Holding costs of an empty property during renovation: what to budget

From the moment the escritura is signed, the owner pays for the property, even if nobody lives there and it is being renovated. The biggest cost here is not the bills but time: the months during which the capital is tied up.

A property costs money even when it stands empty

The regular costs do not depend on whether anyone lives in the property:

• IBI;
• monthly fees to the comunidad de propietarios (owners' association);
• standing charges for the water and electricity connections;
• insurance.

During the works, the building site's own utility bills come on top.

Time is the main cost

The largest hidden costs are not payments but the time the project takes. For every month that the licence or the works are delayed, the investor's capital sits idle, and if the purchase is financed with borrowed money, that is another month of loan interest too. This is why the type of licence and a realistic works schedule have to be settled before the purchase, not after. More in our article on licence types.

A non-resident's tax obligations

If the owner is a non-resident individual, holding an empty property may give rise to an obligation to file an annual return on imputed income. We explain how this works in the article on Modelo 210.

How DNPI builds this into the budget

In a DNPI Capital project budget, holding costs are a separate line that grows with the timeline. That is why a scenario in which the project runs several months over plan is a mandatory part of the sensitivity check. The full budget structure is set out in the article on the full project budget, and scenario analysis in the article on investor risks.