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Let’s Talk Rental!

What you need to know about renting your property before buying it
Thinking of buying a holiday home in the Costa del Sol sunshine?

Maybe you have been considering renting it out while you’re here or even buying a property as a pure rental investment. Renting your property out can be a great way of paying the running costs when you’re not using it or generating a good return on investment.
Before diving in head first, there are a few important things we feel you should know before you buy!I need to point out that the explanation below is my opinion of the considerations of buying a property for rental purposes and renting out.
It should be emphasised that I am not giving you legal, financial or taxation advice and you should consult a qualified professional before entering into any purchase contract or rental contract. With that being said, first, you need to decide how you want to rent out your property.

Short term or Long term?
Short term rental and long term rentals are very different things and as a property owner or prospective buyer you need to be aware of what you are getting into and the specific legal requirements.Quite simply, short term rentals are generally rentals for periods of less than one month to holiday makers or tourists.  Long term rentals usually start for periods of no less than 12 months and up to 5 years.

Short term rentals
If your intention is to buy a property and rent it out on a short term basis while you are not using it, you need to be aware of certain legal requirements to enable you to do so.In 2016, in a bid to raise standards of private rentals (and to ensure due tax was collected) the Junta de Andalucia introduced the “Touristic Rental License”. This means that before you can rent out your property to holiday makers, you need to apply for this licence. The application itself is fairly simple and can be acquired at a nominal cost as long as you have implemented certain standards in your property, for example, all bedrooms must have natural light to be considered a bedroom and must along with the lounge have air conditioning. You need to have TV and internet and other basic features.

The LPO requirement
Before 2016, no one apart from the most informed had even heard about the LPO.  Now it is written and spoken of almost daily and buyers seem to think that a property is only legal if it has a LPO (this is not the case). So, what is this LPO?The “Licencia de Primera Ocupación” (LPO) is the First License of Occupancy. Very few properties built before the 1990s have the LPO (the document didn’t exist) even though they are perfectly legal. Some properties built after 1990 don’t have it simply because there was no significant value placed on the document and it cost the developer money to apply for it.Fast forward to 2016, the Junta de Andalucia made having the LPO one of the criteria in order to obtain the touristic licence! So this means that there are perfectly legal properties which in theory cannot get the Touristic Licence. Depending on the location of the property and whether any amendments have been made to the original layout there are some workarounds in order to be able to secure the Touristic Licence. It’s beyond the scope of this article to go into further detail, but I am happy to discuss it with you and refer you to an expert.Bottom line is you need the Touristic License to legally do short term rentals and there can be hefty fines if you get caught out without the appropriate licence.

Community consent
The second and important point you need to check before buying a property is whether the community of owners permits short term / holiday rentals. Your agent should be able to advise you of this and it is certainly something that your lawyer will check for you should you articulate that short term rentals are something you might like to do. Several communities are the moment are voting on this point, so it is important that you are well informed.Once a property has been issued a touristic licence, it cannot be revoked so essentially becomes an asset of the apartment as it can be transferred if managed correctly to a new owner. As such we now recommend to all of our clients to apply for the touristic licence even if it is not their intention to rent as it may make the property more saleable in the future.

Long term rentals
You can pretty much rent out any property you own on a long term rental basis.  You need to be aware that even if you sign a contract for a period of 12 months, your tenant might have the right to stay in the property for up to 5 years.  Some landlords believe they can get around this by offering an eleven month contract where allegedly the tenant has no rights to extend.  However, my understanding is that if the tenant can prove it is his / her first residence, then they are more than likely to be able to stay beyond this term. When taking on a long term tenant it is advisable to take up references and thoroughly check them as if a tenant does not pay the rent, depending on their circumstances, it can be difficult to get them out and it can be a lengthy and expensive process.Hopefully this short article has been of value and provided you with some insights and considerations when buying a property for rental purposes. I am happy to talk with you about this in more detail and share my opinions on the sort of properties that rent well and the best locations for rental properties. As mentioned it is absolutely vital that the legal status of the property is thoroughly checked before it is purchased for rental purposes.

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