying all sorts of ways to wriggle out of the purchase contract; such as building was delayed, the exchange rate had gone down, cannot get a mortgage etc etc. With the possible exception of extreme delay none of these excuses are relevant to the investors legal requirement to complete.

What this means to the:Development company. Due to the failure of investors to complete the development companyies have lost significant income (it’s the final completion payment that is most significant to the development company the initial deposit long since spent on sales and marketing costs, construction and running costs). This has led to further issues including the inability to pay interest on construction mortgages, which would have been repaid if the off-plan purchasers had completed. It also led to development companies becoming liable to pay community fees on the finished but non completed units. The development company would also need to spend additional money on sales and marketing to resell the non completed finished units. In a nutshell the business plan of the development company was destroyed, income dropped and costs exploded. This is the simple reason why so many developers have gone to the wall. This has left partly completed developments, with only a few ‘lived in’ units and in some case developments have started to resemble deserted ghost towns. Off-plan Investor. The off-plan non completing investor has also suffered, in many cases losing the original deposit. However the situation may get worse as many developers, or the banks that have now taken control, are investigating suing the off-plan investor in the UK for non completion on the legal purchase contract. This will not only mean the investor has lost their deposit but may mean they will be forced to complete or face losing UK assets i.e. their principle residence. This will make them very motivated to find a solution, such as passing over their purchase contract for nothing to someone willing to complete!

12

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The Opportunity. To a cunning investor now provides an excellent time to buy. Many of these distressed non completed properties can be discounted by the original paid deposit and in many cases even a further discount, via the development company or the original distressed off-plan investor. In many cases this could mean the new buyer paying nothing as the original off-plan investors deposit can be used as the mortgage deposit. Over the next three to five years the properties will be sold, people will move in and start to use them as holiday homes or permanent residences and the developments will look like the luxury resorts that were first envisaged. The people that will benefit will be the investors and end users who can see what the future holds and enter the market now when there are some great opportunities. It is the people that buy low and sell high that always make money.

EXAMPLE Retail off-plan sold price

€418,000.

Original clients deposit 30%

€125,400

Further discount 5%

€20,900

Net purchase price

€271,700

A saving of

146,300

This is an example based on a known development of two bed apartments with direct access to the beach on the Costa del Sol

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Tel: 952 88 00 66

13


Budget After you decide upon your objective, it’s very important to take a long hard look at your budget. There is nothing worse than spending time and effort in researching areas and opportunities that are not achievable. No matter how excited or interested in a particular area you are, you must treat a property purchase with extreme care. Spending thousands of pounds is a huge decision and you need to understand your exact threshold. Without a firm handle on your available funds, you may fall into the trap of getting emotional and taking on something that you can’t realistically pay for. Many purchasers have failed to calculate all the costs and prior to getting their property, they run out of funds and have to make some very difficult decisions. Once you understand your budget, you can actually arrange your finance, such as mortgage options along with currency exchange and transfer details, before you visit your country of choice. This will put you in a solid position to negotiate a good deal. If you’re interested in talking to reputable mortgage companies then we can point you in the right direction and introduce you to either Spanish Banks or household name UK Banks operating in Spain.

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Location, location, location Without picking an area, it’s easy to fall into a situation where you have too many opportunities and too many decisions to consider. If you’re serious about buying soon, consider your objective and then analyse the various areas on the coast and inland to see which one appears to meet your requirements. For example, if your objective is to buy for pure investment, you’ll want to research the various hot spots and then narrow in on a particular area that is projected to achieve high rental yields and/ or capital appreciation. Once you’ve narrowed your location down, you can then get to work. Otherwise, if you choose the scatter-gun approach and go in blazing all over the place, you might end up wasting quite a bit of time. That’s why it makes sense to use the services of a professional real estate company who are totally familiar with the area of your choice. And if you’re looking to buy your dream home simply create a matrix of all the things you want. Be specific and once you have your requirements, tick off all the locations and then the properties that meet those requirements and keep narrowing your options down until you come up with your potential target.

Tip: Simply create a matrix of all the things you want and be specific. For example, how many beds do you want, how far away from the beach, roads and shops do you want to be? Do you want a garden or a patio? Once you have your requirements, tick off all the areas that have what you’re looking for and keep narrowing your options down until you come up with your top potential target area! And of course, ask people to help you determine the best area for your objectives, budget and requirements!

