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Safe and profitable property rental in Spain in 2023. Here's what an investor should know

Tatiana Pekala Tatiana Pekala |
Title

Renting real estate in Spain is an increasingly popular way to invest capital also among investors from Poland and other European countries. If you dream of a sun-drenched apartment that will generate regular income, first learn about the rules that govern the local rental market in 2023.


For thirteen years of Dream Property's existence, we have answered thousands of questions. Some of them are about investing in rental property in Spain. Why is it worth it? What are the main advantages? Is it safe? How is this business different in the Spanish edition? What rate of return can you expect? Is there a "catch" here? These questions have been coming up more and more lately.    

More and more people from Poland understand that buying real estate abroad is not an impossible mission. It should be assumed that one of the factors driving this trend is the fear of war, which is taking place just across Poland's eastern border. In this situation, many investors want to invest their capital in a theoretically safer market.

Yes, the Spanish rental sector has gone through some turbulence in recent years (economic crisis, pandemic), but it has always returned to good shape, because investing in rental in this region is simply fashionable. Good capital security, regular profit from short-term or long-term rental, owning real estate also for your own use - these are the main advantages. 

ROI, weather and a much longer holiday season 

What about pure math? According to official sources, the annual rate of return on a rented apartment is 7-8%. Although my experience shows that the ROI is in practice about 5% (it all depends on the cost of maintaining the property), but it is still an attractive option for the investor. 

Another factor that makes buying an apartment for rent in Spain a better idea than buying it, for example, on the Baltic Sea, is naturally the weather. The holiday season here is much longer, so you can earn longer. However, in order for you to even start doing this, you first need to know the laws that govern the Spanish rental market. Here is the basic information.

Short-term rental in Spain in 2023 - what are the rules

If you are thinking of short-term rental in Spain, you need to apply for a tourist license (licencia turistica) . Lack of this document is associated with the risk of a fine. Obtaining a license is not a complicated and lengthy process. Just go to the local office, fill out the application (declaracion responsable referente a viviendas de uso turistico), submit it to your province and wait for the license number along with a special code assigned to the location and property. Important: Both the tourist license number assigned to the property and its category must appear later in all listings. 

Before you start looking for an apartment for future rental, remember that in many regions of Spain holiday rentals are limited. In some cities (e.g. Barcelona or Madrid), the authorities have introduced specific limits on the days of the year when apartments can be rented to tourists. The aim of these actions was the need to curb the growing rental market and to stop rent increases, which also hit ordinary resident.

Remember!

Your short-term rental apartment in Spain must also be registered as a place to let to third parties. Each such property must meet specific requirements in terms of equipment, area and available amenities. It is about the so-called requirements for real estate for tourist use (requisitos de las viviendas de uso turistico). 

Long-term rental in Spain in 2023 - what are the rules

First, for long-term rentals in Spain, you don't need a tourist license.    
Secondly, you need to know the specifics of long-term rental contracts here. Generally, such leases in Spain last for 12 months and are renewed annually. In turn, long-term contracts signed for more than 12 months give the landlord the right to renew the lease for 5 (if the owner of the apartment is a private person) or 7 years (if the owner is a legal person). 

However, many landlords wrongly assume that after the aforementioned 5 or 7 years the contract is terminated. If you don't make a move as the owner, an automatic contract extension, known as a "silent renewal", will legally take effect. The purpose of this law is to better protect the rights of tenants. For all long-term leases signed on or after March 6, 2019, it looks like this in practice:

  • if the landlord is an individual, a silent lease extension extends the 5-year lease by an additional 3 years, for a total of 8 years of lease;
  • if the landlord is a legal entity (company), a silent renewal adds 3 years to the 7-year lease for a total of 10 years.

How to avoid such situations if you would like to end your cooperation with the tenant after 5 years? You must draw up a formal notice and deliver it to the tenant by the specified date. If you are an individual, you should do so with 2 months' notice. 

