What do I need to know about renting out my holiday home in Spain?
If you’re thinking of buying a holiday home in Spain, you’ve probably got plenty of exciting plans of how you’re going to use it – short weekend breaks, long summer holidays lazing around the pool, November half term to escape the British weather… Have you considered, however, what you will do with it when you’re not there?
You’re actually sitting on what can be a very profitable investment. If you rent out your holiday home while you’re not there, you’ll find that you may well get a strong return – meaning the property can actually pay for itself long-term.
Before we get to how much yield you can get from your property, however, it’s important to make sure you know what taxes you’ll need to take into account.
What are the taxes to take into account when letting a property?
As a holiday-home owner, you will generally be considered as non-resident. The criterion for this is spending fewer than 183 days per annum in Spain.
Nonetheless, non-residents are still liable for tax in Spain if they’re renting out a property there.
There are two main types: taxes on your property’s cadastral (land registry) value and taxes on your income.
Taxes on your property’s value
You’ll need to know your valor catastral, or land-registry value, for this.
You’ll pay the gravamen especial sobre bienes inmuebles de entidades no residentes at a rate of 3% of your land-registry value.
You’ll also pay the IBI/impuesto sobre bienes inmuebles at a rate fixed by your local town hall. This can vary between 0.4% and 1.1% for a city property and 0.3% and 0.9% for a rural one. If your bill’s a little higher, it’ll be because municipalities can slightly increase the rate depending on local circumstances. For example, provincial capitals will add an extra 0.07%.
Taxes on your rental income
This is the impuesto sobre la renta de no residentes. It’s calculated on your whole income from the rental (not just gross profits) and, for the moment, is fixed at 24% for non-EU citizens and 19% for EU citizens.
So, what can I expect as a yield from my property?
Many of the popular areas in Spain can offer a great yield. It’s important to remember, however, that areas with higher costs – high property prices – will get a lower percentage yield. Often, you’ll find moving inland from the coast can give you a higher yield.
Here’s the breakdown for the main expat areas:
Main expat area: Mallorca
Average yield: 4.9%
Starting in this popular location for second-home buyers, you’ll find great yields across the island. The west coast is slightly pricier, meaning lower percentages – Cala Major gives 4.7%, for example. On the eastern side, Manacor offers a higher yield, at 5.2%.
Province of Girona
Main expat area: Costa Brava
Average yield: 4.8%
This popular area includes a number of great seaside resorts for a holiday home. You can find strong yields in Lloret de Mar, at 5.4%. Most coastal ones are a little below the average, however. L’Escala gets around 4.6%. Further inland, in Figueres, you can get 6.5%.
Province of Tarragona
Main expat area: Costa Daurada
Average yield: 5.3%
This is one of the higher yields in the northeast of Spain – no wonder with the popularity of the area. There is a lot of variation, however. You’ll find very different rates quite close: Sant Carles de la Ràpita gets an already impressive 6.1%, but nearby Tortosa gets 7.8%.
Province of Alicante
Main expat area: Costa Blanca
Average yield: 5.1%
Carefully choose your location in the Costa Blanca and you could find very high yields. There is massive variation between the towns and villages of this popular holiday destination. Places like Altea’s yield is relatively low compared to the average (4.1%). Just a short trip down the road, however, is Benidorm, with yields of 7.1%.
Province of Murcia
Main expat area: Costa Cálida
Average yield: 6.7%
Unlike its northern neighbours, Murcia has consistent prices along its coast, so yields don’t vary too much geographically. You’ll see slightly lower yields in the south than the north of the Costa Cálida, with a 0.7% difference between Águilas (6%) and Mar Menor (6.9%).
Province of Granada
Main expat area: Costa Tropical
Average yield: 5.5%
This region is doubly popular, among both international second-home buyers and locals from the city of Granada. As in its Murcian neighbour, yields are quite geographically stable, at around 5.5% in most towns. Almuñécar is slightly lower at 5.3%.
Province of Málaga
Main expat area: Costa del Sol
Average yield: 5.2%
This renowned tourist region is probably the first that comes to mind when you think of Spain. In the northeast of the coast, towards Málaga itself, yields are high. Benalmádena, for instance, gets 5.4%. Torremolinos gets even higher, at 5.8%.
Provinces of Cádiz and Huelva
Main expat area: Costa de la Luz
Average yield: 5.8%
The main Atlantic coastal region in Spain offers great weather year-round (if slightly chilly water!) and a good rental yield for your holiday home. Close to Gibraltar, Tarifa gives a yield of 5.6%. Moving towards Portugal, yields increase as property prices drop, with Puerto de Santa María offering 6%.
Main expat area: Gran Canaria
Average yield: 6.8%
Spain’s African islands are immensely popular with British buyers (and others from northern Europe). It’s no surprise when you see that prices are low and income from rentals can be relatively high. You can expect a yield of around 6.4% in Playa del Inglés and even higher in Telde – 6.8%.
Buying a holiday home in Spain
So, if you’re considering buying a holiday home in Spain to also rent out, the figures are looking in your favour. Carefully plan your finances and you’ll be onto a strong investment. For more information, make sure to download your Spain Buying Guide and visit our property portal