- This topic has 20 replies, 13 voices, and was last updated 17 years ago by
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Hello, this looks like the board i need.
I can’t see how non-residents would make a rental investment pay. This is my understanding in an area of interest:
Talking to agents, friends and potential neighbours i reckon the annual holiday rental income (on a 2 apartment) would be £6,000 (that’s an average of 4 or 5 owners, so a reasonable estimate.)
I can’t see how running costs would be less than £1800 (cleaning, laundry, advertising, agents, utilities, maintenance.)
As i understand it a non resident has to pay Spanish tax at 24% on all rental income with no deductions allowed. That’s about £1500.
If i’m correct that leaves the owner with an after tax “profit” of £2,700.
A reasonable post tax return on investment should be about 5% at the moment.
That means the purchase price needs to be about £54,000. Even if i’m 50% out it would not be economic at a price of more than £70,000.
Am I barmy? Am i missing something? Or do i need prices to fall 50% before rentals are an economic proposition. I just can’t see how I could make any money.
Any experienced renters ou their with some advice?
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It does not pay. As you can see that the biggest item is the Tax. Spain is the only Country where they do not allow cost to be offset against the rental income for non residents. This is another of the Government policy to milk the foreigners.
I was expecting that this unjust treatment of non resident would have been equalised when the Government reduced the %capital gains tax under pressure from EU.
The people who are involved in rental are only there to subsidies their holiday homes or until such time that they retire. The ones who have got into rental market have not done their sums or dont understand opportunity cost.
Whilst, I agree that you need to be looking at 5% return. This % is not Gospel and cannot be achieved in most countries most of the times.
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It doesn’t (at the moment)
But for the general case, if your a higher rate tax payer then that 5% reduces to 3%.
And your property could appreciate by 5% or more a year. But clearly no one would buy in a falling/flat market, hence why people in general are not purchasing with the intention of renting.
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The rental market is dead on the CDS. Listen to agents and they will tell you that they can get an inflated amount of bookings. In reality you will be lucky to get 2 months July/August. Even August 2007 there were many empty. A friend is renting a new 3 bed apartment in a nearly empty block. She is paying 650 euros a month. It is so spooky she is moving.
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Whatever an agent tell you, reduce instantly by 90 per cent and you may be near the mark. Otherwise, a lot depends on where you are and what you are trying to rent.
Costa del Sol – 2-bed apartment – forget it!
Nice villa with pool – perhaps 8-10 weeks in the summer if lucky.
Costa Blanca – similar, but less rental income.
Costa Brava – virtually impossible to rent outside July and August. Excellent rental from villas in northern Catalunya – up to 1,000 per week for four-beds in good condition.
Apartments in Lloret etc – forget it! -
This whiffs of disaster to me.
How can someone considering buying to let, ask such basic information on a forum.
As with any business, work out the outgoings, cost, expenses, professional fees, insurance, etc., and see how it compares with realistic potential income.PS.
It does not work at present. -
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If you want to purchase a buy to let. No place better than London in the whole of EU.
Spain is or never will be a buy to let market in the true sense of an investment. Besides the % yield gross or net. The legal system, legislation and the working of the Courts will deter a investor as he/she will not be there providing social housing for Spanish or the Expats
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@katy wrote:
The rental market is dead on the CDS. Listen to agents and they will tell you that they can get an inflated amount of bookings. In reality you will be lucky to get 2 months July/August. Even August 2007 there were many empty. A friend is renting a new 3 bed apartment in a nearly empty block. She is paying 650 euros a month. It is so spooky she is moving.
Spot on Katy, the Costa de la Luz took a big hit last summer with rentals as well. We tell our clients the whole truth and they don’t like to hear it, especially when they have purchased a property from an agent who has said yes you will cover all your costs and make a profit etc..
It doesn’t make us popular but I’d rather sleep at night. It seems to us we are just picking up all the pieces and problems after the agents have taken their commissions and left their clients without any after sales service.
