If you are serious about generating income, you should choose an area of Spain which has a long season. So look at the Costa Blanca which has around 300 days sunshine a year, or the Costa del Sol which has around 320 days of sunshine a year.
What type of properties rent out best?
Consider buying where there are lots of golf courses, which extend the holiday season for renters from February through to November.
Or look at year-round destinations which have it all e.g. Barcelona, Valencia, Alicante. These cities and their neighbouring areas offer bars, restaurants, cultural venues, night clubs, shopping as well as beaches. What’s more, you are more likely to attract longer term renters in these year-round destinations and avoid the complications of Tourist Rental Licensing rules and regulations, although you always need to check, given there are restrictions in certain parts of cities like Barcelona.
Where to look in Spain, the inside scoop?
Sales transactions and prices have stabilised in Spain and pockets now represent some of the best value-for-money in Europe. The winners have been the major cities like Barcelona, Madrid and Valencia, along with pockets of the coastline along the Costa del Sol and the Costa Blanca. Good value-for-money properties can be bought in Almeria, which is still eminently reachable via multiple modes of transport. There are still affordable spots on the ever-popular, Costa del Sol e.g. Estepona.
What are the best ways to manage your property, if you are not on-the-ground?
If you find a really good and efficient local agent to manage your property, work with them closely, they are like gold-dust. Yes the charges may be higher than self-managing, but if you have a busy day job, then it is unlikely you are going to have the time to deal with day-to-day rental issues, as well as keeping up with, and ensuring you are compliant with, all the local regulations. What’s more, using an agent could ensure higher occupancy levels, particularly in the early days of renting out, which will translate into profit. A good agent should be able to help with other services like filing a tax return too and providing valuable insight into what is happening on the market during Brexit.
If you have time on your hands, then go with one of the portals like Owners Direct or a more specialist Spanish site like Kyero, but this will be an à-la-carte option, assembling all the services you may require yourself. This may also be an option once you have become more experienced and confident, but not necessarily for a starter who may be less familiar with the raft of legislation you need to comply with.
What finances or legalities do I need to sort?
A furnished Spanish holiday let, might be a great option for Britons, wanting to generate rental income in a tax-efficient manner. Harsh taxation on buy-to-let in the UK has turned many off this sector, but furnished holiday lets attract more favourable tax treatment in the UK. So as long as you comply with the rules on things like, the number of days the property is available for rental, then you can continue to offset mortgage interest costs against income 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.
You must be clear about your rental strategy. Longer term lets (of several months) are regulated on a national level under Urban Rental Law (LAU- Ley de Arrendamientos Urbanos) but Holiday rentals (weekly lettings) are subject to regional laws by Spain’s 17 Autonomous Regions, which can be complicated to navigate.
So whilst Airbnb is all the craze at the moment, it may create more than a headache to navigate the maze of rules and regulations to ensure you are renting out legally. It is worth taking note because non-compliance – where it is discovered by the authorities – can lead to sizeable fines.
How do I avoid the pitfalls?
If you go into renting out a holiday home without being well-informed you could come a cropper, particularly if you bought a holiday home for personal use and then decide to rent it out later to cover costs, you could be caught out unwittingly. Ensure you know the legal situation for tourist lets in your area, which often need a Tourist Licence in places like Andalusia, Murcia, Valencia (covering Costa Blanca) and ensure you are properly registered, and are paying appropriate taxes locally.
In the increasingly global nature of our tax affairs, with greater cross-border transparency, authorities are monitoring tax-payment more closely and pursuing non-payers. It is not a question of being resident in one country means you can avoid paying taxes in another country, you still have responsibility to pay taxes and can be pursued from another country in Europe.
Louise Reynolds, Director of award-winning European property investment firm Property Venture®
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Property Venture® is an award-winning, European Investment property company who helps build portfolios and the purchase of holiday homes in Europe, with common-sense advice.
The focus is mainly greater Europe: UK investment property, Managed Property in France, German property investment, buy-to-let and homes in Poland, Spanish city and Costa property, Cypriot homes
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Tags: Barcelona, Coastal Property, furnished holiday let, holiday home, overseas property agent