Making money from your property in Spain

by Chrissy Dawson

There’s just one thing better than owning a holiday home in Spain - and that’s making some money from it too. . The buy-to-let market may be struggling in the UK, but in Spain, given a good property in the right kind of area, the demand for holiday rental properties is still high. So any income generated from buy-to-let is a bonus beyond the capital appreciation you can expect from your investment, which is currently predicted to be about 10 on average in 2005. Spain is still the favourite place for investors hoping to combine pleasure and profit by buying a property that they can then rent out. And the Costa del Sol and Costa Blanca are the places that attract the greatest number of holidaymakers looking to rent a property in Spain. Some buyers invest purely for this purpose, perhaps as an alternative to investing in a pension fund, but with no intention of using the property themselves at present. Other buyers find it a useful way of financing the purchase and ongoing costs by renting out their house when they are not staying in it. Despite what you may be told about ‘year round rental potential’, be realistic about how much you can rent out your property. The average period that a Spanish property is let out is 10 weeks a year. This, of course, will be far higher for a well-maintained and desirable property in a popular holiday area, and less for something in need of a repaint and a long way from the beach, amenities and transport. Though bear in mind that in the most popular resorts, such as Marbella, the competition for rental properties is immense – and there may be little to distinguish one two-bed, two-bath apartment on a beachside complex from the next. When buying, be clear whether you are buying solely for investment, or partly for your own use. This will clearly affect what kind of property you buy – and if buying for both purposes, you may struggle to work out whether to compromise on the aesthetic or financial element to make the most of your purchase. If your taste naturally sees you roaming into the wilderness of inland Andalucia, be realistic about just how many holidaymakers will want to stay somewhere that remote and appreciate the same rural charms as you. For pure investment, a golf property on the Costa del Sol is a pretty safe bet, and Marbella – within 45 minutes of Malaga airport, and with numerous courses within a 40 minute drive – is a good option. A similar property on the Costa Blanca, near Alicante, will cost less and capital appreciation will be less, but there is still a huge golf holiday market to tap into there. Another important decision is whether you intend to let out your property for long periods (eg. 6-12 months) or on a short-term basis for holidaymakers. This will be determined by how long you want to stay there yourself – and how much hassle you can handle. Holiday lets may bring in tempting income – £600 a week is typical for a two-bed apartment in Marbella in high season. But you may only be able to rent it out for July and August, yet still have to pay the running costs, taxes etc. for the rest of the year. And you’d be amazed how much constant cleaning and maintenance a property requires when let out on this basis. Long-term lets provide more security with a regular source of income, but the rate is lower (that same flat which rents for £600 a week in summer would bring in about the same amount per month on a long-term basis) and you won’t be able to use the property yourself. To boost the rentability of your property, especially for short lets, the following are desirable: • Proximity to the sea, restaurants and bars.• Proximity to supermarkets and other shops.• A swimming pool, either exclusive to the property or a shared pool.• An area where you can walk safely at night • A barbecue (especially gas which is easier for the client to keep clean).• A plentiful supply of fresh linen and towels.• A washing machine and an area where clothes can be dried.• Satellite/cable T.V. Management of your property:Using 'word of mouth' is the simplest and easiest way to rent out your property. Let friends know that you have a property abroad that you would like to rent and ask them to tell their friends about it. Having people you know in your holiday home may make you feel more comfortable about others staying there. You may consider handing your property over to a holiday company. This may make you good money but be careful to check out their fees before you sign any contracts. And remember, you can't build a clientele if you have no details of who is staying there.There are numerous companies in Spain who will manage your property for you. The service provided by these agencies varies enormously, so make sure you have thoroughly checked what their service includes. For a small established company, expect to pay between 25 - 40 of your letting for their services and £300 per annum for additional maintenance. Many estate agents offer a property management service, but always deal with people you can trust.Contracts:Ensure that the terms of your contract and the quality of your tenants meet your requirements. If you deal with a holiday rental company, read the contract very carefully before you sign. Make sure that any damage to your property is made good and the cost does not fall upon you. If you are supplying the tenants then any damage will be down to you, so make sure you receive a deposit. Ensure any rental business is legally registered and that you pay the appropriate taxes and insurance. When you provide linens and other services you qualify as a business and should legally declare a property as tourist letting accommodation. This may seem an unnecessary burden, but remember that if anything goes wrong you will have a legal footing.

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