© Bargain Properties Spain 2009. www.bargainpropertiesspain.com

Tel: 952 88 00 66

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Investment Analysis

Key Factors to Analyse Price per square meter. Always ensure you know the price per square metre of the enclosed living space to compare different properties. Many agents and developers try to make a property sound larger, or the price per square metre lower, by using built space which includes walls! Others even include a percentage of community space, i.e. hallways and reception areas! Its always worth checking as supposedly cheap property can actually be dearer by price per square metre then a more expensive larger property. Remember mortgage valuation is based on living area and a percentage of outside space for example covered terraces are generally valued at 50% of the internal price per square metre. Interest rates This will tell you how much it’s going to cost you to borrow. The cheaper money is to borrow, the better off your return will be. Buying costs In Spain buying costs run at around 10 to 14% depending on mortgage costs. As a guide the costs to buying are:

• IVA (VAT) 7%

• Legal fees 1 to 2%

• Stamp duty and notary fees approx 2%

• Mortgage and valuation fees 1 to 3%

Selling costs It is important to be aware of the costs of selling before you buy as this will also impact on your profit. Selling agents fees 5 to 7% Capital gains tax is payable against UK income although Spain does have a withholding taxation of 3% which can be offset. It worth noting that some countries promote zero capital gains tax, this is only applicable to residents of that country, any capital gain made by a UK resident anywhere in the world is chargeable to capital gains under UK rules regardless of the tax charge ( or non tax charge) in the country the property is owned.

16

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Tel: 952 88 00 66


Financing/Refinancing In some countries you cannot get a mortgage. Others you can get an 85% mortgage for 30 years with interest rates at under 4%. Clearly your budget, income and available cash are key to whether or not you can finance a property. In Spain it is usual to get a 70% advance as a minimum but it may be possible to get more. Taxes You should investigate not only purchase and sales tax costs but also annual taxes which can also eat into your profits. If you are intending to rent the property you should also investigate potential taxation on the rental income and what allowances are offsetable against this income. In Spain the tax office ( the Hacienda) is very strict on the format of receipts for income tax deductions. You should discuss this with a Spanish accountant. Accessibility If you’re going to rent to tourists, you’ll need to be within one hour of an airport. If you’re going to rent to a local market, you’ll want to consider public transport. A nice villa out in the sticks might be cheap to buy but getting renters could prove impossible. Political situation Is the country politically unstable or is it economically weak, does it have developed infrastructure such as roads, hospitals, public transport etc ? If not, what the heck are you thinking? Is the country safe to invest in? Check with the British Consulate to get peace of mind. Legal issues Some countries will not let you take money out of the country. Others have a bad land registration system, or sometimes none at all...and so it’s uncertain as to who actually owns the land. It’s imperative to research these factors beforehand. Economic/Employment If employment is rising that is an excellent sign. Check out the trends of the economy...is everything going in the right direction? Another good indicator that things are going well is if the number of tourists visiting is on the rise.

© Bargain Properties Spain 2009. www.bargainpropertiesspain.com

Tel: 952 88 00 66

17


How to Analyse a Deal

Demand This is paramount. It makes no sense to buy a property that is not in demand by renters or future buyers. To research demand, ask letting agencies what is most desired in the locations of your potential purchase. As a test, you could even put an advert in the local paper to judge the response you get. Financials Does the deal make sense? Will the rent cover the mortgage – will you get an acceptable cash flow? What are the maintenance and the running costs? What are the forecasts for capital appreciation? Have you considered all fees, taxes and add-on costs? Seller/Developer Is the seller or developer reputable? This is especially important for investors. Many developers in various countries deliver properties up to two years late. In all that time that you may have budgeted on a rental return, you could be making nothing. Furthermore, just as in the UK, there are bad builders everywhere. When investing you’re not only risking a loss of time and income with a bad builder but you’re also risking the loss of all your funds invested. Importantly, are they covered by insurance if they go bust? Location In some countries you must be within an hour’s journey from the airport, five minutes from a beach, have a pool and be near amenities to get a maximum rental yield – or any at all! If you’re going to buy-to-sell, you’ll want to buy in a location that appeals most to your target market (i.e. future buyers). Avoid properties under a flight path, on a busy road, next to a rubbish dump, etc.

Risk Not only do you want a great return, but you also want to sleep at night. In the world of investment the higher the risk, the greater the return. Buyer beware! There is no secret formula for what will make you feel comfortable other than your ability to research key indicators until you are happy with the level of risk. Equity It is often possible to purchase a property that already has equity in it. You can do this by buying at a discounted price. Many developers/agents will work out deals where, if you buy more than one property, they’ll give you an overall discount. You’ll have to do your comparables to determine if you are actually getting a discount, but no matter what you do, always try to negotiate a reduction in the price of the property! Research your Target Location by Reading Read at least one book on the country and region of your choice. This will give you a solid foundation to ensure you know the basics and, provided the book is comprehensive, it will cover all the area’s that you need to research and contemplate (i.e. legal, culture, health-care, employment). Tip: While reading, keep a notepad and pen to jot down “Things to Do,” “Questions to Ask,” and “Resources to Use.” As you press forward, this will allow you to easily and effectively do your research.

