Letting property in Spain or Portugal: tips by Pedro

You may be planning to buy property (or have already done so). But what about the rental possibilities of your property(s) and thus your return? Below you will find an extensive explanation and tips from Pedro for letting your Spanish or Portuguese property.

Why rent out your Portuguese or Spanish property

Renting out your property can be a smart move. It brings in extra income and your property stays in use. So it is a good way to cover the cost of having a (second home. Sounds good, right?
It could also be that you really want to invest in real estate without using it yourself (much) and thus make a return (in the short and long term). Both through direct income and capital accumulation via a potential increase in value. Even then, our tips on renting out your property are important.

We start briefly with the purchase and rental implications.
(Have you already bought a property? Then proceed to direct hire)

Purchasing property you want to rent out

It often happens that rental options were not taken into account when buying, even though this was specifically what you wanted when buying. Therefore, we will tell you a few things to consider when buying so that you can take this into account:

• Does the property you buy meet the rules for rentals?
• What is the location and what type of property is it for rent?
• What are the costs and is a mortgage required for the purchase?

Does the property comply with rental rules

The rules in Spain and Portugal can sometimes be quite strict. They differ from one municipality to another, but especially in cities there are requirements. Think safety requirements or presence of air conditioning. Is something missing here? Then you will have to invest extra in your property to rent it out!

Location & type of property

Of course, the location is very important, as this determines what rental price you can charge and what the occupancy rate will be. Via Pedro's rental yield check you can establish this by the way! In addition, the type of property is important. With apartment complexes, there is also often some kind of VVE that may or may not give its consent to letting and can therefore throw a spanner in the works!

What are the rental and financing costs

Pedro regularly gets questions about revenues. But costs matter too. You need to maintain a property, possibly hire a property manager, you will have to pay income tax and when you buy, you will pay buyer's fees. Do you want to finance with a mortgage? Then you will also pay 20-30% yourself as equity on the purchase. So all this is important for your return. You can read more about this in our article on making a return on your holiday home

Effect of mortgage on rental

Unlike in the Netherlands, Spain or Portugal do not (yet) have an obligation of residence for purchases with a mortgage. So the bank where you arrange the financing will not set any conditions for letting your property as a non-resident buyer.
We do get asked regularly whether (potential) rentals will affect the amount of your mortgage. Here Pedro can be brief: no. Portuguese and Spanish banks see the purchase as a private matter and so will only assess you as the buyer for maximum financing possibilities. Any future income is also private. Incidentally, this also applies to more business rentals, such as a B&B. You buy the property as a private person.

There is an exception where you buy the property in a local limited company (Spanish SL or Portuguese LDA). But in this case, we advise you to talk to a professional lawyer who will set this up with you completely.

Rentals are often only considered in terms of income. But the costs are just as relevant. They determine your ultimate return.

Types of rentals (fixed vs. short-term)

Let's move on to the actual letting of the property. However, it is important to differentiate between permanent residence (permanent rental) and short-term (tourist) rental. With the former, the legislation in Spain and Portugal is quite strict and you cannot actually use the property yourself.

The second therefore involves short-term rental, where you yourself also use the property for part of the year. In principle, a maximum rental period of 3 months or 90 days applies. The rules of this fall under the tourist rental law. So from here on, we will only talk about these tourist rentals. And you need a rental licence for that.

Apply for rental licence or tourist permit

As in Amsterdam, the problems surrounding tourist rentals in Spain and Portugal have not gone away. That is why in Spain, too, local authorities have started taking stricter action against short-term rentals through platforms such as AirBnB, in order to prevent nuisance and protect their own hotel industry.

In Spain, this is regulated by province (comunidades autónomas) and it is almost always necessary to get a legal rental licence and the property must also be registered (a registration number is needed). Especially in very touristy cities like Barcelona or Palma, it is very difficult to get a rental licence these days. This is because the municipality has to send documents to the province to issue the licence, but can refuse (or delay) this. So before buying, make sure you find out whether the municipality is willing to grant licences!

