It’s difficult to make a living providing holiday accommodation in most areas, as the season is too short and there’s often too much competition. If you’re planning to let a property, it’s important not to overestimate the income, particularly if you’re relying on letting income to help pay the mortgage and running costs.
The letting season varies with the region, e.g. 12 to 16 weeks on the Costa Brava, 20 to 24 weeks in the Balearics, 24 to 30 weeks on the Costa Blanca and the Costa del Sol, and year-round in the Canary Islands. However, you’re unlikely to achieve this many weeks’ occupancy and you should budget for around half of these figures, even when letting full time. Apartments and townhouses tend to have year-round letting potential, whereby villas (especially large ones) are in demand from Easter to late autumn plus Christmas.
You may be unable to meet all your mortgage payments and running costs from rental income, even if a property is available to let year-round. Most experts recommend that you don’t purchase a home in Spain if you need to rely on rental income to pay for it.
Buyers who over-stretch their financial resources often find themselves on the rental treadmill, constantly struggling to earn enough money to cover their running costs and mortgage payments. In recent years, numerous buy-to-let investors have been forced to sell their Spanish homes after finding that the rental income was insufficient to pay for maintenance of the property. In many resort areas (e.g. western Costa del Sol and the south of Gran Canaria), there’s currently a surfeit of short-term rental accommodation and many property owners have discovered that rental returns are far below their expectations.
Rules & Regulations
If you let a property in Spain, you’re required by law to pay tax on your rental income in Spain and not in the country where the income is received (e.g. in the UK). Since July 1995, all legal short-term ‘tourist’ letting in the Canaries has been conducted by registered letting agencies, thus ensuring that income tax is paid on earnings. In other parts of Spain, the authorities have a problem getting foreign, non-resident owners to comply with these regulations and many simply turn a blind eye, although there are fines of up to e6,000 for offenders. However, several regional governments (e.g. the Andalusian) have advanced plans to follow the example of the Canaries and it’s expected there will be widespread clamp-downs on illegal letting.
If you provide bed and breakfast or something similar in a rural property, you must obtain a permit from the local tourist board and have the property inspected. If you’re planning to buy a community property, you must check whether there are any rules that prohibit or restrict short-term letting. You may also be required to notify your insurance company.
Rental contracts in Spain
Most people who do holiday letting just have a simple agreement form that includes a property description, the names of the clients, and the dates of arrival and departure. However, if you do regular letting you may wish to check with a lawyer that your agreement is legal and contains all the necessary safeguards. If you plan to let to non-English speaking clients, you must have a letting agreement in Spanish or other languages. If you use an agent, they provide a standard contract.
However, if you do longer lets, you must ensure that you or your agent uses the correct contract. In Spain, ‘long-term’ lets usually refer to lets of one year or more, for which contracts ( arriendos de vivienda) are for a minimum of five years. The contract for short-term lets, usually of one year’s duration or less, is called an arriendo de temporada. These contracts are available from tobacconists ( estancos), but they don’t apply to holiday letting.
Because of the dangers of a tenant refusing to leave after the rental period expires, some foreign landlords are wary of letting to Spaniards.
If income from a Spanish home has a high priority, then the location must be one of the main considerations when buying. When considering the location, you should bear in mind certain factors.
Properties in areas with a pleasant year-round climate such as the Costa Blanca, Costa del Sol, and the Canaries have greater rental potential, particularly outside high season. This is also important should you wish to use the property yourself outside the high season; for example you could let a property over the summer months when rental income is at its highest, and use it yourself in May or October and still enjoy fine weather.
Proximity to an Airport
A property should be situated within easy reach of a major airport, as most holidaymakers won’t consider travelling more than 30 to 45 minutes to their destination after arriving at an airport. Choose an airport with frequent flights from your home country and one with a range of scheduled and charter flights. It isn’t wise to rely on an airport served only by budget airlines, as they may alter or cancel routes at short notice.
Public Transport & Access
It’s an advantage if a property is served by public transport or is situated in a town where a car is unnecessary. If a property is located in a town or urbanisation within a maze of streets, you should provide a detailed map. However, if it’s in the country where signposts are all but non-existent, you must provide not only a detailed map with plenty of landmarks, but you may also need to erect signs. Holidaymakers who spend hours driving around trying to find a place are unlikely to return or recommend it! Maps are also helpful for taxi drivers, who may not know the area.