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Tel: 952 88 00 66


Other things to consider It’s in your best interest to at least learn the basics of the language. Although most foreign people can manage some English, it’s not a good idea to assume everyone understands it. Whether you need repairs, help at the local grocery store (to find your baked beans!), need to consult a local builder or to have the ability to program your phone answering service, understanding and speaking the basics will reduce your stress and that of those around you. Furthermore the locals will respect you for making an effort to learn their language. Start learning as soon as you know you’re going to execute your plans!

Contact a Lawyer As soon as you know which country you are going to be buying in, contact a lawyer – do this before you commit to any property! We can, should you wish, introduce you to a number of very reputable legal firms who speak fluent English. They will review the sale agreement, verify titles and carry out other checks to ensure that you’re protected. They will be responsible for paying any taxes and registering the property with the land registry if this is required in the country of purchase. Charges vary for this service but can be between 1 - 2% of the sale value of the property. In many countries, the buyer’s lawyer is also liable to investigate that the property being bought is free and clear of any charge, lien, mortgage, and especially of estate taxes (viz. land property and inheritance) or municipal taxes, damages to neighboring owners and so forth. This investigation, held by the buyer’ s lawyer, is the guarantee that the Title Deed of Ownership and the relevant certificates issued by the land registry indicate that no third party claims of any kind exist. Contact an Independent Financial Adviser or Accountant This is highly advisable. Depending on your particular circumstances, there may be many ways to save on taxes. Your tax status, whether you take out a mortgage or loan, register the property in your name or not, all these decisions have the potential to reduce or increase the amount of tax you will have to pay. It’s well worth your time and money to seek proper financial advice before going abroad to view property. Things such as deciding on who will actually own the property have a large impact on your financial situation. You’ll have the option of sole or joint ownership, making your children legal owners, buying through a limited company or putting it in a trust. There are pros and cons for each, make a decision on ownership preferably after you’ve digested the advice taken from the relevant expert(s) but before signing any deals. You can seek out a UK based advisor with knowledge of various countries; however I recommend that the best professional to speak to would be one based in the country of purchase as they will be up to speed on the relevant country’s laws.

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Tel: 952 88 00 66

19


Finance Before you get too far, it’s important to understand the costs and finance options available. In this report, I can’t cover all your options, but let me mention a few to get you started. Financing Options, in almost all cases, you’ll need to pay out a deposit. You can get the money for this by using savings, re-mortgaging an existing property or selling a property. Once you have the funds, you may:

a. Pay cash b. Secure a Sterling based mortgage c. Secure a currency mortgage

Consider hiring an accountant as well as a local, English-speaking lawyer and possibly an architect. The accountant will be able to guide you through complicated tax returns and explain the taxation laws to you. Go with your lawyer to carry out a final check of the property before completion. You should check for fixtures and fittings that were included in the price, and any structural damage that might have occurred since your last viewing. If there are any problems, you can ask for a reduction in the price or some other form of compensation. This may slightly delay the signing of the deed. Always, it is highly recommended that you seek specialist advice from independent surveyors, solicitors and currency exchangers before buying any overseas property. When dealing with such large purchases many people fail to take absolute responsibility for their actions. You must keep in mind that the legal system overseas may not be in your favour if troubles strike, so it’s paramount that you hire qualified people who can ensure your financial future.

A - Pay Cash Well, this is quite obvious. If you’re lucky enough to be cash-rich you can pay for your dream property entirely with cash or simply use cash to pay a deposit. However, there are reasons (tax issues) why you might want to get a mortgage even if you don’t need to – seek the advice of an Independent Financial Advisor or Overseas Mortgage Broker.

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B - Sterling based mortgage Many UK lenders now offer international loans based in sterling, some may also offer currency based loans ( outlined in section c). The advantages of these types of loans are that you may be able to organise the loan via your current lender with whom you may have a good relationship, some people find it easier to deal with their financial affairs in the UK rather then overseas. Also, having the mortgage in sterling means that you do not have currency exchange risks with the repayments. However, should you have a loan and the value of the currency where you own the property falls you could find the property moves into negative equity even if the property value remains the same, especially with an interest only loan. For example, a €100,000 house with an 80% loan taken out in sterling with the current exchange rate of 1.1€ to the £1 gives a loan of £72,727. If the euro were then to weaken back to historic rates of 1.45€ to the £1 then the property value in sterling (equivalent sterling value) would be only £68,965 - less than the mortgage value, so the property would be in negative equity even though the price had not changed! Note. Many people take out a remortgage or second charges against their principle home to fund all or part of an overseas purchase, the same principle above still applies. C - Currency mortgage A mortgage based in the currency of the country where you purchase the property is known as a currency mortgage. The advantage of these types of mortgages are that they are generally more readily available in the country of purchase than a Sterling mortgage which will need to be organised back in the UK. Generally, the overseas lender will be more willing to lend a higher loan to value (LTV) as they are more familiar with their local market.

