One of the downsides of investing in real estate is the lack of liquidity. When you buy a property, you have to wait for some time so that the price of the market raises. Once this happens, you may decide it is time to sell the property, but now you need a buyer. While in the stock market finding a buyer can take a matter of seconds, in real estate it could take weeks or even months.
One alternative to investing in Spanish real estate, and with much more liquidity, is buying SOCIMIS stocks in the stock market.
A SOCIMI is a Real Estate Investment Trust. In Spanish, the full name is Sociedades Cotizadas Anónimas de Inversión en el Mercado Inmobiliario. In Spain, these entities are regulated by the Ley 11/2009, de 26 de octubre.
One of the advantage of SOCIMIS is that they have fiscal exemptions. They do not have to pay the corporation tax and have a 95% discount on the property transmissions tax.
The law also states that their main activity should be renting their properties. Therefore, 80% of their profits have to come from renting activities, and they should use 80% of their property portfolio on that activity. In order to keep the percentages, they have to hold a property 3 years before selling it. However, with the other 20% they can do more speculative transactions in shorter periods.
They also must, by law, make dividend payments for the 80% of their profits from renting properties and 50% of the profits from selling properties.
There are SOCIMIC in MAB (Mercado Alternativo Bursátil) market, but it does not have the same liquidity and transparency rules as the stock market. Thus, for the general public, getting the information to decide where to invest seems easier if the investor focus on the ones that are in the stock market, not in the MAB.
As a result, when you do not have enough cash to buy your own property, buying some SOCIMI stocks could be a good alternative. Saying that, always keep in mind that since they are in the stock market, they behave similarly to any other stock and you may need to conduct fundamental and technical analysis before deciding to invest.
The biggest SOCIMIs in Spain are Merlin Properties, Colonial, and Hispania – which has been take over by the fund Blackstone and will be removed from the stock market by them – and Lar España.
Please keep in mind this is not a recommendation to invest. This post only intends to show you alternatives to investing in real estate if you are already considering doing so. If you do not know what to do, we advise that you ask your investment advisor.