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Buy-to-let: What you need to know about renting out a property in Spain

Buy-to-let: What you need to know about renting out a property in Spain
The beautiful Catalan village of Calella. Photo: Zsanett Herczegh from Pixabay
With the rise of Airbnb and other home sharing platforms, many people are buying apartments in popular vacation areas and renting them out to earn additional income.

The returns are high, according to Moving2Madrid, a buyer’s agent based in Madrid that helps people purchase properties to earn investment income, who claim their clients earn an average 6 percent net return when renting out their apartments short term

For those interested in earning additional income through buy-to-let, here are five tips to follow.

Have the endgame in mind when you purchase your apartment

Buying a property to earn rental income is completely different than buying a property that you want to live in yourself.

This is because the requirements of short term tenants are very different than long term residents.

For example, many property buyers are drawn to large, well equipped kitchens and fancy bathrooms. However, keep in mind that short term tenants rarely cook.

Moreover, if you rent your property short term there will likely be a number of tenants occupying the flat, all wanting to take showers at the same time.

So if you purchase an investment property, you need to think of details like boiler capacity rather than fancy bathtubs.

Refurbishment is key

When you are apartment shopping, look for the “fixer-upper.” This not only will enable you to get a larger apartment at a better price, but you can refurbish it to optimize its long term rental performance. 

People looking for apartments online focus on details that “pop.” If you know what renters look for, and how to make your property pop online, your refurbishment will differentiate your property so that in the long term your flat dictates pricing and reviews.

So decorate in neutral colours with accent peices, such as a stylish antique or artwork that will attract attention online.

Buildings on Madrid’s Gran Vía. Photo: GERARD JULIEN / AFP

Decide whether you want to rent your apartment short or long term

In the context of the pandemic and how it’s affected travel and short-term rentals, most landlords are choosing to rent out their properties to long-term tenants to curb their losses. (You can find out more about it here).

But let’s assume in this case that once Covid-19 doesn’t dominate global affairs, things will get back to how they were before.

Although Airbnb gets all the publicity, and renting short term does lead to higher returns if your property is managed properly, you can also rent your apartment long term. Some apartments, by their very nature, perform better when rented long term. Moreover, there is less wear and tear on long term property rentals. Think about it: short term rentals are highly trafficked by people that don’t care for your personal space, rolling suitcases through your apartment.

In general, it depends upon size. Small apartments with few amenities that cannot comfortably sleep more than two people don’t necessarily perform well on the Airbnb market. However, they are ideally suited for students or people recently divorced. In Madrid, people average a net return of 4.0-4.5 percent when renting small properties short term.

Medium sized apartments with two bedrooms and one or two bathrooms perform very well on Airbnb. In Madrid, people average a net return of 6.0 percent when renting medium sized properties short term.

Large apartments perform best rented long term. Luxury items are not appreciated on the Airbnb market. Thus, it is hard to get an adequate occupancy rate and return to compensate for your initial purchase price and refurbishment costs. In Madrid, people average a net return a little shy of 4 percent when renting large, luxury properties long term.

Prepare the necessary paperwork


An anti tourism banner during a protest staged by residents against “drunken tourism” on La Barceloneta beach in August, 2017. Photo: AFP

Paperwork varies, depending where in Spain you purchase your apartment. Rental laws, especially for tourist use differ from city to city and region to region and are subject to change.

Barcelona is the most restrictive, as it is no longer granting Airbnb licenses.

Valencia, Palma and Madrid have also introduced measures to curb tourist rentals.

In Madrid, you have to fill out and submit forms called Documento Propiedades Turísticas and Cédula de habitabilidad. You also have to apply for, and submit, a form certifying your apartment’s level of energy efficiency. All in, plan to spend around 500€ and ten months to get your paperwork in order.

It’s always best  to seek professional advice to guide you through the process.

Find the right property manager

High quality reviews and quick response times are key on home sharing platforms.

For short term rentals, you must have a high occupancy rate to maximize your rental yield. Keeping the apartment immaculate, providing fresh linens, responding to messages from tenants and ensuring your apartment is always rented at the optimal price (remember: vacation rentals are highly seasonal thus pricing varies) takes a lot of time and expertise.

That’s why it can be worthwhile to hire a professional to manage your property. Even if you pay an additional 20 percent for their services, they will save you time and money.

Mary Clare Bland is a relocation expert with Moving2Madrid, a buyer’s agent that focuses exclusively on the Madrid market.   “We help international buyers locate, negotiate and close the deal on apartments in Madrid. We work with renters, buyers and investors. We focus exclusively on an international clientele and speak multiple languages.”

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