The main disadvantage is movements in currency exchange rates, this has been a major issue recently as the euro has strengthened against sterling with current rates only 1.1. € to the £1 where as a year ago the rate was some 1.45€ to the £1. This means that someone paying a mortgage of 1,000 pm would have seen the amount of sterling transferred to service the loan increase from £689 to £909 – over 30% more. This exchange rate risk can be offset by advance purchasing fixed exchange rates for a period of time, specialist currency brokers can help provide this service. If the property is rented in the currency of the loan and this money is used to pay the mortgage changes will have no impact. However, if the tenants are also sterling based and need to transfer to the Euro to rent the property you may find a reduction in overall rentals. Overall Generally it is better to have the loan and property in the same currency and then protect the payments from exchange rate fluctuations rather then the property and loan in different currencies, as it is almost impossible to protect a negative movement in the sterling equivalent property value due to currency movements

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Currency Exchange

Getting the right exchange advice can be the difference between

In most instances you will have a set exchange rate in mind

saving or losing loads of money. Below is a brief explanation

when you determine the cost of the property that you want to

along with a case study so that you clearly understand what

buy. Generally, buyers find a property, get the current exchange

could happen if you get your currency strategy wrong...don’t

rate and base their decision to buy at the price based on that

neglect this important factor in the buying process!

day’s currency exchange rate. If you’re very lucky, on the day you actually send your money to Greece for example, you may

When buying an overseas property, you’ll eventually have to

achieve your budgeted rate, or the rate you had in mind. To

pay a deposit, staged payments and/or the full purchase price.

do that you would need to be very lucky though. Unlike most

During this process, you’ll be required to convert your British

buyers don’t leave your currency purchases to the last minute

Pounds to the currency of the country you’re buying in. Since

and leave yourself at the mercy of whatever the rate is at that

the exchange process is simply one tiny aspect of the entire

time.

transaction, many buyers fail to give it the attention it deserves and make a fundamental mistake.

Exchange rates do fluctuate, much more than people realise, and the art is to time your purchases so that your budgeted

Most buyers understand that the price of currency fluctuates

exchange rate is achieved. But do you have the time to do

second by second as it gets traded on the currency market floor,

this? That’s where working in tandem with the right currency

and they also realise that banks add on a 2-5% profit margin when

specialist can be so beneficial. If you tell the specialist what your

selling the currency to the end-user – you. However, what many

budgeted rate is and details of the payment schedule, they will

buyers don’t realise is that there are ways to purchase currency

have the time (and inclination) to try and achieve the budgeted

at a far more competitive and much better rate, by buying at

rate for you.

the right time. “To save £1,000’s on your currency exchange and transfer charges call a Currency Exchange Specialist, rather than using your high street bank!”

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The history of International Property Investment

and where it all went wrong

International property investment for the masses started in Southern Spain, in two main areas Benidorm to Torrevieja (Costa Blanca) and Torremolinos to Marbella (Costa del Sol). Why? The answer is simple - they were by far the largest overseas holiday destinations for British and Irish holiday makers and therefore the perfect location to purchase a holiday home. With the EU ploughing money into these regions, prosperity at home, and a fast developing financial market within Spain - all the ingredients were in place for perfect holiday homes, except one - Good Quality Property. The property available was old and not of a standard that was in demand, so new property had to be built. As the demand increased, the supply could not react as fast so the prices increased. Early purchasers found that people were queuing up for their finished property and demand was booming. It didn’t take long for people to realise and start to purchase off-plan stock, with no intention of owning it, but knowing there was a huge end user demand for finished stock. Local farmers, national building companies and international developers could also see this demand. The local governments could see nothing but money flowing in officially and in many cases unofficially, from building licences, taxes, etc. So supply exploded, or rather slowly exploded as building a development is a long winded process. But the demand continued to grow. At some point, no one knows when, demand changed from wanting a holiday home to wanting an off-plan investment. This was when greed took over and the bubble began. At this time there was little control (or even concern) over building in relation to end user demand. Companies continued to build and soon the total supply of property was well beyond expected end user demand. But prices kept increasing and people kept buying - Why? At this time the supply of good quality finished property was still low but there was not a natural market place i.e. unlimited buyers and unlimited sellers creating a market price. There were only a limited number of suppliers, the development companies. These development companies controlled the prices.