The property should be close to attractions and/or a good beach, depending on the sort of clientele you wish to attract. If you want to let to families, then a property should be within easy distance of leisure activities such as theme parks, water parks, sports activities and nightlife. If you’re planning to let a property in a rural area, it should be somewhere with good hiking possibilities, preferably near one of Spain’s many natural parks. Proximity to one or more golf courses is also an advantage to many holidaymakers and is an added attraction outside the high season, particularly on the Costa del Sol.
If you’re planning to let your property, a swimming pool is obligatory in most areas, as properties with pools are much easier to let than those without, unless a property is situated on a beach, lake or river. It’s usually necessary to have a private one with a single-family home (e.g. a detached villa), although a shared pool is adequate for an apartment or townhouse.
If you plan to let mainly to families, it’s advisable to choose an apartment or townhouse with a ‘child-friendly’ communal pool, e.g. with a separate paddling pool or a pool with a shallow area. Country properties should have a private pool (some private letting agencies won’t handle properties without a pool). You can charge a higher rent for a property with a private pool and it may be possible to extend the letting season even further by installing a heated or indoor pool, although the cost of heating a pool may be higher than the rental return. Note that there are strict regulations regarding pool safety (including private pools) and you should check that your pool complies with them.
Letting rates in Spain
Rates vary greatly depending on the season, the region, and the size and quality of a property. An average apartment or townhouse sleeping four to six in an average area can be let for between €300 to €1,000 per week, depending on the season, location and quality. At the other extreme, a luxury villa in a popular area with a pool and accommodation for 8 to 12 can be let for €1,500 to €3,000 (or more) a week in the high season.
Most people who let year-round have low, medium and high season rates. The high season usually includes the months of July and August and possibly the first two weeks of September. Mid-season usually comprises June, late September and October, plus the Easter and Christmas/New Year periods, when rents are around 25 per cent lower than the high season. The rest of the year is classed as the low season. During the low season, which may extend from October to May, rates are usually up to 50 per cent lower than the high season.
Rates usually include linen, gas and electricity, although electricity and heating (e.g. gas bottles) are usually charged separately for long lets in winter.
Costs & expenses
When letting your property, make sure you allow for the numerous costs and expenses that inevitably reduce the amount of profit you can expect to make. These may include: cleaning between and during lets; laundry of household linen; garden and pool maintenance; maintenance of appliances; replacement of damaged or soiled items; insurance and utility bills (electricity bills can be high if your property has air-conditioning or electric heating). Some property owners find that costs and expenses can account for as much as half the amount paid for the let.
If you let a property, it isn’t advisable to fill it with expensive furnishings or valuable personal belongings. While theft is rare, items will get damaged or broken over a period of time. When furnishing a property that you plan to let, you should choose hard-wearing, dark-coloured carpets or rugs which won’t show stains (although most properties have tiled or marble floors rather than carpets) and buy durable furniture and furnishings. Simple inexpensive furniture is best in a modest home, as it needs to stand up to hard wear. Small, two-bedroom properties usually have a sofa bed in the living room.
Properties should be well equipped with cooking utensils, crockery and cutlery (including a kitchen knife that cuts!), and it’s also usual to provide bed linen and towels (some agents provide a linen hire service). Make sure the bed linen and towels are of good quality and replace them often, before they wear out. You can buy good quality, inexpensive household linen at most hypermarkets in Spain and during the Corte Inglés sales in January and July. You may also need a cot and/or high chair.
Appliances should include a washing machine and microwave, and possibly a dishwasher and tumble dryer. Depending on the rent and quality of a property, your guests may also expect central heating, air-conditioning, covered parking, a barbecue and garden furniture (including loungers). Heating is essential if you want winter lets, while air-conditioning is an advantage when letting property in summer, although it’s only considered mandatory when letting a luxury villa. Some owners provide bicycles, and badminton and table tennis equipment. It isn’t usual to have a telephone, although you could install a credit card telephone or one that just receives incoming calls.
You need several sets of spare keys (plus spare remote controls for electric gates, etc.), which will probably get lost at some time. If you employ a management company, their address should be on the key fob and not the address of the house. If you lose keys or they can easily be copied, you should change the lock barrels regularly (at least annually). You don’t need to provide guests with keys to all the external doors, only the front door (the others can be left in your home). If you arrange your own lets, you can send keys to guests in your home country or they can be collected in Spain. It’s also possible to install a security key-pad entry system, the code of which can be changed after each let.
A property should always be spotlessly clean when holidaymakers arrive and you should provide basic cleaning equipment. You must arrange for cleaning in between lets and also at regular intervals, e.g. weekly or twice-weekly, for lets of more than one week. If you use a local agent, they usually arrange cleaning at your expense, currently around €8 to €10 an hour in coastal resorts. If applicable, you must also arrange pool cleaning and a gardener.
