Dear friends,
The last couple months we have noticed that the same two questions kept coming up from different investors. The first one is, what happens if house prices fall in 2023 and how can I protect my investment? The second one is, how can I get access to the Spanish Real Estate market faster and without putting up a lot of capital? Although it would be easy to dismiss these questions as too naïve or too risk-averse, we listened.
These are legitimate concerns from investors who understand the benefits of investment in Real Estate, but at the same time they have constraints in how much capital they dispose and how much risk they can tolerate. What can we offer to them? How can we simulate buying an asset but not actually paying for it? How can we capture above average returns but without taking risk? We looked at the corporate world for inspiration and then the idea hit us.
If you can’t buy it, lease it! The idea is very simple. The investors rent a property, which is decent but not great condition, in an area that has a lot of demand. The key is to sign a long-term tenancy contract (between 5 to 10 years), with the option to sublet. The investors then pay for a light-touch refurbishment (not more than €5-€10K), and they can even ask the owner to make a contribution to that cost. Then the property is leased out to tenants on short- and mid-term basis by Artemis Assets, in order to maximize the rental income.
Voila! The difference between the long-term lease (rental cost) and the short- and mid-term rentals (rental income) goes in the pocket of the investor. Usually the refurbishment is paid for within 4-8 months, which means that the investors can enjoy a steady stream of rental income for the rest of their lease. If it sounds familiar, it’s because it’s similar to the WeWork business model. It’s WeWork for your savings.
Let’s have a look at the example of a property we are evaluating right now. An investor plans to take a long-term lease for 10 years at €1500 per month, to perform an one-off refurbishment of €10000 (which is paid 50% by the owner), and achieve rental income if €3000 per month. The investor gets back the invested capital in 4 months, thereafter enjoys hassle-free rental income with no capital tied up, and achieves an astronomical Return On Investment.
If you like what you just read and you want to invest without spending the upfront capital, reach out to Artemis Assets and we will show you the solution.
Until the next one!