Continued on next page...

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Continued from previous page... Buyers are buying to sell on before completion, no longer thinking about a holiday home for themselves. Real estate agents (for want of a better word) are pushing various investment schemes, like buy three sell two and keep one for nothing because the prices are rising so quickly. The developers kept increasing the prices; the more they increased them the more people wanted to buy (as they thought they were making profit) and the higher the prices the more profit the developers thought they were going to make. A classic bubble. A classic bubble is like the dot com bubble, people bought on the expectation that it would continue going up. The more they bought the higher it went for no other reason than the fact that people kept buying. Underlying fundamentals were forgotten about; it was just a frenzy of greed. People were buying off-plan to re-sell before completion with no thought of who would actually want to buy the unit from them. This situation was even worse in the new markets, such as the Black Sea coast in Bulgaria, Morocco and Cape Verde. In some instances whole developments were purchased by investors, and at no point did anyone ask the question - Who actually wants to come here on holiday so much they will buy a holiday home here? It’s one thing going somewhere on holiday but it’s a whole different thing to want to go somewhere so much you want to own a property there. Investors and developers alike thought that an investor buying a unit actually meant the unit was sold. Big Mistake. An investor buying a unit just means you have a sort of mini developer, thinking they too can make money on property development, by selling on. The developers thought this was real demand so built more, investors saw developments selling out in days (to investors) so bought these new developments. Then the penny dropped when the developments started to come to completion. In the case of Spain, there was some end user demand, but pretty much anyone that had wanted to buy, had already bought (and probably two more properties for investment!!). In the case of other non established regions, no one actual wanted a property for the benefits of having the property. At this time a new market emerged. There were now unlimited suppliers, all the people that had completed on properties they didn’t want and were facing a much reduced demand. So prices plummeted.

These investors were not looking to maximise profit but to minimise loss - a totally different motivation to sell. Many had purchased at low historic prices and were willing to sell at/or near this level. So the artificially increased developer prices were undercut. Developers became tangled up in competition with the investors who had bought early phase units and were now selling them finished and substantially cheaper than the developers were trying to sell their off-plan stock. A crazy parallel market! This is where we are now. Many off-plan investors had agreed to purchase a property, but only paid a small deposit. Many were and still are unwilling or unable to complete. This has cause huge problems to the development companies, builders, banks etc. These investors are now trying to off load property at rock bottom prices.

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So where is the future? To see the future you need to look at the fundamentals. Spain, unlike the emerging markets has as strong following of holiday makers (40 million per annum), a strong expat community, good infrastructure, and is highly accessible. Spain could even see an increase in tourism this year as people stop travelling so far abroad for holidays due to increase costs and the recession in the UK. You can be sure they will still want the sun, but for less money, Spain provides this. Prices in Spain are now cheaper than some of the emerging markets. For example property in Cape Verde, where they are thinking of building a golf course or two, and which has little infrastructure and terrible access, is in some places more expensive than Costa del Sol, which has over 50 established golf courses, daily flights from most UK airports and excellent infrastructure. So where would you invest for the future? The answer to the future is simple - Buy in the strongest market and at the lowest price.

The market is Spain and the time is Now! Š Bargain Properties Spain 2009. www.bargainpropertiesspain.com

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The 5 ‘must play’ golf courses

on the Costa del Sol Spain is home to numerous world-class golf courses ranked among the best the world has to offer. A lot of the more prestigious golfing circuits also take place in Spain. Indeed, golfing in Spain may be one of the best golfing experiences one can have in his/her lifetime. Rated as one of the finest golf courses in Europe, the Old Course at the foothills of Sierra Bermeja has hosted a lot of memorable golfing matches. Designed by Dave Thomas in 1990, this golf course demands straight and accurate driving due to its tight and sloping fairways, strategic bunker locations and deceiving water hazards. It remains to be one of the most challenging courses in Spain and provides fair test to golfers with very high golfing standards. Since its opening in 1964, the Real Club de Golf Sotogrande, designed by Robert Trent Jones, has been rated among the 100 best courses in world. Despite having wide fairways, the lakes, fast greens and strong wind conditions make it a real challenge even for the best golfers. One of the newest golf courses is the Almenara Golf Club that opened in 2001. Also designed by Dave Thomas, the golf course is set amidst some of the most beautiful golfing landscapes in Europe and also provides tough challenges for the avid golfer. Golfing professionals and golf writers describe the Valderrama Golf Club as the best in Europe, if not the world due to its marvelous design that calls for careful thought and precision in every shot. Designed in 1974 by Robert Trent Jones, Sr., it once was ranked first in the list of golf courses in all of Europe. It has hosted the Volvo Masters, the PGA European Tour and the Ryder Cup.