Using an Agent
If you’re letting a second home, the most important decision is whether to let it yourself or use a letting agent (or agents). If you don’t have much spare time, then you’re better off using an agent, who takes care of everything and saves you the time and expense of advertising and finding clients. Agents usually charge commission of between 20 and 40 per cent of the gross rental income, although some of this can be recouped through higher rents.
If you want your property to appear in an agent’s catalogue or website, you must usually contact him the summer before you wish to let it (the deadline for catalogues is usually September). Note that although self-catering holiday companies may fall over themselves to take on a luxury villa in Majorca or Ibiza, the top letting agents turn down many properties.
There are numerous self-catering holiday companies operating in Spain and many Spanish estate agents also act as agents for holiday and long-term lets.
Take care when selecting an agent, as it isn’t uncommon for them to go bust or simply disappear owing their clients thousands of euros.
If possible, make sure that your income is kept in an escrow account and paid regularly, or even better choose an agent with a bonding scheme who pays you the rent before the arrival of guests (some do). It’s absolutely essential to employ a reliable and honest (preferably long-established) company. Anyone can set up a holiday letting agency and there are many ‘cowboy’ operators. Always ask a management company to substantiate rental income claims and occupancy rates by showing you examples of actual income received from other properties. Ask for the names of satisfied customers and contact them.
Other things to ask a letting agent include:
- When the letting income is paid.
- What additional charges are made and what they’re for.
- Whether they provide detailed accounts of income and expenses (ask to see samples).
- Who they let to (e.g. what nationalities and whether families, children or singles).
- How they market properties.
- Whether you’re expected to contribute towards marketing costs.
- Whether you’re free to let the property yourself and use it when you wish. (Many agents don’t permit owners to use a property during the months of July and August.)
The larger companies market homes via newspapers, magazines, the internet, overseas agents and coloured brochures, and have representatives in a number of countries. Management contracts usually run for a year and should include arranging emergency repairs; routine maintenance of house and garden, including lawn cutting and pool cleaning; arranging cleaning and linen changes between lets; advising guests on the use of equipment, if necessary and providing guests with information and assistance (24-hours a day in the case of emergencies).
Agents may also provide someone to meet and greet guests, hand over the keys and check that everything is in order. The actual services provided usually depend on whether a property is a budget apartment or a villa costing €1,500 or more per week. A letting agent’s representative should also make periodic checks when a property is empty to ensure that it’s secure and everything is in order. You may wish to check whether a property is actually let when the agent tells you it’s empty, as it isn’t unknown for some agents to let a property and pocket the rent (you can get a local friend or neighbour to call round).
Doing Your Own Letting
Some owners prefer to let a property to family, friends, colleagues and acquaintances, which allows them more control – and hopefully the property will also be better looked after. In fact, the best way to get a high volume of lets is usually to do it yourself, although many owners use a letting agency in addition to doing their own marketing in their home country. You must decide whether you want to let to smokers or accept pets and young children – some people won’t let to families with children under five due to the risk of bed-wetting. Some owners also prefer not to let to young, single groups. Note, however, that this reduces your letting prospects.
Rental Rates & Deposits
To get an idea of the rent you can charge, simply ring a few letting agencies and ask them what it would cost to rent a property such as yours at the time of year you plan to let it. They’re likely to quote the highest possible rent you can charge. You should also check advertisements. Set a realistic rent, as there’s lots of competition. Add a returnable deposit as security against loss (e.g. of keys) and breakages. This is returnable less any deductions. A booking deposit is usually refundable up to six weeks before the booking, after which it’s forfeited. Many people have a minimum two-week rental period in July and August.
If you wish to let a property yourself, there’s a wide range of Spanish and foreign newspapers and magazines in which you can advertise, e.g. Dalton’s Weekly (020-7955 3808, www.daltonsholidays.com) and newspapers such as the Sunday Times. You will need to experiment to find the best publications and days of the week or months to advertise. Most owners find it’s prohibitively expensive to advertise a single property in a national newspaper or magazine.
For rural properties it’s best to advertise within Spain targeting Spanish residents or long-term visitors, who make up the majority of guests. Spanish regional tourist agencies can put you in touch with letting agents. There are many rural tourism websites where you can advertise. Typical arrangements include posting your property’s details (in up to four languages), photos and prices, and links from major search engines. Some companies even provide you with your own website. Among the best websites are www.toprural.com and www.azrural.com.
