Renting a property in Spain: everything a landlord needs to know

Renting a property in Spain: everything a landlord needs to know

Recent statistics show a sharp growth in prices for real estate in Spain, which is highly in demand among foreign buyers. Even when recognising the possibility, not everyone considers foreign housing as a place to relocate to for permanent residence. Real estate remains the most secure investment asset. Investing in the Spanish housing stock allows you to not only combat inflation but also maximise it.

Spain ranks first among the European countries in terms of popularity among real estate buyers and potential tenants. A high quality of life, a stable economy, and pleasant climatic conditions make the kingdom appealing to vacationers as well as to students and ex-pats coming here to work. The local rental housing stock has a consistently high profitability ratio. However, to receive a legal income and avoid any legal complications, it’s crucial to adhere to the country's rental regulations. So, let's have a quick look at what an investor wanting to purchase buy-to-let apartments in Spain should know.


What types of units bring the highest return?

Both apartments in off-plan development projects in Spain and secondary housing are highly in demand. However, when acquiring a property for subsequent rental, the following factors should be considered:

  • The audience on which the future landlord is counting If they are students, it’s worth considering purchasing housing units in cities with a concentration of educational institutions. For vacationers, it’s worth picking up residences in large tourist areas and near the coast.
  • The quality of the housing stock. Saving money when buying a house is understandable, but tenants prefer modern and comfortable housing. It’s more difficult to find tenants for an apartment with poor renovations or other flaws, and the profit from renting will be lower.
  • Location. It’s simple to determine the potential rental income beforehand. It’s necessary to research the average rent in the selected area to see whether the investment will be profitable.

Studio apartments were once the most popular type of rental property. The pandemic has forced people to recognise the value of having available space in their homes. As a result, apartments with one or two bedrooms are highly in demand and so is the premium housing stock. The demand for villas in Spain went up by 6.7% in 2021 alone, the highest figure in the last 30 years. The information for 2022 is still in the development stage. At the same time, the analysts note that the demand for high-end properties already outstrips supply, as the pandemic period caused some stagnation in the construction sector and a decrease in the number of completed properties.

Renting a property in Spain: everything a landlord needs to know

Features of the rental sector

What happens now that the apartment has been purchased and the paperwork has been issued? You can rent out housing while living in the country or use the services of local agencies that will take over the trust management of the property for a commission percentage. In any case, the owner should be aware of the following general legal requirements:

  • Rent can be both short and long-term. In both cases, however, the property is registered with the Ministry of Tourism, and the owner must pay taxes equal to 24% of the income received.
  • When renting real estate, a contract must be drafted, outlining the parties' rights and obligations, as well as the rent amount. There are no restrictions on the amount: the owner can rent an apartment for less than a comparable segment on the market, or more - what matters is finding a buyer who’ll be satisfied with the amount.
  • It’s illegal to change the rental amount after signing the contract at your discretion; this is a legal requirement. More on this topic follows.
  • Utility payments can be made by both the property owner and the tenant. This is also reflected in the contract. Rent is typically paid once a month, one month in advance.
  • The tenant is not allowed to make any structural changes to the dwelling but he is required to keep it in good condition and repair any arising minor defects at his own expense. Major renovations are carried out at the owner's expense unless necessitated by the tenant's illegal actions. To avoid any misunderstandings, an acceptance certificate is usually attached to the contract, indicating the condition of the housing stock, as well as the available furniture and household appliances.
  • Every foreigner renting an apartment is required to register with the local police. The owner of the property or a realtor acting under power of attorney sends the information.

Given that the last requirement is not present in all the provinces, it’s far safer for a house owner who is unfamiliar with the complexities of the local legislation to use the services of a professional expert when drafting a contract and interacting with tenants. The regional governments establish their requirements for renting housing and are unique in each of the 17 Autonomous Communities. Frequently, the requirements are linked to specific constraints.

Rise and drop in rental payments

The current legislation restricts rental increases under renewable contracts during the first five years of their operation. More specifically, such an opportunity exists, but only as part of the expansion of the consumer price index (IPC). The lease agreement must include the option to increase the rent. At the same time, the property owner can only raise the fee once a year, notifying the tenant no later than one month in advance.

In the event of a reduction in IPC, the tenant may request a rent reduction based on data from the National Institute of Statistics, taking inflation into account. The index is updated once a month.

How to deal with taxes on real estate?

Property ownership is the basis for the tax. Its rate is determined by the cadastral value of the unit and ranges between 0.4 and 1.1% depending on the province. The tax is paid annually.

The income declaration is completed every quarter when renting an apartment. Rental income is taxed at a 24% rate., The declaration must be submitted even if the dwelling was empty during the taxable period.

Property owners earning over €700,000 are subject to a luxury tax. The rate varies by region and ranges from 1% to 3.5%.

Renting a property in Spain: everything a landlord needs to know

Tips for overseas investors

  • Lack of knowledge of the local laws and language barriers when looking for housing on your own can have terrible consequences. It’s advisable to use the services of a qualified real estate agent to avoid financial loss. It's not worth it to try and save money.
  • Independent research of the Spanish real estate market, as well as a comparative analysis of options for sale or rent, will be greatly appreciated. You can find relevant Internet resources online in both Spain and throughout Europe.
  • A rental agreement should be legally registered. Yes, there will be taxes, but they will also protect you from financial loss and unscrupulous tenants.

It’s important to remember that illegal housing rentals can lead to large fines of up to €90,000.

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