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San Roque (Old) The San Roque Club is well known for its very high standards and immaculate grooming. The par 72 course offers spectacular mountain views to the north and occasional glimpses of Gibraltar. This attractively landscaped course is both challenging and fair, and fairways are lined with mature trees. Host of Spanish Open 2005 (European PGA)

La Reserva de Sotogrande Golf Club Cabell Robinson-designed La Reserva de Sotogrande is an excellent 18-hole golf course with the facilities to match including an impressive Clubhouse. The golf course opened in August 2003 and has already made a reputation as one of the best in Spain. It is a long course with wide, undulating fairways and well guarded greens. The greens are often multi-level with slopes and speed to deal with. Great views from many holes, especially the 15th. Tee times are every 12 minutes. Visitors allowed between 11.30 and 13.30h.

San Roque (New) The New Course was opened in 2003 and two designers have come together to create this beautiful course- Perry Dye and Seve Ballesteros. It is a 18 hole and 72 par course which has been host to two prestigious events already: European School Qualifying School, 1-7 Nov 2005 and Spanish Open 2006 (European PGA), 1-7 May 2006

Sotogrande The grand old golf club of Andalucia, Sotogrande has only improved over the years. The course is in great condition and affords a wonderful golfing experience. Sotogrande opened in 1964 and is still voted amongst the top ten courses in Europe. It has well established vegetation with pine, cork oaks, eucalyptus and palm trees. Water hazards play an important role here, affecting holes 12, 13 and 14 and 16, 17 and 18.

Valderrama Valderrama is a 6356 metres par 71 with no hole of less than championship quality but it can be fully enjoyed by players of all handicaps, thanks to the genius of Robert Trent Jones, Senior. Valderrama hosted the first nine editions of the Volvo Masters (1988-1996.) It hosted the Ryder Cup in 1997 and has hosted the first World Golf Championships - American Express Championship in 1999 and the second in 2000. Golf holiday tour operators operating in the area will organise your golf holiday very efficiently and professionally. Their services take care of all your requirements when on a golf holiday in the Marbella area. We suggest you always book your tee times in advance in the peak seasons to avoid disappointment and to avail of discounts. All the golf courses are fully booked through the whole season here; so are the hotels and car hire. Look for companies who offer golf booking, hotel reservations and car hireall three under one roof. All your holiday requirements should be well planned before you arrive for your vacation. It is much more convenient to let one company manage your holiday; they have many package offers for individual as well as group bookings. Confirm all services they cover in their all-inclusive charges. A well-known and established company gives all their clients an insurance coverage and you should choose only such a company. You should not have to end up paying any hidden charges- choose a company that clearly states its charges against services.

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Come and taste the wine Spanish Wines and Regions If you had to summarize Spanish wines in a single word, it would have to be, hands down, value, you simply get much more for your money with Spanish wines as a whole than you do from any other New World or Old World wine producing country. Not only, are Spanish wines able to boast on the value front, but also on the quality, tradition and technology fronts. Spain captures third place, worldwide, for its wine producing capacity. The U.S. imports of Spanish wines have seen a 75% increase in the last five years, and will likely keep gaining steam over the next five years.

Key Wine Regions of Spain Rioja Spanish Wine Region– The Rioja region is certainly the “sweetheart” region of Spanish red wines. There are actually three sub-regions or unique districts that compose the Rioja: the two cooler climates of Rioja Alta and Rioja Alavesa and the balmier region of Rioja Baja. Strategically placed between the Atlantic and the Mediterranean, the Rioja region produces the majority of its acclaimed red wines from the Tempranillo grape in addition to growing and utilizing Garnacha, Mazuelo and Graciano – which are often used for blending with Tempranillo. Viura is the dominant white grape grown in the Rioja region, but keep in mind white wine only accounts for about 10% of Rioja’s total wine production. With both the Cantabria and Demanda mountain ranges adding physical protection and the river Ebro winding through the region providing both moisture and creating various microclimates within the area, this region is truly set up for winemaking success!

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Spain’s Rioja wine classifications are “user friendly” - allowing consumers to easily identify their favorite Spanish wines. Rioja wines are classified by the time they have spent aging in-house and are not released until they are ready to drink. This makes finding a very drinkable, food-friendly wine upon purchase much more likely. The three Rioja red wine classifications, as found on the front or back Spanish wine bottle labels are:

1. Crianza – This is a fresh, fruit-forward youthful red wine that is aged in oak for a minimum of one year and then spends another year aging in the bottle. The Crianza is a well-priced Spanish wine and averages around £10 a bottle. Crianza has a reputation for being a perfect partner when it comes to pairing with food – give it a whirl with novel Spanish commodities like tapas. This is an easy going, everyday wine that will not disappoint and offers good, consistent value year in and year out.