You can also advertise among friends and colleagues, in company and club magazines (which may even be free), and on notice boards in companies, stores and public places. The more marketing you do, the more income you’re likely to earn, although you should also ensure that you provide a quick and efficient response to any enquiries.
It also pays to work with local people in the same business and send surplus guests to competitors (they usually reciprocate). In addition to advertising locally and in your home country, you can also extend your marketing abroad (or advertise via the internet). Note that it’s usually necessary to have an answer machine and preferably also a fax machine.
Advertising on the internet is an increasingly popular option for property owners, particularly as a personalised website is an excellent advertisement and can include photographs, booking forms and maps, as well as comprehensive information about your property. You can also provide information about flights, ferries, car rental, local attractions, sports facilities and links to other websites. A good website should be easy to navigate (avoid complicated page links or indexes) and must include contact details, ideally email. It’s wise to subscribe to a company that will submit your website to the main search engines, such as Google and MSN. You can also exchange links with other websites. One good way of promoting your property is to post an ad in our housing section.
Brochures & Leaflets
If you don’t have a website containing photographs and information, you should ideally produce a coloured brochure or leaflet. This should contain external and internal pictures, comprehensive details, the exact location, local attractions and details of how to get there (with a map included). You should enclose a stamped addressed envelope when sending out details and follow up within a week if you don’t hear anything. It’s necessary to make a home look as attractive as possible in a brochure or leaflet without distorting the facts – advertise honestly and don’t over-sell the property.
If you plan to let a home yourself, you must decide how to handle enquiries about flights and car rentals. It’s easier to let clients do it themselves, but you should be able to offer advice and put them in touch with airlines, ferry companies, travel agents and car rental companies.
If you do your own letting, you must arrange for cleaning and maintenance, including pool cleaning and a gardener if applicable. Ideally, you should have someone on call seven days a week.
If you own a second home in Spain, you will find it beneficial or even essential to employ a local caretaker, irrespective of whether you let it. You can have your caretaker prepare the house for your family and guests, as well as looking after it when it isn’t in use. If it’s a holiday home, have your caretaker check it periodically (e.g. weekly) and allow him to authorise minor repairs. If you let a property yourself, your caretaker can arrange for (or do) cleaning, linen changes, maintenance, repairs, gardening and pay bills. If you employ a caretaker, you should expect to pay at least the minimum Spanish wage.
Closing a Property for the Winter
Before closing a property for the winter, you should turn off the water at the mains (required by insurance companies), remove fuses (except ones for a dehumidifier or air-conditioner if you leave them on), empty food cupboards and the fridge/freezer, disconnect gas cylinders and turn off mains gas, and empty bins. You should leave interior doors and a few small windows (with grilles or secure shutters), as well as wardrobes, open to provide ventilation.
Lock main doors, windows and shutters, and secure anything of value or leave it with a neighbour or friend. Check whether any work needs to be done before you leave and, if necessary, arrange for it to be done in your absence. Most importantly, leave a set of keys with a neighbour or friend and arrange for them (or a caretaker) to check your property periodically.
Most people aren’t security conscious when on holiday and you should therefore provide detailed instructions for guests regarding security measures and emphasise the need to secure the property when they’re out. It’s also important for them to be security conscious when in the property, particularly when having a party or in the garden, as it isn’t unusual for valuables to be stolen while guests are outside.
Ideally you should install a safe for your guests (and for yourself when you’re there) and leave the key for it in the property. When you or your guests leave the property unattended, it’s important to employ all security measures available, including the following:
- Storing valuables in a safe (if applicable) – hiding them isn’t a good idea, as thieves know all the hiding places.
- Closing and locking all doors and windows.
- Locking grilles on patio and other doors.
- Closing shutters and securing any bolts or locks.
- Setting the alarm (if you’ve installed one) and notifying the alarm company when absent for an extended period.
- Making it appear as if a property is occupied by the use of timers and leaving lights and a TV/radio on.
Bear in mind that prevention is always better than cure, as stolen possessions are rarely recovered. If you have a robbery, you should report it to your local police station, where you must make a statement. You will receive a copy, which is required by your insurance company, if you make a claim.
Increasing Rental Income
Rental income can be increased outside high season by offering special interest or package holidays – which can be organised in conjunction with local businesses or tour operators – to broaden the appeal and cater for larger parties. These may include:
- Activity holidays, such as golf, tennis, cycling or hiking.
- Cooking, gastronomy and wine tours/tasting.
- Arts and crafts such as painting, sculpture, photography and writing courses.
You don’t need to be an expert or conduct courses yourself, but can employ someone to do it for you.
This article is an extract from Buying a home in Spain. Click here to get a copy now.