Renting out your Spanish Property
As the holiday capital of Europe, Spain is a boom area for rental returns.
More and more of us are looking abroad to invest in buy-to-let property, and Spain remains as popular as ever.
This turn of events is hardly surprising considering the experience that many people have had with the down turn in the investment markets. PEP’s, ISAs and of course pensions, have all taken a beating over the last 5 years. Investing in buy-to-let makes sense, given that people now see property as one way out of the pension’s crisis that is becoming more and more apparent.
To make sure you get it right hear are a few pointers to help you along the way.
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WHO?
There are a number of letting companies who will take care of everything for you-finding tenants, collecting rent and maintaining the property. Some estate agents and developers also provide this service. Using a furnishing company will save you time and effort. When decorating a flat for letting, choose function over beauty-expect a lot of wear and tear from holidaymakers.
WHERE?
Buying near a golf course will help to ensure year round tenants. “Rental returns will vary according to numerous factors, but predominately its location.” Says Alan Hall, manager of Sunsea Property Management.” An apartment at the Agulia Golf Resort with it facilities and position to the beach will achieve a much higher yield than an apartment in a non-established inland resort.”
WHY?
The Association of Residential Letting Agents (ARLA) has found that the average rental return on a buy to let investment in the UK is down. Prime Central London is suffering in particular at a 5.6% average. It is estimated that if you rent a Spanish property out for eight months of the year you can expect a return of between 6% and 8%.
WHAT?
Two bedroom homes on a development are easy to let, says Michelle Turnbull of Costa Property Investments. “Properties on the Costa Blanca and Costa del Sol are quite easily let out because of their long holiday seasons.” Demand on these costas has been more acute of late as many people are waiting for their own house to be built and want to rent in the area to get to know the location or just to wait to move in.
If you buy a property with its own pool and gardens, then you could find that you will incur high maintenance costs in the form of gardeners, pool cleaners and maintenance men to keep an eye on things. However, a more rural location can provide a high rental yield in the property is a large villa that can support a good-sized or extended family holiday.
Buying in the Northern Costa Blanca and in areas like Mazzron in the Costa Calida area, offer excellent rental opportunities for owners, as these areas do not have a substantial number of Hotels to support the influx of new tourists to these areas. The main rental period for Spain is March till October, with High season rental prices running from June to September.
Your agent should be able to give you advice, as the Spanish offices will have had years of experience in finding the right type of investment property.
HOW?
Advertising your property is important-internet, newspaper, and shop windows, lettings agency. Often your sales agent will let your property for a fee, or find a company on your behalf.” We can aid in all aspects of the rental,” says John Hall of Sunsea Properties. “We recommend rent management companies, home maintenance, pool cleaning etc. The client can be involved in the rental or they can leave us the keys and we will deal with it entirely.
THE LAW?
The good news is that in 1995 Spanish Rent Law was updated, bringing it into line with Britain-to the benefit of the landlord. The owner of the property now has much more power to decide who rents their property and how much they pay. You can evict a tenant for the following reasons; failure to pay rent, damage to the property; use of the property for immoral uses; subletting the property without prior agreement; and causing a social nuisance. But legal action should be a last resort as the legal process can be long and exhausting.
Landlords may have to pay comunidad fees if your property shares communal facilities. Do not confuse your investment with your dream home. Priorities rental return above any emotional attachment. When you want to move to Spain you can sell your rental property and buy a new home more suitable for your personal requirements.
TAX?
Spanish residents are liable for Spanish income tax if the income from the rent exceeds roughly £5,000 per year. Non-residents renting in Spain are liable for income tax on their income (less expense) at a rate of 25% from the first euro. This is payable even if the rent is paid in another country and currency-the money is deemed to have been made in Spain. In fact your income is also liable to tax in the UK if that is where you are resident, but you can deduct any Spanish tax paid.
Further more, those dealing with a lot of tourists on a short basis are considered to have created a business, and are liable to an extra 16% VAT on top of the 25% income tax. The good news on this is that you can now deduct maintenance expenses from your rental income before tax is calculated.
Always discuss your situation and potential tax implications with a Spanish lawyer to ensure you know fully, the extent of any and all liability.
Top Tips:
- Charge in advance and always take a damage deposit
- Lock away the phone and estimate the running cost in your rental price.
- Have a full inventory drawn up, including the condition of your items.
- Ensure the walls are painted with a washable paint and try to pick furnishing that will not show up the odd spill, marks and blemishes.
- Leave a welcome pack for each new arrival. Your best customers are repeat ones.
- Check in with your tenant during there stay. They should always know who to get hold of if there is a problem.
- Don’t provide cheap beds, as there is nothing worse than a poor bed on holiday.
- Don’t exaggerate the strong points of your accommodation If its 10 minutes to the beach, don’t say its 5.
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