A “buy to let” property means owning your dream house, which also creates revenue for you while you are away.
Earning money is indeed hard work and takes up a big part of our lives. But once we succeed in earning it, the next question is how to invest it in the best possible way. Buying property abroad and using it as a second home is indeed a popular practice among British and Irish families. Instead of booking a different accommodation or hotel on every trip, many choose a favourite travel destination and find an apartment or a villa near the beach, usually in some warm Mediterranean country, such as Spain, Greece or Malta.
If managed properly from a legal and tax perspective, such properties can be an attractive source of income, especially by exploring “buy to let” possibilities. After all, assets that are likely to grow in value are always the smartest investment.
As a well known destination for holiday lettings, the region of Malaga and la Costa del Sol also stands out as one of the most profitable ones ever since the early 70’s. 320 days of sun a year, 70 golf resorts, and 150 km of coastline strongly increase the value of a property in the province of Malaga, whether it is located in Mijas, Nerja, Benalmadena or Marbella. Water parks for families in summer, historical sites for pensioners in autumn and trendy restaurants for young people offer plenty of outdoor activities for groups of all ages.
In Spain, managing “buy to let” properties demands a number of bureaucratic formalities that need to be completed wisely to ensure the profitability of the investment. In this article we explain some of the most common mistakes to avoid when entering the market of holiday lettings in Spain.
New Spanish Rental Laws For Holiday Lettings
Due to the booming profits of holiday apartments and rentals, in the last years the Spanish government has decided to demand a compulsory registration, as a way of increasing surveillance over these properties. In Andalusia, failure to register the property may carry sanctions that range from € 2,001 to € 150,000 (£1,770 to £132,758). For this reason, getting registered at the Tourism Office is of vital importance before you start contacting rental agencies and other internet platforms.
In 2016 the Spanish regional governments passed new laws and regulations for holiday lettings, which apply independently to each region. In the case of the Costa del Sol it was the 28/2016 regulation, which established the following requirements for any holiday letting to be considered legal:
- owning a license and meeting some minimum quality conditions
- being registered in the Andalusian Tourism Registry
- sufficient room ventilation, obscured windows and enough furniture to rent out the property immediately
- having a heating system in the rooms from October to April and air conditioning from May to September
- providing the visitor with a telephone number to call and ask about the rules of the property
- having basic equipment such as first aid kit, proper cleaning, bedding and household items, as well as a complaints book and some tourist information of the area.
As one of the most complete regulations in Spain, the 28/2016 law specifies a maximum of three properties that can be rented for less than 2 months in order to be considered private holiday lettings.
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Whether To Buy A House In Spain After Brexit
The uncertainty caused by the Brexit and the fear of losing privileges stopped many British citizens from moving to Spain and acquiring new properties. Almost a year later, British investors have started again to be active in the Spanish market, making up for 14% of foreign investments (compared to 8% of French and Germans, or 7% of Romanian citizens). Many other investors started to buy in Eastern European countries, expecting a higher a profitability. Nonetheless, Spain is clearly not the European country where prices of housing are growing most. Countries like Latvia, Slovenia and Slovakia have registered a yearly price increase of 13.7%, 13.4% and 11.7% respectively, forcing the national governments to intervene. Besides, the standard of living and level safety in Spain are much higher.
Some aspects worth while considering before investing money in a Spanish property are:
- Analysing your personal reasons for purchasing property in Spain: ¿is it a simple “buy to let” investment or will it be a home for spending your holidays?
- Calculate your budget. It is important to understand the costs of purchasing a house in Spain plan the amount of taxes that have to be paid.
- Decide where in Spain you want to own a property. Weather conditions, size and acquaintances in the area are some factors that should influence your decision.
- Visit the area before you decide to buy. It is important you get a deep knowledge about the region where you intend to spend your money.
Once you reach a final decision, you will have to address the basic legal steps for purchasing your dream house in Spain, which means:
- Getting an Identification Number for Foreigners – called NIE. ). It is a unique and personal number sequence which is needed to carry out all types of economic transactions. This document can be obtained in your country of origin at the Department of Immigration or police station or, if requested from Spain, through the Embassy or the Consulate.
- Although it is not essential to have a Spanish bank account, it is strongly recommended, since all taxes and expenses linked to the purchase must be paid in Spain.
- Apart from the usual mortgage conditions that apply to locals, non-resident foreigners can benefit from special mortgages that fit their needs.
Tips & Frequent Mistakes to Avoid When Buying Spanish Property
Going through all this process can be difficult without professional legal advice. Not only will you know what is happening at every stage, but hiring an English speaking lawyer will save you any possible misunderstandings with the locals, including the bank staff and tax authorities. Some other recommendations that apply to most cases are:
- Make sure there are no outstanding debts on to the property before you acquire it
- Verify the ownership by getting a copy of the deeds of the house
- Establish a clear date for moving in
- Check that all building permissions are available
- Get the cadastral value of the property, so that you can now the tax burden
- Check the Land Registry ( Registro de la Propiedad) to ensure the property is legally registered
- Make sure the real estate agent is accessible and on-call when you need it.
- Contact with a professional and experience-based lawyers who can speak your home language.
By appointing a legal representative, you can get help to carry out all these tasks in English, as well as negotiating your own conditions and understanding what is happening at every stage.
Tejada Solicitors is an English-speaking law firm based in Malaga and Costa del Sol, specialised in property conveyancing, inheritance tax, residence for foreigners, self-employed tax declarations and most legal and financial aspects of relevance to foreigners and expats living in Spain. For any questions and enquiries, don’t hesitate to contact us either by phone or e-mail.
Author: Rosana Tejada
Biographical Info: Rosana Tejada Crespo is a tax advisor holding a Master’s Degree in International Taxation. She specialises in companies and freelancers, tax regulations concerning foreign employees (Beckham Law), non-resident tax, inheritance tax and Spanish income tax. She is one of the founders of Tejada Solicitors, which comprises a group of English speaking solicitors, economists and architects.