What you need to know before buying a rental investment in Costa del Sol, Spain
A guide for future landlords
If you're considering buying a holiday home in the Costa del Sol, it may be worth thinking about renting it out for extra income. With an influx of tourists year-round, renting out your property can be an excellent way to generate good return on investment and pay the running costs when you're not using it.
However, before diving in head first, there are a few important things you should know before you buy. In this article, we'll cover some essential considerations that you should keep in mind before buying a property for rental investment.
Note: The following is based on my opinion and knowledge regarding the property rental market in Costa del Sol. Please consult a qualified professional before entering into any rental agreement.
Short-term or Long-term rentals?
It's important to decide how you want to rent out your property before you buy. Short-term rentals refer to periods of less than a month and cater mainly to holidaymakers or tourists. Long-term rentals, however, typically last 12 months or more and can stretch up to five years.
Short-term rentals: To rent out your property on a short-term basis, you'll need to know the legal requirements in your area. In 2016, Junta de Andalucia introduced the "Touristic Rental Licence" in order to raise rental standards and collect due tax. This licence is mandatory before renting your property out to holidaymakers.
The application process is relatively simple, but you must adhere to specific standards in your property, such as TV/internet access and air conditioning. Besides, all bedrooms must have natural light to count as a bedroom.
In order to secure the Touristic licence the property strictly speaking needs to have the "Licencia de Primera Ocupación" or the "First License of Occupancy" (LPO). While few properties built before the 1990s have this licence, it was not mandatory back then. Even some properties built after 1990 do not have this licence as it costs developers money to apply for it. Keep in mind that hefty fines may apply if caught renting without the appropriate licence.
For those properties without the LPO, the Mijas and Estepona town halls have created some sensible workarounds, but in Marbella this is not the case. This is something we can discuss in more detail if it is of interest to you. However, since 2016, the Junta de Andalucia has made LPO a prerequisite to obtaining a touristic licence.
Community Consent: Another essential factor to check before buying a property for short term rentals is whether the community of owners allows short-term/holiday rentals. While agents may advise you on this, it's best to have a lawyer inspect this before finalising your purchase.
Long-term Rentals: While there are many legal requirements for short-term rentals, renting out a property on a long-term basis is relatively simpler. However, it's essential to note that while an initial contract may last 12 months, tenants who can prove that the property is their first residence may stay for up to five years. In the case of rental collection issues, eviction can be a lengthy and expensive process.
Read our blogpost about “Pitfalls of long-term rentals” to find out about a few of the many mistakes people make when renting out their property.
Property Considerations
Apart from knowing the legal requirements, there are several other factors one should consider before buying a holiday home for rental investment.
Location: Location is crucial when it comes to rental properties and this cannot be stressed enough. Properties in central areas, close to public transport or popular tourist sites, tend to be in high demand and are more profitable, particularly for holiday rentals.
Property Type: When it comes to property types, of course all different property types can be rented out. Apartments are often the best choice for holiday rentals as they're often more affordable than villas and are located in central areas.
Property Condition: Of course, the condition of the property also plays an important role in attracting holidaymakers as do the quality of the photos taken. Maintaining a high standard of cleanliness and ensuring all essential items are in good working order is essential for positive guest feedback.
Conclusion
In conclusion, buying a holiday home for rental investment in Costa del Sol can be an excellent way to generate income or cover property running costs. However, it's crucial to know the legal requirements and community consent before making such an investment. Considering factors like location, property type, and condition of the property can also make your rental property more profitable. Remember that the legal status of the property must be thoroughly checked before you buy.
If you have any questions or require insights and opinions on buying a rental property, feel free to contact us.
Thinking about buying a property on the Costa del Sol? In this article we will take our 20 years of experience in the industry and simply explain the process for you in 5 easy steps.
Are you looking to buy or sell real estate in Costa del Sol? With the current changes and uncertainties in the global economy, it can be hard to answer this question: where is the balance of power when it comes to negotiations in the Costa del Sol real estate market?
