Spanish Buy To Let
In the UK the majority of buy to let investment is geared towards long term renting. With buy to let in Spain it seems to be geared towards holiday lets.
The reason is simple enough, most of the property buyers want to own a holiday home that they can let out and use when they choose to.
But what are the options and implications of letting your property as a holiday let?
Just before we go into that, a quick word about buy to let mortgages in Spain...
In the UK it is perfectly acceptable and feasible to borrow up to 80% of the value of the property on the basis of the income that it will produce. Your earnings are secondary.
In Spain you can only really borrow about 50% of the value on this basis, and most banks are only happy lending 70% of the value to non-Residents of Spain even with your income declared.
So if you decide to buy to let in Spain what can you make from holiday letting?
We will use a 2 bed, 2bath apartment in Marbella as our point of reference as this is what I know. We will assume the value is €250,000. (£175,000).
The rents would be roughly as follows..
Season |
Rent in euros per week |
High-July-Aug-Easter & Xmas |
1000 |
Mid- May-June-Sept-Oct |
800 |
Low-Remainder of the year |
600 |
From this we could expect the average rent to be around €800 each time, but lets say an average of €700 to be safe
What would the running costs be..
Let's cover the estimate for the basics first..
Service Charges |
€2000 |
Taxes |
€1250 |
Insurance |
€400 |
Electricity |
€600 |
Total |
€4,250 |
Then you need to add your mortgage payments...
Lets assume a 70% mortgage, interest only and at a rate of 3.5% pa.
The annual mortgage payment would be roughly €6,125 + the running costs.
These means that your buy to let in Spain would need to generate an income of €10,375 pa just to pay for itself.
With an average rent of €700 it would have to be occupied by holiday makers 15 weeks of the year, or one week in three.
You also need to factor in the costs of a cleaner each time it is let, wear and tear, as well as someone to manage and visit your property when it is empty and last and by no means least, any costs involved with letting it. Agents fees, adverts etc...
Unfortunately, when you look at the cold figures of buy to let in Spain it starts to look less attractive but we are forgetting one thing...
Holidays
Assuming you will stay in the apartment for 6 weeks each year, that's six weeks worth of holiday costs that you will save. If you visit in peak times you could shave around €5000 euros off the costs.
Many people I know also justify the costs of running their buy to let in Spain by using it as a pension.
Certainly when I first purchased my property I felt happier paying off a mortgage each month with money that I would otherwise have been paying into a pension.
Perhaps the figures I give above aren't a good example as the costs start to look prohibitive but there are 2 areas where these numbers can be improved...
What You Pay For The Property
If you are smart and do your research you may be able to secure a good property at a good price, either through buying off plan or by doing your research. either way it can hugely effect your yields. See my buy to let section.
Further Information
Within this guide we also have advice and information on:
