INVESTING ON THE COSTA DORADA

Although the most common association with a house by the beach is vacations, sun, the sea, tanning by your pool, and dining out, it’s important to remember that coastal cities in Spain have positioned themselves as some of the most profitable places to invest, with returns between 5% and 7%.

There are different ways to make the most of your second home. This can help cover the expenses generated by the property, amortize part of the mortgage, or even generate extra income.

I. TOURIST RENTAL.

You can rent your property by the week during certain months of the year. On average, a 3-bedroom villa with a private pool can earn you between €15,000 and €20,000 per season. Factors such as the number of sleeping arrangements, proximity to the sea, and having air conditioning, for example, can influence the price, but most importantly, the duration of the rental during the tourist season. Finally, just like with sales, having a nice decoration and taking great photos is key to success!

To do this, it’s best to go through a rental agency that will take care of advertising, check-in and check-out, cleaning, handling minor issues, responding to tenants' requests, and tax declarations. They will charge you between 20% and 30% of the rental income.

The benefit of choosing this type of rental is that you can still enjoy your little piece of paradise during the off-season, and you won’t have to worry about anything! But be aware that some cities in Catalonia no longer issue tourist licenses, so I recommend reading my other post on this topic!

https://www.cherchevilla.com/post/licence-touristique-en-catalogne

II. LONG-TERM RENTAL.

You can also rent your property for the long term, and while you’ll earn less money than with seasonal rentals, you'll have more peace of mind and a steady monthly income with fixed expenses. Additionally, unless you buy a property in a large city where the rental market is regulated by the September 2020 law*, you can set the rental price you want!

For example, in a small town on the Costa Dorada in June 2021, residential properties for rent had an average price of €6.73 per month per square meter, which means around €400/month for a 60m² apartment and €874/month for a 130m² villa.

You can rent your property yourself or go through an agency, which typically takes a commission of one month’s rent (paid by the tenant), and you can ask for up to 2 months' rent as a deposit.

*The rent price regulation applies to areas where prices have increased by more than 20% between 2014 and 2019, in areas with a very tight rental market, such as Barcelona or cities with over 20,000 residents. The Generalitat establishes a maximum price at which the property can be rented.

III. SHORT-TERM RENTAL.

A short-term rental contract in Catalonia refers to a temporary rental agreement, designed to meet a housing need for a specific period. This type of contract is not intended to be the tenant's usual or permanent residence, but rather for a specific period, such as for vacations, studies, temporary work, or other limited-time activities.

IV. RENTING PART OF THE PROPERTY OR ROOMS.

TO DECLARE RENTAL INCOME:The declaration is made using Form 210. You can group all tenants by quarter, indicating code 35 for seasonal rental and code 01 for long-term rental if the income comes from the same payer. The deadlines for presentation and payment are the first 20 days of April, July, October, and January for income from the previous quarter.

For residents of the European Union, Iceland, and Norway, the tax rate is 19%, and they can deduct expenses proportionally to the rental period: property tax, waste collection, community fees, repair costs, insurance, internet, etc.

For residents outside the European Union, Iceland, or Norway, the tax rate is 24%, and they cannot deduct any expenses.

EXAMPLE:Let’s take the case of Mr. Martin, a French national and non-resident. He decided to rent out his villa.

He rented it for €18,000 from July to the end of September 2020.All the expenses he incurred for this rental period amounted to €1,200.

Taxable base: €18,000 – €1,200 = €16,800Tax rate: 19%Amount to pay: 19% of €16,800 = €3,192

From October 1st to 20th, 2020, Mr. Martin will have submitted Form 210 and will need to pay €3,192 for his rental season.