May 07, 2024

Invest to rent out - short or long term?

Many people who buy a property on the Costa del Sol do so as an investment with a focus on renting it out. But which is really best, renting out on a short or a long term? Felicity Estates lists the pros and cons with both variants.

If you have bought or are planning to buy a home and want to rent it out to make a profit, you need to make a decision whether to rent it out by the day/week or for a longer period. To rent out short-term in Andalucia you need a special license and you must make sure before you buy that there are no rules within the community that specifically prohibit short-term letting. Starting from two months, it is considered a long-term rental, which requires a contract in Spanish, signed by all parties and which complies with the legal framework and time frames established by law.

Which one you choose is influenced by various factors, for example how you and your family want to use the home. If you want to be able to use it as a private holiday home and only rent it out occasionally, short-term rentals are probably a better fit. But there are other aspects to consider as well, such as local laws and regulations, monthly costs and different risks associated with the two variants.

Advantages of short-term rentals:

• The potential revenue is higher than traditional long-term rentals, especially given the greater flexibility where prices can be varied depending on the season and even days of the week with greater demand.
• The risk of non-payment is basically non-existent because the guests pay in advance.
• Greater flexibility when it comes to using the accommodation yourself and making the decision to put it up for sale without any obstacles.

Disadvantages of short-term rentals:

• The cost is higher. The home must be fully furnished and equipped with kitchen equipment and everything needed during a stay. In addition, there are costs for maintenance and basic services such as electricity, water, Internet, cleaning, etc.
• In most cases, a high occupancy level is necessary to get interesting profits or for the investment to become profitable within a not too long period of time.
• They are included by municipal or regional regulations which in some cases may limit short-term rentals.
• Occupancy levels can vary greatly and thus provide irregular income.

Advantages of long-term rental:

• The income is regular and predictable in the vast majority of cases.
• Expenses are limited because it is the tenant who pays for electricity, water, Internet and sometimes also for furniture and other belongings.
• Tax benefits in the form of deductions in personal income tax declaration.

Disadvantages of long-term rentals:

• Less flexibility regarding the rent level, in particularly high-stress areas there may even be an upper limit to comply with, according to the new Housing Act.
• Greater risk of non-payment.
• Poorer accessibility to the home. It is necessary to wait until the end of the contract to be able to make changes to it or to repossess the property.

Felicity Estates recommends that you consult with experts regardless of whether you are renting out for a short or long term so that everything is done correctly and according to the current laws and regulations. For more information about short-term rentals, ypu are welcome to contact our sister company Solrentals.

Source: Spainhouses