Renting a Spanish property to holiday makers can be a lucrative investment option, especially now whilst property prices are yet to reach their peak. In 2006 8.97% of property sales in Spain were to foreign buyers, this figure now stands at 13.25%, according to the Spanish Registrars Association. Foreign buyers are taking advantage of the fact that property prices have remained under pre-crisis values so are able to purchase a lot more property for their money, meaning higher rental yields in return.
Many international buyers are searching for Spanish properties in popular coastal areas, where tourism is high, to guarantee a regular rental income over the summer period; tourism in Spain reached 75 million in 2016, 10% more than 2015, and Andalucia registered the largest growth in tourist numbers.
Once you have chosen your desired location it is important to consider how long the holiday season will be, this can impact any potential yearly rental income. Louise Reynolds of Property Venture tells ‘A Place in the Sun’:
“If you are serious about generating income, you should choose the Costa Blanca, which has 300 days of sunshine a year, or the Costa del Sol, which has around 320 days of sunshine and lots of golf courses, which extends the holiday season for renters from February through to November”.
All year-round destinations “that have it all – bars, restaurants, cultural venues, nightclubs, shopping and beaches” are factors buyers need to consider, says Shirley Rhodes, head of rentals for Lucas Fox estate agency.
Apartments are a popular choice for buyers investing in a holiday home in Spain. They are manageable; the owner does not have to worry about maintaining outside space such as a garden and are often viewed as being more secure, surrounded by neighbours who can keep an eye on the property or notify the owner if any issues arise whilst the property is not in use. Apartments are often part of a community, with many having onsite facilities such as swimming pools, a gym, wifi access, restaurant and bars, all popular requirements for the modern traveller.
If you choose to buy a property in a remote location you might want to consider using a property rental agent. They can advertise your property for rent, have a spare set of keys in case of emergencies or let holiday makers into your property.
Tim Swannie of Home Hunts told ‘A Place in the Sun’: “We always recommend you speak to a reputable agency. Websites can work well, but it pays to have a professional rental agency to manage the property. They will advise on insurance, vet tenants, arrange changeovers and let you know of any specific local rules.” These types of companies can come at a cost though.
Talk to local agents and search the area to see who is holidaying there, and then plan how you will advertise your property. Will you use social media to target foreigners, newspaper advertising or large property portals?
If using property portals such as HomeAway or Owners Direct you can manage the bookings yourself, although the companies often work on commission or require a monthly/yearly fee.
Ensure your property is registered and legal. Andalucia is the latest region to introduce holiday rental licences; your holiday home must now have an occupational license and adhere to technical conditions and quality requirements outlined by the Andalucian government. If not adhered to the owner can be faced with a large fine. Over 9,000 licences have already been issued across Malaga and the Costa del Sol, with a further 20,000 pending.
Once you have bought your property it is important you are aware of any administrative procedure that needs to be completed, such as home insurance and completing tax returns.
“You can offset mortgage interest costs and expenses as an allowable expense in the UK and Spain. You will, of course, need to document income and expenditure, as well as providing proof, by means of an HMRC certificate of tax residency in the UK and submit this to the Spanish tax office,” says Reynolds of Property Venture.
The Spanish tax man has sweetened the rental package recently by introducing a reduction of 50% in rental income for tax purposes. However, this unfortunately applies only to official residents on Spain. It is designed to stimulate the rental market. Resident landlords can deduct almost every expense imaginable from their rental income, meaning that most landlords will pay little or nothing in income tax.
Non-residents are allowed no deductions and must declare their rental income on a special form 210.
Identification of the landlord
Tenants who make tax declarations in Spain are now required to list their landlord`s name and tax number on their income tax declaration along with the Catastral reference of the property they rent. Although many owners rent out their flats and do not declare the income, this requirement to identify the landlord has already produced tens of thousands of new tax declarations in its first years.
Important! Tax on rental contracts
Unfortunately, a large proportion of owners who let their Spanish property, seem blissfully unaware that they are subject to Spanish Income Tax on their rental income. This applies to both residents and non-residents.
For a consultation on the legal & tax implications of renting your Spanish property CLICK HERE or call 952 833 169
Main article source: aplaceinthesun.com