Investing in Spanish Real Estate - Rental Income.
18.06.2023The idea of combining real estate investment with the thriving tourism industry has become increasingly popular in Spain. Recent research shows that holiday rental again offers a higher return than long-term rental.
Where long-term rentals provide stable monthly income, investors who rent their property to tourists receive their income during a specific period of the year. However, the price tag for vacation rentals is usually much higher. As a result, on balance, there is often more to earn from renting to holidaymakers.
At the moment, the context for holiday rentals is also favorable. Tourism seems to have fully recovered after the pandemic. Nights in tourist accommodation increased by 23.7% in 2022, according to data from INE, tourists spend 71% more, with an average daily spending of 148 euros. The gross value added of the sector in Spain amounts to 159 billion euros. That is an increase of 1.4% compared to 2019.
“We are in an excellent context for private investors to decide on holiday investments, especially on the coast, where tourist rental income has grown faster than prices,” says Borja Badiola, general manager of Suomma in Inmodiario.com .
Net return of 7 percent
The rental of holiday homes yields a net return of 7%. This applies to houses on the Costa del Sol and the Costa Blanca. The average investment there is about 200,000 euros in a house of 128 m2 with three bedrooms.
According to an algorithm developed by Prop-Tech platform Suomma, the owner can generate a net profit of 15,906 euros annually from holiday rentals. The algorithm analyzed more than 30,000 coastal properties with an average price per square meter of 1,679 euros.
Consisting of 5 elements, this investment tool provides accurate asset valuation based on property price, nightly rates and occupancy rate, seasonal revenue, cost analysis, financing and income statement, and various investment scenarios.
Profitability of real estate up by 150 percent
In turn, rental platform GuestReady states that tourist rentals increase real estate profitability by no less than 150% compared to traditional rentals. Commitment to technology, attention to detail, making guests feel at home and customer service are some of the several factors that increase vacation rental profitability.
Good idea, buying property in Spain as an investment
Based on the above, buying real estate as an investment certainly seems like a good idea. By renting to other tourists at times when you cannot enjoy a holiday in your holiday home in Spain, you can still get a return on your assets. Pay close attention to whether the purchase price of the home you have in mind is also the market price. There are all kinds of tools for this.
Why should you invest in holiday homes in Spain
- Protect your savings against inflation
- Your investment grows as prices rise
- Leverage your investment
- The mortgage pays for the property, the property pays the mortgage
- Opportunities with a high return
- Take advantage of the lack of liquidity of holiday markets and get a high return on your investment
- Diversify your investments with one of the safest asset classes
- An investment that you can also enjoy
- A house that can also be used by family or friends
- A passive income
- Invest in gaining financial freedom
Limit the risks of your investment in Spain
Just like investing in shares, investing in stones also involves risks. It is therefore important to limit these as much as possible. Also with regard to any future income from rental with which you can recoup the costs. The easiest way to avoid problems when buying a house in Spain is to use a reliable expert real estate agent. Therefore, choose an recognized, qualified and experienced real estate agency with an API registration, the professional association for real estate agents in the Comunidad Valenciana.
As of October 1, it is no longer possible for everyone to establish themselves as a real estate agent in this region. That will separate the wheat from the chaff and with such a registration you know that the company of your choice meets specific requirements. Such a company is for example MEDVILLA. It is a family business with years of experience and a wide range of new homes in Spain on the Costa Blanca, the Costa Cálida, the Costa de Almeria and the Costa del Sol.
MedVilla does not rent itself, but we will put you in touch with companies that rent out your home when you are not there yourself. If you do not want that, but would like to know whether everything is okay with your home and have someone on site to solve any problems, we have a professional key management company. You see, you can go to MedVilla Spain with peace of mind for all your real estate affairs.