An annual budget before buying
The purchase price is only one part of the cost of owning an estate. Every year there are fixed and variable costs that should be budgeted before signing, above all if the estate generates no income. To estimate them realistically, the best thing is to ask the seller for the receipts and invoices of the last two or three years and complete them with quotes from professionals in the area. There is no single figure that works for everyone, because each estate is different: a hundred-hectare dehesa with no house and a two-hectare plot with a home and a pool have nothing in common.
IBI on rural property
The Property Tax (IBI, Impuesto sobre Bienes Inmuebles) is a municipal, periodic tax levied on the ownership of properties, whether rural, urban or of special characteristics. Its basis is the cadastral value, which appears in the cadastre, and its administration is split between the Directorate General of the Cadastre, which deals with the cadastral side, and the town councils, which deal with tax management. The cadastral owner pays. In the province of Cáceres, for example, the provincial collection body publishes frequently asked questions on who pays the tax and what it taxes. To know how much you will pay, ask for the estate's latest IBI receipt and check the cadastral value on the Cadastre's electronic office.
Other local taxes and fees
- Waste collection fee and other services, depending on the municipality and whether the estate has a home.
- Vehicle tax, if you have your own machinery or vehicles.
- Licence fees, if you carry out works or start an activity.
- Irrigation community dues, if the estate has irrigation rights.
Ask the town council which fees apply to your estate. For the taxes on purchase and sale, read taxes when buying a rural estate and taxes when selling.
Insurance
An estate with a house or buildings needs home or building insurance covering, at least, fire, water damage and civil liability. If there is agricultural or livestock activity, specific insurance exists. Compare coverage and exclusions. Ask whether buildings without a licence or not registered are covered. Ask also about forest fire cover and about liability to third parties if someone is hurt on your estate. For agricultural activity there is also a system of agricultural insurance that is explained in another guide.
Utilities
- Electricity: contracted power, fixed charge and consumption, or your own solar system.
- Water: municipal mains, a well with its maintenance and pump, or tanks.
- Fuels: firewood, gas or diesel for heating and machinery.
- Internet and telephony: a rural connection can cost more than in a city.
Maintenance
Maintenance is the most variable cost. It includes brush clearing, repair of fences and tracks, roofs, painting, gardening and repairs to the house. A well-kept estate spends a predictable amount each year; a neglected one may require a large investment at the start. The guide to the annual maintenance calendar of an estate helps you plan it month by month.
If the estate has activity
An agricultural or livestock estate adds operating costs: seeds, fertilisers, plant protection products, feed, vet, machinery, labour, dues and administrative agent. It also has income, which depends on the campaign and the market. Keep a separate account for the activity and do not mix it with the costs of the home, so you know what each thing really yields. The guide to profitability of a rural estate gives you a prudent method.
Administrative agent and adviser
If the estate has activity or agricultural subsidies, an agricultural administrative agent (gestorÃa) helps you with records, filings and procedures. If it is a recreational estate, an occasional adviser for taxes and deeds may be enough. Ask for a written quote and ask what each service includes.
Unforeseen costs
Set aside an amount for unforeseen costs: a breakdown of the well pump, a burst pipe, a storm that damages a roof or a fence. It is advisable not to spend the whole annual budget on planned items and to keep a cushion.
Inheritance and shared ownership
If the estate belongs to several people or is part of an inheritance, the costs are shared according to ownership. It is advisable to put in writing who pays what and who decides. For more information, read inheriting a rural estate in Extremadura: taxes and deadlines.
How to gather real data
- Ask for the IBI and fee receipts of recent years.
- Ask for utility and insurance invoices.
- Ask what works and repairs were done and how much they cost.
- Check the cadastral value and its evolution with the nota simple and the cadastre.
- Ask for quotes for pending repairs.
- Add everything up and add a margin for unforeseen costs.
How to prepare your annual budget
Before buying, ask the seller for the receipts of recent years for each fixed cost of the estate and note which are mandatory and which depend on you. Then add the items on a sheet with three columns: costs paid every year, costs paid every few years and costs that only arise if something happens. Review that sheet with your agent or adviser before signing, and update it each year with the real receipts. That way you will know whether the estate really fits your budget and not only the purchase price.
Conclusion
The cost of owning an estate does not end with the purchase price. With a realistic budget, based on data from the property itself, you will avoid surprises and be able to decide whether it suits you. Do not depend on generic figures: ask for the papers.