Thursday, 2 January 2014

Buying a property with rental potential: Part 2


                         The cost of renting out your property in Spain.
 
 

 

First we need to mention that as each region is autonomous there are different rules in some regions.  For instance, currently the Canaries, Balearics and Catalonia all require holiday lets to be licensed but most regions do not.  This may, however, change in the future.  So this is not a legal guide regarding renting but a general commentary and regional, local and community rules and laws need to be checked for specific properties.
                                                
 
As we have mentioned in an earlier blog, your relationship with your keyholder is an essential part of successful renting.  If they are not doing a professional job to the standard you require then sack them and find a better keyholder!  Keyholding costs are likely to be 300 to 400 euros per annum plus the cost of cleaning after each guest.
 

The first, and perhaps most obvious cost, is that of advertising.  In this day and age the vast majority of bookings will come from having and on-line presence.  You don’t need to spend hundreds of pounds on a fancy web site and then hundreds more on SEO work.  Use a couple of the big companies advertising holiday homes on line.  Decide which ones to use by making your own searches under ‘Spanish holiday lettings’ or ‘villas to rent in Spain’.  There are many small and free sites you can use too.  However the ones that are search engine optimised are the ones that get the visitors and so will get the bookings too.  These will also charge the most, say £250-£300 per year.  They are easy to use and relatively quick to set up.  Of course if you can also utilise free advertising on a work-place notice board, or similar, then do so.


Setting your rental rates is always tricky.  Be realistic about the rates you charge.  The best guide is to take the average rates of properties very similar in size, style and location to your own by checking out several web sites.  Ideally the amount of the twelve high season weeks’ rentals will need to total the same as your annual mortgage payments, but this is not always possible if you have a large mortgage or use the property yourself during the high season weeks.  The rest of the rentals should then cover the bills.  It is unlikely that your rentals will also cover your tax costs if you have a large mortgage.
 

 TAX!  It’s not a popular word.  Despite what many will tell you, including some fiscal representatives, you ARE liable for tax in Spain on your rentals.  The current rate is approx. 24% after allowable deductions such as mortgage interest, utilities, community fees etc, for the weeks that the property is let only.  You will also be liable for non-residents tax.  The Spanish tax year runs 1st January to 31st December.  You will also need to declare your income in the UK, but if you have paid your Spanish tax it’s unlikely you will need to pay UK tax as there is a double taxation agreement between the countries.
 

Insurance is another important area often overlooked.  Take out a specialist insurance policy with a UK company covering holiday lettings; and read the small-print!  Ensure you have good third party cover.  If you have a mortgage with a Spanish bank they may insist on contents and building cover being part of the deal but Spanish banks do not offer a comprehensive holiday let policy.  You need the policy in a language in which you are fluent too.


When you receive an enquiry via one of the websites, contact the people as soon as you can, preferably that day.  Remember you do not have to let your property to anyone you don’t like!  You may decide to refuse groups of people under 25 years old, or students, and we would recommend you do not accept parties where they are all under 18 years old. 
 

Once you are happy with your prospective client send a booking form.  On this set out the basics for your contract – the name and address of the booking client, names and addresses of all party members, the ages of those under 18, the arrival and departure dates and provisional times, the rental, the deposit, the date when the rental is due, any compulsory extras, (such as cleaning fee), and optional extras, (such as airport transfers).  You also need to have a cancellation policy.  Generally there is a deposit payable on booking to secure the dates, the balance of the rental plus the key deposit should be paid 8 weeks before the holiday.  The key deposit is returned to the guest within 14 days of the end of their stay, but this can be subject to damage deductions, which must be justifiable if made and with proof.  Regarding the contract itself, there are some good pro-former ones available from some of the larger advertising web sites that can be adapted for your own use.  A contract is essential, not optional.


 

If you have bought your holiday home for personal use rather than pure investment potential, then the most important factor is to enjoy your holiday home!


www.house-by-the-pool.com

www.spanishdreamproperty.com