Importantly, the tenant himself may terminate the contract early at the earliest after six months, provided that the landlord is notified 30 days in advance . And what if the landlord wants to leave your apartment before six months? This is a breach of contract and as a landlord you will have the right to claim the rent for the 'missing' months. 

Rental property in Spain: the law on the deposit

If you are aiming for long-term rental, Spain provides for the obligation to pay a deposit (fianza) by the tenant. It is a security for the property owner in case the landlord defaults on payments or damages the apartment. Two types of deposits should be distinguished here: statutory and contractual. 

The statutory deposit is a mandatory deposit provided for by Spanish legislation. This is the equivalent of a month's rent if the property is rented for residential purposes. Importantly, the deadline for the payment of the statutory deposit is set by the Autonomous Communities, so it may look slightly different in different parts of the country. What is permanent, however, is the law according to which the amount of the deposit cannot be changed during the first 5 years of the lease. As for the return of the deposit, the landlord has one month from the moment when the tenant returns the keys to the apartment.

The contractual deposit is not regulated by law and is an additional security. In this case, the amount of the deposit can be flexible, and you, as the owner, are not required to make a deposit to a specific Autonomous Community. But beware! Submitting a contractual deposit does not release the tenant from paying the statutory deposit.

Rent - what you need to know

In Poland, the issue of the date of payment of rent by the tenant can be very flexible. In Spain, things are a bit different: if the tenancy agreement does not regulate the rent, according to the law, the rent must be paid within the first seven days of the month. If the tenant fails to meet this deadline, you, as the owner of the apartment, have the right to enforce the receivables in court proceedings.

Renting real estate in Spain is also associated with tax obligations. It looks like this:  

  • residents and non-residents who live in EU countries pay 19% income tax (rental income can be reduced by tax deductible costs incurred to generate income);
  • citizens of non-EU countries pay 24% tax. 

Important : in 2022, the Spanish government approved a decree on housing law, which provides for the possibility for the state to regulate the prices of rented apartments. The new regulations make it possible to control prices in regions of high demand for rental properties.

"The threshold to enter the rental market in Spain is very high" - truth or myth?

As you probably already know, I like to dispel various myths about the real estate market in Spain. Now it's time for another one: the threshold for entering the rental market in this country is very high and requires a lot of capital, which is why many investors simply cannot afford to buy real estate.  Here are some examples. 

An example of an apartment ideal for long-term rental in 2023

To begin with, let's take a look at possible long-term rental properties in Spain. Analysing the Dream Property offer from this angle, this 134-meter penthouse in Casares, in the Estrella de la Bahia estate, may be a good proposition. 3 bedrooms, 3 bathrooms, large roof terrace, fantastic sea and mountain views. The estate is closed, beautifully maintained, there is a swimming pool at the disposal of residents, and the apartment includes a place in the underground garage. All this can be had for 285,000 EUR.  [find out more about this apartment

An example of an apartment ideal for short-term rental in 2023

However, if you are thinking of a holiday / short-term rental in Spain , an interesting offer may be the second stage of the Las Mesas estate in Estepona. Contemporary design, walking distance from the center of the charming town center, full of narrow streets and local shops. The estate is being built in a privileged location, close to local golf courses, sandy beaches, with easy access to the main transport routes and only 45 minutes drive from Malaga airport. 

Residents will have an outdoor swimming pool at their disposal, and all apartments will have parking spaces and storage rooms. Prices for one-bedroom (i.e. two-bedroom) apartments start at EUR 199,000. For a 2-bedroom apartment you have to pay from 284,000 EUR. [find out more about this apartment]

 

 

See also

Legal regulations for renting real estate in the most popular regions of Spain in 2024

Investing in Real Estate in Spain. What do you need to know in 2024?

Inheritance of real estate in Spain, or what you need to know about Spanish inheritance law

Taxes and fees related to buying a property in Spain in 2023

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