Buying a property to rent in Spain

Buying a home to rent in Spain can be a good option if you want to earn a regular monthly income in a type of operation that is usually quite profitable. However, certain drawbacks must also be taken into account when carrying out the transaction.

What to consider when buying to rent

It is important to take into account some factors that will influence the profitability of the operation, such as the price at which the home is purchased, the related expenses and the total investment made.

The price of the house

It is advisable to know the average price of other similar homes in the same area to acquire the property at an appropriate price according to the market and location.

Zone and communications

The supply and demand of housing in the area where the property is located, the communication and the nearby services greatly influence the price that will be paid for the rental and, therefore, the profitability that can be obtained from it.

Housing type

Some types of homes, such as apartments, flats or three-bedroom chalets with extras such as a terrace or pool, have a higher demand and rental price than other types of properties, so it may be a good idea to opt for this type of home.

Rental price

Like the purchase price of the home, an analysis must also be made of the average price paid for the lease according to the area where it is located, the meters available and the characteristics of the property. In this way, it will be possible to estimate the price that tenants will pay for that apartment or house.

Expenses in the purchase of a home

In addition to the agreed price for the purchase of the home, other expenses directly generated by the purchase must also be taken into account, such as taxes, registration or notary, as well as expenses that will have to be paid periodically, such as the IBI or the community. These expenses influence the profitability of the operation since they must be deducted from the income received from the lease.

Investment

The expenses of all the interventions that are necessary in the property, such as reforms or furniture, must be added to the amount of the purchase to know the total investment in the home. In most cases it is more advisable to choose a property that does not have to carry out major modifications.

Risks of buying to rent

When calculating the profitability of the rental, it must be taken into account that some unforeseen events may occur, such as not renting for some time or that the tenants do not pay. To minimize the risks, it is possible to take out rent non-payment insurance.

Advantages of buying a home to rent

Currently, the option of renting a home is the preferred one for most people, among other things, due to the difficulties in accessing financing for the purchase of a home. Therefore, buying a property to rent in Spain has the following advantages:

A good performance of the operation, which has increased in recent years. This is one of the main benefits of leasing.
Speed in the transaction, especially in highly demanded areas such as the urban centers of the main cities.
Generate regular income, obtaining monthly liquidity.
In certain types of homes the profitability is greater due to the demand they have.

Disadvantages of buying a home to rent

But, in addition to the advantages that we have mentioned, buying a home to rent in Spain has some drawbacks:

Risk of non-payment and squatting. To solve it, the best solution is to take out rental insurance that covers the damage and the amount owed.
Lack of liquidity. The money invested in the purchase of the property cannot be recovered quickly, it will take several weeks at least to sell the house.
Unleased time. It is possible that the house is left empty and, therefore, no income is generated. However, it is also possible to obtain performance for days or weeks whenever the tourist rental is possible.
Reinvestments. In order to compete with other properties for rent to individuals and tourists, the property must be included in one or more digital platforms, which entails a cost. This also leads to having to carry out maintenance, cleaning and equipment so that it is kept in good condition, in addition to offering them good care. All these services, in addition to the Internet connection, generate periodic costs that must be taken into account when calculating profitability.

When buying a home to rent in Spain, certain aspects that directly influence profitability must be taken into account, such as the price of the property, the location and characteristics, the price at which it will be rented or the investment that must be made in it before lease it. These types of operations have the advantage of being very profitable and providing regular income, but there are also risks of non-payment and damage, difficulty in recovering the investment and the need to make reinvestments to keep the property in optimal conditions for leasing.

Further information

This article is part of our service Real Estate Lawyer in Spain. Visit this section where you will find all the useful information on this topic, including a complete guide on How to buy a house in Spain.

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