In this era of prevailing economic conditions, buying property has become an excellent alternative for those looking for additional capital investment options. If you combine this with a prestigious resort – such as Marbella – you have a ready-made recipe for success.
Luxury home for holiday and… rental
The attractiveness of the Andalusian coastline and the ever-increasing prestige associated with owning one’s home or flat in this location mean that more and more people are looking for luxury properties located in this region of Spain.
Investors buying property on the Costa del Sol are mainly driven by two needs – the desire to have a private luxury enclave for their holidays, and to diversify their investment portfolio by renting out luxury properties in the short and long term. When you decide to buy a property for investment purposes, you don’t want to worry about the day-to-day responsibilities of renting or administration, and you want to focus solely on looking after the profits from it and booking it for a well-deserved holiday.
In such cases, the perfect solution is to partner with an experienced and qualified Agency that will take care of all matters related to the rental process – from the preparation and management of advertisements on portals, to interviews with potential customers, to formal and organisational issues such as rental contracts, guest services and cleaning.
The role of the agency in the letting of property
Many clients do not delve into the whole process and the series of actions that an Agency takes to find a client for a property. And while at first glance it might seem that the work of the rental management team is limited to simply preparing and publishing an ad on a portal like Booking or Airbnb and then waiting for an application, the list of tasks is definitely longer.
In order to fully exploit the potential of a property, it is essential to prepare the most advantageous offer that meets market requirements and customer expectations. In order to do this, it is necessary to constantly monitor advertisements with characteristics similar to your property. This process allows ongoing modifications to be made to the offers both in terms of price and the package of services comprising the offer.
Another important area requiring increased vigilance is to watch the content of the adverts we publish on the portals. Are you wondering why? Well, there are situations in which portals make their own modifications. This in turn translates into increased costs for the property owner, e.g. by paying a cleaning company. In such cases, it is necessary to intervene in order to update the ad and restore its original form. This is successfully handled by the Agency, which ensures that the rental process is carried out as previously agreed.
However, the full scope of the tasks of an Agency caring for a property and dealing with its rental is much broader and includes tasks such as:
- Registration of rental property – a person wishing to rent a property for a period of, for example, 7 days, is obliged to register it with the Spanish authorities. The cost of registration is approximately € 200.
- Control of payments made by customers.
- Check-in / check-out of guests renting the facility – service during their stay in accordance with the services included in the advertisement.
- Organise cleaning after guest check-out – liaise with a cleaning company that will perform the service each time guests check out.
- Nurturingpositive reviews – reviews from people renting a property are one of the main indicators used by users looking for a house or flat for rent. In the first year, due to the small number of reviews, there may be less interest in the offer, so the Agency places great importance on the satisfaction of the tenants and, consequently, on their leaving a positive review.
- Price management – The agency sets and modifies the price of the property in full consultation with the client. Depending on demand, the amount of the price is increased or decreased, so that the property does not stand empty and generates the greatest possible income and profit.
Property maintenance costs
When deciding to buy a rental property on the Costa del Sol, we need to be aware of its maintenance costs, which include:
- Costs of cooperation with advertising portals – Airbnb (3-5% of listing value + 21% VAT) and Booking (15% of listing value + 1.1% transaction fee, total should not exceed 16.5%)
- Cleaning (the cost is included in the price offered to the landlord)
- Power consumption
- Water consumption
- Settlement fees (rent)
- IBI (Impuesto Sobre Bienes Inmuebles), or property tax – dependent on the size of the property and the fees set by the municipality where the property is located
- [Optional] Dedicated insurance – broader coverage for possible owner losses not covered by the basic insurance package – cost approx. 200€ per year.
If we decide to cooperate with an Agency that will handle the rental of the property to the full extent, we have to add a commission to the total costs incurred, which under market conditions amounts to approximately 20% (+ 21% VAT) of the revenue generated.
Rental property tax
The purchase of a rental property involves the permanent acquisition of additional income, which will have to be settled with the Spanish tax authorities. According to the established legal norms, this tax must be settled quarterly and the amount is 19% of the income received.
For tax purposes, deductible costs include:
- estate tax
- cost of electricity consumption
- cost of water consumption
- home insurance
- maintenanceservice costs, e.g. cleaning (invoice for this service must be provided)
- the cost of working with a real estateagency
- the cost of cooperation with advertising portals – Booking, Airbnb
- Internet
When making a tax return, it is worth remembering that we can only deduct from income the costs attributable to the period in which the property was rented.
For example, if we rented a flat or house for 90 days in a given quarter and the annual insurance costs us €360, we will deduct an amount of €90 in the quarterly settlement. This rule applies to all costs related to the operation of the property incurred by the owner.
In order to carry out your tax return in full compliance with Spanish law, it is advisable to establish a relationship with an established accountancy firm at a cost of approximately €150 per quarter.
Let yourself be helped
Owning your dream home or flat on the Costa del Sol comes with many additional responsibilities, which you can successfully delegate to Agnes Inversiones. Our many years of experience in the Spanish property market make us the perfect partner to take the management of your property and its rental off your hands, with the result that you can focus solely on planning your well-deserved holiday and your next investment.