2. Reserva – The Reserva ups the ante a bit from the Crianza both in complexity and in price. Again, Spain’s beloved Tempranillo is the dominant red grape and makes its presence known with commanding cherry flavors. The aging requirements for a Reserva are a minimum of one year in the barrel and another two years aging in either the barrel or bottle. The pricepoint for a Reserva ranges from around £15 to over £35, with super value packed into every pound. Reserva is a very versatile red wine that eagerly complements an assortment of food options. Consider pairing it with grilled dishes, fish, beef, lamb and it’s made for ham (or jamón as they say in Spain).

3. Gran Reserva – The creme de la creme of Spain’s Rioja red wines is the appropriately named, Gran Reserva. These wines require barrel aging for two years and must have an another three years (minimum) of bottle aging before they are released, making them a terrific wine find as they have already enjoyed five years of aging before they may even grace the merchant shelves. The Gran Reserva is not made every year, but enjoys its high status because it is only made in extraordinary vintages. The Gran Reserva boasts both depth and body intrigue without pretence and elegance without breaking the bank, as it starts at around £20 a bottle and rivals many New World reds that are asking triple the price.

Ribera del Duero Spanish Wine Region – This is another major red wine producing region of Spain that continues to gain recognition for its vibrant red wines, made predominately from the Tempranillo grape. The region is situated north of Madrid, but south of Rioja, smack in the middle of northern Spain. With a climate that is marked by intensity and extremes, the grapes have typically had to fight against a myriad of climate conditions to bear a bold bottle of red wine. As a result these reds typically exemplify both intensity and strength - ultimately telling their own unique stories of place and time, year after year.

Penedes Spanish Wine Region – The Penedes wine region is close in proximity to Barcelona on the Mediterranean coastline. This unique region is known for its sparkling wines as well as prominent reds and whites. As far as Cava, or Spanish sparkling wines, go Freixenet and Cordoníu are the big names to know. They both produce great wallet watcher sparklers at around £10 a pop. If you are interested in red and white wines from Spain’s Penedes region, then Torres is a great place to start. They make consistent, well-distributed wines that won’t bust your budget, yet are easy on the palate and continue to be party pleasers.

Rias Baixas Spanish Wine Region (pronounced Ree-ahss By-shass) – This region resides in Spain’s northwestern Galician region. Rias Baixas has become well-known and loved for its rich source of Albarino grapes which translate into very engaging and refreshing white wines. These dry, mediumbodied white wines are beloved for both their acidity and their tropical fruit-forward flavours. The U.S. is currently the leading importer of Spain’s Rias Baixas Albarino wines.

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Tapas from Spain Spain is known for its very diverse culture and this reflects in the Spanish food as well. Spanish food consists of a variety of mouthwatering food items, which lay emphasis on seafood. There are many typical dishes that form a part of Spanish cuisine. Potato dishes, food items that include beans, different types of stews and dishes that include bread are all a common feature out here. Spanish food also varies as per region. Well, you don’t really have to travel all the way to Spain for a taste of different types of Spanish food. These recipes from Spain are bound to let you have the real taste of Spain in your own home. Take a look at some of these recipes from Spain and add more variety to the way you cook.

Stuffed Tomatoes This one is a simple recipe, very handy when preparing a barbeque or a picnic party. Tomatoes here are used as a container for a delicious Spanish stuffing. If you don’t like garlic, you can use plain mayonnaise instead of allioli (typical Spanish garlic mayonnaise). Ingredients

• 8 small tomatoes, or 3 large ones

• 4 hard-boiled eggs, cooled and peeled

• 6 tablespoons allioli or mayonnaise

• Salt and pepper

• One tablespoon parsley, chopped

• One tablespoon white breadcrumbs, if using large tomatoes

Preparation Skin the tomatoes, first by cutting out the core with a sharp knife and making a ‘+’ incision on the other end of the tomato. Then place in a pan of boiling water for 10 seconds, remove and plunge into a bowl of iced or very cold water (this latter step is to stop the tomatoes from cooking and going mushy). Slice the tops off the tomatoes, and just enough of their bases to remove the rounded ends so that they will sit squarely on the plate. Keep the tops if using small tomatoes, but discard those large tomatoes. Remove the seeds and insides, either with a teaspoon or small, sharp knife. Mash the eggs with the allioli -or the mayonnaise, if using- salt, pepper and parsley. Stuff the tomatoes, firmly pressing the filling down. With small tomatoes, replace the lids at a jaunty angle. If keeping for later, brush them with olive oil and black pepper to prevent them from drying out. Cover with cling film and keep. For large tomatoes, the filling must be firm enough to be sliced. If you make your own mayonnaise, thicken it by using more egg yolks. If you use shop-bought mayonnaise or allioli, add white breadcrumbs until the mixture reaches the consistency of mashed potatoes. Season. Fill the tomatoes, pressing down firmly until level. Refrigerate for one hour, then slice with a sharp carving knife into rings. Sprinkle with chopped parsley.