In Portugal, this is also regulated by municipality, but on top of that, a VVE will also co-decide. It is common to see protected zones in certain cities, which prohibit tourist rentals in order to preserve the social character of a neighbourhood.

Also note that rental licences are increasingly common for certain time are issued. These have to be renewed after X years, and it may then expire!

Letting permits are often made easy by sellers and estate agents. It may pay to check this with our specialist at an early stage!

Requirements for obtaining rental licence

If you want a rental licence for your Spanish or Portuguese property, you have to comply with rules. Among other things, this has become stricter since the new Spanish rental law. Think about:

• Requirements of the local municipality (differs)
• The requirements of the VVE (in the case of a residential complex)
• Property requirements (water, electricity, etc. in order)
• Energy certificate
• Safety regulations

Both Spanish and Portuguese rental laws provide that owners of a housing complex, such as a condominium/apartment building will have more rights to impose restrictions on rentals. In inner cities, housing complexes are the rule rather than the exception, so again, you should check with the owner of the complex first.
You're going to need a registration number, to be arranged through the local government/municipality. To do this, you will submit an application form (declaración responsable in Spain and licença de utilização in Portugal) where you will also need to be able to prove that your property is the legal and suitable, and meets basic health and safety requirements, such as: heating and/or air conditioning, sanitation complete, electricity, clean drinking water and landlord's contact details.

So, in short, getting this licence can be trickier than you think. Both Spain and Portugal can be quite bureaucratic and a mountain of paperwork is often unavoidable!

Engage specialists to obtain rental licence?

You can submit the application form yourself, but supplying the housing requirements is quite a complex matter. Sometimes the estate agent or the seller of the property helps. But in many cases, this is a lawyer in Spain or Portugal who specialises. Pedro will be happy to put you in touch!

Ask Pedro for help

How do I apply for a rental licence?

Pedros tips when renting out your property

Pedro has 5 important tips for renting out your property in Spain or Portugal:

1. Preparing your home + home insurance

When you also stay in the home yourself, you have to take into account than others live in your home. Are there locked rooms or cupboards for your own belongings? Is the furniture suitable for (tourist) use? Are all essential household appliances there? Is the home safe and is there first aid? Wifi arranged?
Realise that things will break or disappear. Home insurance can help limit the damage. Often platforms like AirBNB also offer additional insurance.

2. Setting rental prices

What prices will you charge? Too low a price will cost you money and possibly attract the wrong people. Too high a rental? Then you may get too few bookings and too low occupancy....
Do you want to maximise your yield and charge an optimal price (per season)? Then use Pedro's rental yield calculator!

3. Finding the right tenants

With tourist rentals, you also sometimes bring in annoying guests. Think of people who leave your property dirty, throw parties or let strange types in. So make use of screenings, chat with guests about the purpose of the stay and make arrangements and rules! A local property manager can take this off your hands.

4. Marketing your property

You will also need to find guests, who want to use your property. This can be done via AirBnB and Booking, for example, or think of Marktplaats for Dutch people! Good photos and an attractive description are important. Also count your reviews. It is also possible to build your own website for your property(s) with which you will do promotion. Send us a message If you have any questions about this.

5. Don't forget your taxes

Besides taxes for "owning" your property, you also pay income tax on your rental income. You have to declare this to the tax authorities in Spain or Portugal. In the case of tourist rentals, this is once a quarter. In Spain, you use Form 210 (Modelo 210) and pay 19% tax. In Portugal, this is Modelo 3 and the tax rate is 28% for non-residents.

Outsource property rental in Spain or Portugal

Does the above now sound like a lot of work? Then realise that a local property management service can save you a lot of time, stress and money. Many times they charge a decent percentage (15-20%), but they also do a lot for this. think about:

• Obligation to register tenants (name and address details, proof of nationality, etc.) and if with the Guardia Civil or Policia Nacional
• Cleaning and home inspections
• Regular check alarms and gas/water/lighting
• Home maintenance (incl. garden or swimming pool)
• Marketing (often they do this efficiently through rental platforms)
• Multilingual key issuance (in Spain this often has to be physical)
• Tax service, often as an additional service from an office

Want more info on outsourcing now? Then have a chat with Pedro!