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Hi Frank,
My knowledge of Barcelona property is that it is very expensive and than when you work out the average salary there, how is a commercial landlord to make any money. Keeping in mind1) High cost of property’s, with a rent that market cannot sustain = low yield.
2) A landlord can subsidise rent for capital gains. I think we all agree that this can be forgotten for while. baring exceptions.
3) (2) above is also affected by the high cost of purchase/sale in Spain. In fact all of EU.
4) If the salaries are a low a point will come when no matter how sincere/honest the tenants are they just wont be able to pay the rent.
5) There may be people who might buy today as a hedge against future
price increases. However if the law is so absurd as tenants having a
right to stay on for five years because the contract was renewed in 11 months etc. They will not be able to move in.6) If you finally get to the Court and the tenants decides to pay some money and avoid eviction and later in subsequent months stops paying.
You will be back to the Courts with more voids & legal cost and damage to property.7) I am not for the Bank guarantee that has been talked on the forum in the past as I believe a guarantee is good as its guarantor.
8) The current interest rates are higher than the yield that you can expect forget other cost associated with properties.
I hope that i have not confused the issue any further.
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“Everyone is not like you being such a shrewed investor”
Not for me to say one way or other.“and expert in the whole Spainsh property market”
No, and why do you need to be an “expert” in the property market, specifically Spain. The property market is the property market wherever it is. There are always quirks in every Country.“thats why people ask questions on the forum”
OK, so if not an expert, read the experts. One such the weekend states that in the buy to let market, you need a rental yield of 7% to service the loan. Therefore, if self funding, you probably need 6.5% to tread water. -
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Well I don’t know what I’m doing wrong but I have a 2 bed/2bath apartment on the CDS and I really don’t want to rent out my property, but every year I have at least 10 weeks rental (repeats) and could book more, but I try to limit the extent of wear and tear as this property was really intended as a holiday home exclusively for ourselves.
I do not advertise and I’m selective of who I allow in the property.Each year I increase the rental cost and know I charge the going rate.
It’s a pain declaring the tax but it is possible to rent out on the CDS.
After all Malaga is a very accessable airport due to low cost airlines and many of my friends and family get a family holiday in home from home accomodation at less than half the price of a package holiday.
I’m not an expert but my calculations are based upon mortgage payment less nett income, less capital repaid on mortgage and less costs that we would pay for our holidays as a package holiday.
We have friends who have properties in Cyprus, Turkey and Bulgaria and none of these countries offer the frequency or low priced flights that we have to the CDS.
Location and Accessabilty are the most important factors.
We are more than happy with our investment
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It depends how good you are at advertising, pricing. Same in any business.
Our 2 bed apartment for 2008 is booked jan 10 to 18 March. Then 2 weeks in July, 2 weeks in August, and then from Nov 5th to 30th December. And we’re still only mid January! We’re using it for 8 further weeks.
We’re usually booked for about 26 to 30 weeks including our stays.
We do it to cover our costs, not as a business. But the results aren’t bad. After tax we make about 4% and get all the holiday we want.
However, if I were running it as a business i would like to see local prices down by about 30% before buying as a business with no family occupancy.
Spanish tax is easy; we just download the forms from aeat.es and then send ’em off to the bank every quarter. My only gripe is that i wish you could submit and pay on-line.
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@ashtondav wrote:
It depends how good you are at advertising, pricing. Same in any business.
And as someone else mentioned earlier in the post location. As the Costa de la Luz is fairly un-known to many and with only a couple of flights to Seville & Jerez from the UK it doesn’t stand much chance when you can virtually fly to Malaga and Alicante etc from the most minor airports in the UK and other EU countries.
What whoflungdung? doesn’t mention is where his/her property is or if it’s just for info regarding a possible purchase?
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Owners who just give their properties to agents to rent ou have to be sure the agents are promoting as well as they can. Many tour operators have gone to the wall and not many are taking on private accomodation.
I know it is very possible to do well but it takes a lot of hard work ro do so.
A proeprty in a good location and definately on the south coastal strip will fare the best but one cannot expect it to rent itself out.
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