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Spanish Omelette Along with paella, the ubiquitous Spanish omelette - tortilla de patatas - is perhaps one of the best-known Spanish dishes. It is impossible to find a self-respecting tapas bar that does not feature tortilla in its repertoire. As delicious as it is versatile, this Spanish staple lends itself to countless variations according to personal taste. Some cooks mix in mushrooms, beans, spinach, and tomatoes, while others choose to omit the onion and instead cover the tortilla in tomato sauce. Others still would never dream of serving the tortilla without heaping mounds of mayonnaise. Each region, and each tapas bar, will have its own variation of the traditional tortilla. This delicious tapa can be served warm or cold.

• Serves: 4

• Difficulty: Very easy

• Preparation time: 35 minutes

Ingredients

• 1/2 pint of olive oil

• Five medium (40 oz each) baking potatoes, peeled, sliced and lightly sprinkled with salt

• 1/2 yellow onion, chopped

• Three cloves garlic, minced

• Five eggs

• Salt

Preparation Heat the olive oil in a 9-inch frying pan and add the potato slices carefully, because the salt will make the oil splatter. Try to keep the potato slices separated so they will not stick together. Cook, turning occasionally, over medium heat for 5 minutes. Add the onions and garlic and cook until the potatoes are tender. Drain into a colander, leaving about 3 tablespoons of oil in the frying pan. Meanwhile, in a large bowl, whisk the eggs with a pinch of salt. Add the potatoes, and stir to coat with the egg. Add the egg-coated potatoes to the very hot oil in the frying pan, spreading them evenly to completely cover the base of the frying pan. Lower the heat to medium and continue to cook, shaking the pan frequently, until mixture is half set. Use a plate to cover the frying pan and invert the omelette away from the hand holding the plate (so as not to burn your hand with any escaping oil). Add one tablespoon oil to the pan and slide the omelette back into the frying pan on its uncooked side. Cook until completely set. Allow the omelette to cool, and then cut it into wedges. Season it with salt and sprinkle with lemon juice to taste (optional).

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Shopping in Puerto Banús Every year around five million tourists visit Puerto Banús; one walk around the marina will show you why. Stroll along any pier which takes your fancy and you will find some of the biggest and most expensive luxury yachts in the world. Banús people love to dress up and lovers of designer clothes will find that this is THE place to show off your Armani and Versace. The years 2007 and 2008 saw a huge growth in designer shops in Puerto Banús - Valentino, Missoni, Agent Provocateur, Fendi, Salvatore Ferragamo, Jimmy Choo, Bulgari, Gucci, Lanvin, Chopard Jewellery and Tom Ford have all opened in Puerto Banús over the last two years. Local branches of Versace, Armani, Galliano, Moschino, Hermes, Dior and Louise Vuitton are reputed to sell more than their sister shops on Los Angeles’ Rodeo drive.

There are still a couple of the cheap and cheerful shops - but not many. You still have Mango & Zara just behind the port in Marina Banús and Spanish designer Carolina Herrera which was the first shop to open along the side of the port where the huge boats are moored near the famous Sinatra’s bar, since then Max Mara & Cartier have opened there too. In addition to the shopping centres at El Corte Ingles, (Spain’s best department store) and Marina Banús, over 500 shops thrive in and around the port - most of them open until 2am or 3am 32

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Daren Wallbank and Brian Murray hold regular Property Investment seminars. Should you be interested in attending a seminar please register your interest with our seminar co-ordinator Michelle Donnelly.

michelle@bargainpropertiesspain.com

Legal Notice: Disclaimer and Terms of Use Agreement The author and publisher of this report has used their best efforts in preparing it. The author and publisher make no representation or warranties with respect to the accuracy, applicability, fitness, or completeness of the contents of this report. The information contained in this report is strictly for educational purposes. Therefore, if you wish to apply ideas contained in this report, you are taking full responsibility for your actions. The author and publisher disclaim any warranties (expressed or implied), merchantability, or fitness for any particular purpose. The author and publisher shall in no event be held liable to any party for any direct, indirect, punitive, special, incidental or other consequential damages arising directly or indirectly from any use of this report, which is provided “as is�, and without warranties. As always, when it comes to financial matters, the advice of a competent legal, tax, accounting or other professional should be sought.

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